Bijan Sabet on Spark Capital’s noncompetes approach: Our companies don’t have them

Bijan and Lacy

Last night in the very hot and steamy Projective Space in New York City, Spark Capital’s Bijan Sabet sat down with PandoDaily founder and editor-in-chief Sarah Lacy for a chat that revealed just how concerned the prominent venture capitalist is about the effects certain laws may have on the ability for the East Coast tech scene to thrive.

The almost two-hour discussion covered a wide array of topics, ranging from the geographic (San Francisco/New York/Boston) to wins and losses in Spark’s portfolio to more serious tech industry topics like Silicon Valley wage-fixing. However, one of the more interesting moments of the night came when Sabet discussed how noncompetes hamper innovation in the Northeast, and, quite possibly, the emergence of a truly robust tech corridor between New York and Boston.

When Lacy asked Sabet (who has been outspoken about noncompetes, even speaking at one of the recent legislative hearings on the topic) if noncompetes are the reason for what she called the “chilling effect” of the Boston tech scene, he said it is one of the biggest factors among a few.

“We have this thing in New York and Massachusetts that you don’t have in California,” Sabet said.

“You have one generation that energizes or inspires the next generation, and there’s domain expertise, and learning, and an exchange of ideas, and that level of open information. When you cut it off, you remove all that.”

Which is what Sabet thinks noncompetes are doing in Massachusetts.

“There should be five Akamai competitors in Boston, and there are zero.  There should have been a half a dozen Lotus competitors,” he said. He went on to point out the lack of competition (and, the corresponding lack of innovation) for companies like Avid and Nuance, and added, “There are virtually zero companies that compete with EMC.”

“So we don’t have this next-generation thing.”

(Sabet is not alone with this line of thinking. Yesterday afternoon, Rob Go of NextView Venture mentioned a similar issue to me, calling it the lack of “Me Too” companies.)

To that point, Sabet revealed that Spark has told its portfolio companies to abolish noncompetes for its founders and employees, and has done so since 2008. The company had backed a legislative effort to ban noncompetes in Massachusetts as far back as 2009 (which obviously failed).

Another attempt to get rid of noncompetes has been underway in recent months, and area venture capital firms have been among the most vocal about banning the clauses. But that effort appears likely to result in a compromise rather than a full ban, suggesting to some that Massachusetts will continue to lose tech talent to California.

A video that includes part of Sabet’s answer can be found here.

Dennis Keohane was a Senior Staff Writer for BetaBoston.
Follow Dennis on Twitter - Google+