Some startups leave Boston, go west, and never look back. But this one is returning
When startup companies trade Boston for New York or San Francisco, they typically don’t look back.
But occasionally there’s the exception to that informal rule, like the Harvard-spawned payments startup Plastiq, which pulled up stakes and went west in 2014, after raising $10 million in venture capital money. Plastiq now has plans to open a Boston outpost in 2019, so that it can hire seasoned software developers — something that chief technology officer Trevor Brosnan says is an uphill battle in San Francisco right now.
Yes, the entire Bay Area is flooded with people who hope to sign on with the next Apple, Tesla, or Netflix, and then get rich from stock options. But when it comes to the software developers who craft the code underlying everything, many of them, Brosnan says, are fresh out of school: “Senior staff is more difficult to find.”
And while employers have always talked behind closed doors about the “three-year itch,” when sought-after workers may start considering other jobs, “in San Francisco over the last couple years, it has become the one-year itch,” Brosnan laments.
“The money situation in the Bay Area has gotten out of hand,” says Charley Polachi, a partner at the Boston-based executive search firm Polachi & Co. “Anyone who sticks around in one job for more than two years is seen as a dummy.” Polachi says that he sees mid-level and high-level software developers earning 10 to 15 percent more in California than they do in Boston, and getting equity stakes that are typically twice or three times what they’re offered here and that vest at a faster pace.
Plastiq was one of those classic campus startups. Two Harvard undergraduates who met at the university’s innovation center in 2011 began focusing on the question of why it was impossible to pay big bills — like tuition or rent — with a credit card.
“I was trying to pay part of my Harvard tuition with a card to build my credit score,” cofounder and CEO Eliot Buchanan recalls. Today, Plastiq is a payment intermediary that will bill your credit card, tack on a 2.5 percent transaction fee, and then cut a check or make a bank deposit to whomever you’re paying.
While the company initially focused on individual consumers, now it is working with a growing number of small businesses, Buchanan says.
In 2014, when the company raised money from a California venture capital firm, it decided to relocate. Buchanan says that about half of the startup’s 20 employees moved west, and it kept just two of its software developers locally.
At the time, Plastiq touted the talent advantages of being in San Francisco. It hired people like Brosnan, who had previously worked at the card issuer Visa, and Alyssa Cutwright, a former PayPal executive who signed on as Plastiq’s chief operating officer. (After two years, in 2016 Cutwright left for a new role at eBay.)
The company currently has 60 employees, and Buchanan says the plan is to add 100 more in 2019. In November, the company announced it had raised $27 million in additional funding.
“We were pretty eyes-wide-open to the challenges of being out here,” Buchanan says. “Talent-wise, it’s competitive. But you don’t really know it until you’re in it.” Example: Even with a two-week deadline that the company sets internally to go from first conversation with a candidate to a job offer, Plastiq still loses 20 to 25 percent of candidates to other employers.
In San Francisco, Brosnan says, many people applying for jobs as software developers are recent graduates of so-called “coding academies,” which offer a crash course in programming to people looking to enter the field. “They are not classically trained engineers,” Brosnan says.
In Boston, by contrast, it’s easier to find more experienced engineers with seven or eight years of experience, he says. So the plan is to try to hire 10 to 15 engineers here over the next year. At that point, Brosnan says, “we’ll have dual engineering hubs for the company, in San Francisco and Boston, doing equivalent work in both locations.”
The tight Bay Area employment market, Clark Waterfall of the recruiting firm BSG Team Ventures says, “is a huge problem that has forced almost all companies domiciled out there to find technical and engineering resources outside of the Valley.” Sometimes, that means outside of the United States, in places like Uruguay or Ukraine, he says. Polachi says he sees companies considering places like North Carolina and Minnesota.
It’s tough to unearth other examples of Boston companies that have decamped for California, like Plastiq, and then decided to set up an office here later. Facebook would be one; the social network has announced plans to grow its local office, originally opened in 2012 with just a handful of employees, to about 650 people.
Because of the Bay Area’s hypercompetitive hiring scene, some of Boston’s biggest software and e-commerce companies have chosen not to jump in. While HubSpot, the marketing software firm, recruits engineers for its Cambridge headquarters and its European office in Dublin, the company doesn’t have plans “in the near future” to hire software developers in San Francisco, says Katie Burke, HubSpot’s chief people officer.
Same with Wayfair, the online retailer of home goods. “We have not given any serious thought to a San Francisco office,” says Jane Carpenter, head of public relation at the company.
All of Wayfair’s software developers work in the company’s Back Bay headquarters, she says.
It’s just not possible to persuade every entrepreneur who starts a promising company to stay in Boston. But actively supporting those who do — ensuring they have access to funding and mentorship — is always a better regional strategy than hoping the emigres will one day return to set up a branch office.