Field Notes: Peanut Butter & Jelly
When you’re an entrepreneur moving fast and thinking big, it’s helpful to keep an eye on where the early stage center of gravity is for the space you’re in – and where it might be next.
At Converge, we are privileged to interact with fantastic entrepreneurs every day and to hear where they are investing their energies on a company-by-company basis. In addition, we monitor macro and regional trends in our investment geographies regularly – having a bird’s-eye view of the market can give us new perspectives on investment opportunities and provide useful intelligence to share with entrepreneurs.
We recently completed an analysis of early stage (Seed and Series A), B2B tech investment activity for 509 companies in Boston and New York from 2016 – present. While there is diversity within each city’s startup scene, it’s kind of like the Red Sox and Yankees…if you can find a way to love them both, you’re bound to be a winner. Case in point? Boston’s most active segment at the Series A stage, Industrial, was New York’s least active.
Series A Trends
Massachusetts Series A financings (below), are concentrated in Industrial, Healthcare, and Cybersecurity. Anchored by heritage, hospitals and history (Ben Franklin’s ounce of prevention/pound of cure culture lives on), Boston favors big, thorny opportunities that have real staying power. New York, on the other hand, favors Martech and Fintech, where the very real need (and payoff) for speed finds sustenance.
Seed Stage Trends
At the Seed stage, Industrial still tops Boston and Martech, New York. However, as expected in any healthy startup ecosystem, the Seed-stage landscape is even more diverse than the Series A landscape and depending on where traction happens, this “wider net” can influence future concentrations of financing.
For example, Frontier Tech, which is comprised of drones, AR/VR, space tech, and autonomous vehicles, represented 10% of Massachusetts seed financings versus 4% of Series A financings during the same time period. The complexity of the technological problem is similar and requires those skills found in Industrial and IT Infrastructure. In New York, the Healthcare uptick has a focus that feels a lot like the earlier days of Fintech.
Does it Matter?
Yes, and no. In B2B tech, building partnerships, recruiting the “just-right” talent and finding the particular oxygen your business breathes is critical to sustain momentum and build long term success. Knowing where and how to leverage that early network really helps. But it turns out that Boston and New York have combined strengths and robust networks across most all B2B sectors; much like peanut butter & jelly, they’re better together.