On a stretch of the Massachusetts Turnpike, where it exits the suburbs west of Boston and the skyline comes into view, a pair of bright orange billboards greets commuters.
“Have a therapeutic idea worthy of funding?” asks a billboard for Curie.Bio, a year-old venture capital firm and incubator started by Zach Weinberg, a repeat founder and a general partner at early-stage firm Operator Partners, who sold a previous company to Roche for $2 billion.
These days, in Boston, more ideas are getting funded.
Last year, according to data from Carta, the equity management platform, startups in the greater Boston area raised more money than startups in New York City did. This is the first time Boston pulled ahead of its largest East Coast rival since Carta started tracking this data in 2016. Companies with headquarters in Boston, Cambridge, or Newton, Massachusetts, took in $7.6 billion, while $7.3 billion flowed into companies based in New York City, Newark, and Jersey City, New Jersey.
Boston’s step up in the rankings is a big win for a region that traces its roots back to the time of the semiconductor revolution and has been losing ground to other tech hubs since. Historically, Boston was a great place to start companies, but to scale them was an issue. Founders ran into walls trying to hire developers and raise money for their businesses, and investors urged them to go west.
The truism still exists. It’s getting easier to start companies anywhere, but the big, big money lives in the Bay. So while founders in Boston are taking a larger share of capital, most of that capital comes from funds located thousands of miles away.
“It’s a lot easier to meet the founder that’s local than to go across country. This is reality,” said Rudina Seseri, a Boston venture capitalist. It makes Boston’s funding haul all the more impressive. “Relative to the availability of the dollars locally, we punch way above our weight,” Seseri said.
A resilient ecosystem
The past two years ended a funding frenzy through the pandemic. But not every city has experienced the slowdown the same way.
According to Carta data, select metro areas saw the total funding raised across seed and Series A rounds decline on average, by 50% from 2022 to 2023. In tech hotbeds around New York and San Francisco, startups raised 50% less funding year over year.
Yet early-stage funding was only down 24% in Boston, however, the smallest decrease of the metro areas that Carta tracks. Leave it to wintry Boston to weather a funding chill.
Boston’s anchor tenant
Boston owes its edge to a rugged biotech sector, says Peter Walker, head of insights at Carta. The industry displayed some rare immunity to a tech downturn. Carta data shows that biotech’s share of all capital raised ticked higher last year, as funding to areas like fintech and software stalled.
Nowhere does biotech like Boston, with its cluster of world-class universities, labs, and hospitals. Michael Greeley, cofounder and general partner at Flare Capital Partners, says these institutions anchor startups in Boston because founders rely on their talent pipeline and lab space to run their businesses. Their customers are often local pharma companies or hospitals, too, so it benefits startups to share a ZIP code with them, Greeley says.
Two years ago, Mark Castleman set up the Boston office of Intel Ignite, the semiconductor company’s accelerator for early-stage deep tech startups. Over coffee in Boston’s Back Bay, he explained that many funds have budgets for categories of investment. They might pull back from one area to put more money to work in the thème du jour.
This, however, doesn’t usually apply to biotech, Castleman said. These investors are specialists rather than generalists, and they continue to sock money away in investments because — while new drugs and medical devices often fail to reach the market and regulatory approval can take considerable time — the opportunity is extraordinary.
According to Carta data, about $2.6 billion of capital raised in biotech flowed to Boston startups last year. The city also pulled in another $1 billion across health tech and medical device companies. Some notable rounds include $273 million in Series C funding to Generate Biomedicines, which uses machine learning to create new drugs, and $401 million in Series D funding to cell and gene therapy startup ElevateBio.
The Carta data shows Boston also had strong showings across investment in software-as-a-service and hardware. The city also led all metro areas for funding to the energy sector, with $1.2 billion in capital raised, twice the amount that flowed to energy startups in the Bay Area.
The flurry of funding activity in artificial intelligence is also carrying Boston, says Seseri, whose fund, Glasswing Ventures, backs early-stage founders who are producing AI software for enterprise and security markets.
Boston is the center of gravity for biotech, which has led some people to suggest the city only does biotech.
Founders like Clement Cazalot beg to differ. Originally from France, Cazalot moved to Boston for the Techstars program for a previous company in 2012. His current startup, Machinery Partner, is an online marketplace for builders and contractors needing heavy machinery. In December, the three-year-old startup raised $11 million in equity and debt from investors including Pritzker Group, Armory Square Ventures, and One Way Ventures.
People tend to sleep on Boston, he said, because it produces “sleeping giants” in deep tech and industries that don’t attract as much mainstream attention as consumer brands, such as security, robotics, and climate. Boston’s Klaviyo, which helps merchants sell more by improving their text and email marketing, had flown under the radar until last fall when it went public in a barren IPO market.
“The stuff that’s on the front page of TechCrunch isn’t here,” Cazalot said, chatting in a bustling coworking space across from Copley Place.
This might be a good thing for Boston. Walker, the Carta analyst, says that though SaaS is still king, startups focused on solving hard problems are gobbling a larger share of capital, a trend he expects to continue over the next five years. The startup ecosystem, he said, is “rediscovering venture is good for hard problems, things that require a ton of investment up front.”
If that’s the case, Boston is in a good position to clean up capital.
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