Why entrepreneurs still bolt from Boston

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Jason Evanish used to play in a monthly poker game. In 2010 and 2011, the players met after work at the Cambridge Innovation Center in Kendall Square. Usually there was pizza. They were all in their 20s, working for startups or building new ventures of their own.

Evanish moved to San Francisco in 2012, where he now runs a startup called Lighthouse, which aims to help managers upgrade their skills. “Most of the regulars are, ironically, out here now,” he says of his friends from the poker game. One landed in New York, where his fantasy sports startup, Draft, raised $3.5 million last year.

January was a month of high-fivin’ for the Boston business community, with the announcement that General Electric had picked our city for its headquarters, bringing about 800 jobs. That was good news, but let’s not allow it to mask one of the Boston area’s biggest challenges: doing a better job of retaining high-potential young entrepreneurs who start companies here but then feel the pull of California or New York.

In the past five years, another group, middle-aged venture capitalists hunting for huge scores, has followed that same path.

I’ve spoken with more than a dozen people who fit such profiles, asking them what triggered their moves. What didn’t come up? The cost of housing and the creakiness of the MBTA. Here’s what I heard from my batch of “exit interviews.”

Evanish was educated at Northeastern University. After graduating, he built a website called Greenhorn Connect, which kept tabs on local networking events and tried to connect other recent graduates with internships and jobs. He says he worked at a local startup and did a stint consulting with others before realizing that “in Boston the attitude is that you should put your head down for five or 10 years.”

But in the San Francisco Bay Area, he says, “there are so many startups that need to hire, they’re willing to bet on young people who want to level up faster.”

Even better, he adds, investors and fellow entrepreneurs believe that “any idea is possible. There’s an infinite amount of support for entrepreneurs. If you have an idea, the first question is, ‘Why aren’t you starting it right now?’”

Sachin Agarwal was briefly a colleague of Evanish’s at the Cambridge startup Oneforty; he moved west in mid-2012.

“The early days of a startup are just much easier out here,” Agarwal says. “The big law firms will do legal work on deferred-fee agreements. You can go to pretty much any conference you want for free, if you’re willing to volunteer.” And investors are willing to cut a check much earlier, with just a rough design of a site or an app.

Another factor Agarwal cites: employee noncompete agreements. When he took a job at Oracle Corp., he told his bosses he was noodling a side project. When Agarwal left the software giant in January, to build a project management startup called Braid, he had no fear that Oracle would sue him for competing with one of its many businesses, he says.

“It’s a shame that the [Massachusetts] state Legislature still hasn’t come around on noncompetes,” he says. “The safest thing for anyone in Massachusetts to do if they want to start a new thing is move out here, just for the legal protection.”

Ben Anderson moved his mobile startup, Amino Apps, from Downtown Crossing to New York in January. He says the company needed better access to people who had built online communities “and have a deep understanding of mobile.” That wasn’t happening fast enough in Boston. Also worth noting: The company’s two major investors are based in New York.

Aubrie Pagano started Bow & Drape, a custom apparel site, in Boston, but moved the company to New York in 2014; since then it has grown to nine employees.

“The costs of living and running the business weren’t substantially different,” she says. Having access to the press and fashion influencers was a big help.

Venture capitalists have also relocated:

Elizabeth Yin, who earned her MBA at MIT and is now an investor at the venture capital fund 500 Startups in California, says that “there are plenty of people in the Boston tech ecosystem who could be angels but are not. In the Silicon Valley, being an angel investor is the thing to do. I know lots of people who invest about $1,000 in about 10 companies a year.” That supplies early sustenance to a whole flock of fledgling companies.

Evan Morikawa says San Francisco feels “hyper-concentrated” — meaning almost everyone is involved in the tech sector — and “just on a totally different scale” from Boston. The Olin College alumnus, who cofounded a company in Cambridge before heading west in 2014, says that when he goes to meetups with other techies, he’s impressed that the people who created the software they’re discussing are often in the room to answer questions. Morikawa, incidentally, was one of the people who used to play in Evanish’s Cambridge poker game.

It’s easy to dismiss a single entrepreneur like Morikawa, or even a 10-person startup, as insignificant — not the kind of thing we should fret about. But occasionally, these companies get big fast.

We need to continually work to make the business ecosystem more supportive for startups and stop patting ourselves on the back about what we do well.

We should compete for every founder, and every bit as hard as we competed for GE.

One example: Drew Houston and his cofounder, Arash Ferdowsi, left Boston for San Francisco in 2007. Local investors just didn’t believe in the business.

“Boston investors pointed out problems,” Houston says via e-mail, while “West Coast investors wrote checks.”

Today, their company, privately held Dropbox, has annual revenue estimated at $400 million, and more than 1,200 employees.

That’s a few hundred more, I should note, than will work at the GE headquarters.

Scott Kirsner writes the Innovation Economy column every Sunday in the Boston Globe, in which he tracks entrepreneurship, investment, and big company activities around New England.
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