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Boston trailing NYC in number of online-based firms

Survey finds fewer online-based firms

In the race to build a local sector of innovative Internet companies, Boston and New York City are both growing fast - but a new survey says New York, with twice the number of digital companies and a much larger base of venture funding, is bound to pull even further ahead in the years to come.

There are 116 such companies employing nearly 11,000 workers with offices in Boston, according to the survey from executive search firm Cook Associates, which tracks the growth of companies devoted entirely to Internet-related activities. The survey did not include digital operations at traditional businesses like TV networks and book publishers.


“I think you’re going to see these numbers grow dramatically over the next five years,’’ said Cook managing director John Barrett, who created the survey. “We could easily add a thousand new jobs in this digital media sector in Boston in the next 12 months.’’

New York has 230 digital-only companies with nearly 20,000 employees, twice the size of Boston’s Internet and digital media sector - but New York’s population is 13 times larger.

Yet Boston will never catch up or even keep up, Barrett said, because a flood of venture capital funding in New York is spawning a surge in Internet start-ups there.

“Internet and digital media investing in New York continues to outstrip investment in Boston,’’ Barrett said, adding that New York’s huge media and advertising industries are important customers for Internet companies and a major source of skilled workers. “Boston just doesn’t have that same ecosystem.’’

Such pessimism doesn’t sit well with David Friend, chief executive of Carbonite Inc. of Boston, which sells online data backup services to consumers and businesses. Friend agreed that New York is a good venue for Internet companies oriented toward marketing and advertising, but he also thinks Boston has what it takes to compete. Carbonite, he said, relies on complex software for managing millions of gigabytes of stored data.


“For companies like us where there’s a lot of heavy-duty technology, I think we would have a hard time in New York,’’ Friend said.

Boston Mayor Thomas M. Menino said local universities produce a technically trained workforce here that New York can’t match.

Carbonite chief executive David Friend is bullish on Boston’s Internet sector. WENDY MAEDA/GLOBE STAFF

“We have the brainpower,’’ said Menino. “Boston’s one of the best-educated cities in the world. . . . We’ve been ranked one of the most innovative cities in the world. We’re not going to let that ranking slide.’’

The Boston area is also an excellent place to find smart, dedicated employees, according to Brian Halligan, chief executive of HubSpot Inc., an Internet marketing company in Cambridge.

“There’s lots of talent,’’ he said. “There’s not a lot of big Internet companies to necessarily compete with, and the employees are more loyal.’’

Halligan rejected the idea that Boston is doomed to fall further behind New York.

“I don’t see that as inevitable at all,’’ he said.

But Alex Finkelstein, general partner at Boston venture capital firm Spark Capital, said his company is investing more in New York’s Internet sector than in Boston’s.

“VCs follow the entrepreneurs, not the other way around,’’ Finkelstein said, and that’s why so many of their Internet investments are in New York.

“That’s where the entrepreneurs are,’’ he added.

Yet Finkelstein’s company has invested in a number of Boston start-ups, including the online retailer Wayfair LLC and the mobile fitness tracking service FitnessKeeper Inc.


“I think the Boston scene is vibrant,’’ Finkelstein said.

So does Barrett. Despite his prediction of New York’s ascendancy, Barrett said Boston has the entrepreneurial and technical talent to remain a major Internet business hub.

“We need to stop bashing ourselves here in Boston,’’ he said. “We still have an unbelievable ecosystem here. . . . We need to start telling that story.’’

Hiawatha Bray can be reached at