When Facebook bought Instagram, $57 million in VC money turned into a billion. That’s an 18x increase in value. Pretty good! But it pales in comparison to another, older story. In 1957, a savvy moneyman gave $70,000 to a new tech company called DEC in exchange for a big chunk of equity. The company later sold for $450 million, turning that 70k into $183 million. The investor had multiplied the value of his investment 2,600 times over.
This was the birth of tech venture capitalism, and it happened in Boston, not the Bay Area. Had things gone a little differently, we wouldn’t be talking about Silicon Valley today. We’d be talking about Route 128, known Boston’s “Golden Semicircle.”
“It is not clear whether the name derives from the high technologies flourishing in the glass rectangles along the route or from the Midas touch their enterpreneurs [sic] have shown in starting new companies. Maybe both,” wrote the New York Times in 1968. (This article, by the way, is one of the first known mainstream uses of the term “high technology,” or “high tech.”) “When you look at the proxy statements and try to figure out the personal wealth of fellows who have started new companies around here, you reach one billion dollars pretty fast.”
In the late sixties, Boston was tech’s boomtown. It was where you could find the headquarters of Xerox, Itek, Polaroid, Wang Labs, Raytheon and Tyco. It was, and still is, flanked by some of the best universities in the world. The excitement at the time was palpable, encouraged not just by the more traditional successes of companies like Xerox, but by a new type of company with a new type of financing. In Boston, in the late 60s, people were intoxicated by tech startups. Here’s how the NYT tried to describe the phenomenon:
Founded by Georges Doriot, the father of modern venture capitalism, ARD was a money machine, and served as a template for virtually ever VC firm after it. With it, startup culture was born.
So, where did things go wrong? Why are the Instagrams of the world coming out of San Francisco instead of Beantown? After a national explosion in tech venture capital during the 70s, much of which stayed in Boston but a large share of which flowed the nascent VC community in Menlo Park, CA, Apple went public. The colossal $1.3 billion IPO instantly created a few hundred millionaires, and more importantly sealed the deal for the Bay Area: as of 1980, it was the place to get rich in tech.
That’s not to say Boston isn’t still an important part of the tech world — it’s still a good place to look for VC funding, and its talent pool is huge. (Data released today places it as the 18th most important hub for tech investment worldwide.)
Boston is still a tech city. But it’s not the tech city.