What better way to take the pulse of Boston’s tech community than by group text message?
This month, I assembled a group of investors, entrepreneurs, and a few recruiters and attorneys who work with Boston startups to get their take on what’s happening as the clock runs out on 2018. Messages have been lightly edited for coherence and length.
Here’s the cast of participants:
Dave Balter — CEO, Flipside Crypto, a Boston startup
Karin Brandt — CEO, coUrbanize, a Boston startup
Clément Cazalot — managing director, TechStars Boston accelerator program
Todd Dagres — cofounder, Spark Capital, a Boston venture capital firm
Jeff Fagnan — founding partner, Accomplice VC
Lee Gesmer — senior counsel, law firm of Gesmer Updegrove
Jonathan Gworek — partner, law firm of Morse, Barnes-Brown & Pendleton
Jennifer Jordan — founder, PickAxes & Shovels, a startup financing consultancy
Anna Palmer – CEO, Dough, a Boston startup
Art Papas — CEO, Bullhorn, a Boston software company
• • •
Scott Kirsner: Thanks for agreeing to participate in this short, hopefully painless experiment in thumb-based interviewing.
How have you (or the founders you work with) interpreted the stock market drops of November and December? Have you seen people doing anything differently . . . preparing for a tougher environment in 2019?
Dave Balter: It will take a few more months of sliding to create real changes in behavior. At this moment, I’d say there’s some pocket-checking, reflecting on the [startup’s] most recent [fund-raising round], and if it will be enough to get through a protracted dry spell.
Art Papas: Our customers — recruiting agencies and staffing businesses — tend to be the canary in the coal mine for economic slowdown. Other than a slight pullback post-election in early 2017, it has been very steady.
Jonathan Gworek: I don’t think very many founders of early-stage companies relate closely with the Dow or think about it a whole lot . . .
Lee Gesmer: Most investors (if not startups) know that capitalism is a very rocky path, and it really takes a significant change in the economy to derail investment, [or mergers and acquisition] activity. We are nowhere close yet.
Todd Dagres: The recovery and bull market are long in the tooth, and anyone with experience knows it. . . . Assets are overvalued right now and due for an adjustment. . . . I’m advising [startup] companies to raise four years of capital now. That’s not a typo. Companies will need to weather a tougher fund-raising market over the next few years . . .
Papas: Wow. Taking four years of capital seems extreme, but I get why you’re saying that. If I were an early-stage entrepreneur, I’d try to run [my company] at a lower burn . . .
Dagres: I know it seems extreme, and it isn’t feasible for many companies, but I believe we are about to enter a down cycle in which you don’t want to have to raise money, and you have the opportunity to achieve market dominance by outlasting the competition.
Jennifer Jordan: The combination of trade headwinds and slower corporate earnings suggest a correction is afoot. . . . I think it will be hard to find the same tailwinds in 2019 that we had in 2017 for public markets. On the other hand, that’s a good time for corporates with flush balance sheets to go after mergers and acquisitions.
Anna Palmer: In my founder role, I’ve noticed in fund-raising that the question of how a company fares during a recession has been more prominent. We’ve talked about the volatility internally as a company and how it could affect strategy, but it isn’t something yet that we’re shifting our behavior for.
Kirsner: Last week, we saw Uber and Lyft begin the IPO journey. Are there some Massachusetts companies you expect to follow that road in 2019?
Dagres: The most likely MA IPOs will be biotech companies because they don’t require positive cash flow or earnings.
Jeff Fagnan: Both Recorded Future and DraftKings are legit 2020 IPOs. 2019 [is] a bit early, IMO, for differing sets of reasons. Overall, I think you will see a lot of companies file [to go public], but my bet is 2019 will be a soft IPO year, given socioeconomic volatility. [Fagnan’s firm, Accomplice, was an early backer of DraftKings, a fantasy sports site that awards real money.]
Jordan: I would imagine Ginkgo Bioworks will start thinking about this in the next year. Everyone with an IPO on their horizon should be thinking about whether they can be ready while the markets are receptive. [Jordan put money into Boston-based Ginkgo, a bioengineering startup, when she was a vice president at MassVentures.]
Papas: There’s very much a New England theme to our comments. “You better stockpile enough supplies to last the winter, ’cause it’s long and cold!”
Karin Brandt: They may not IPO in the immediate future, but Boston’s 3D printing unicorns — Desktop Metal and Formlabs — are definitely ones to watch.
Fagnan: Good call.
Kirsner: This was a year of continued turmoil at GE . . . and losing out on Amazon HQ2. What felt to you like a tangible win in 2018 for our ecosystem? Or what makes you optimistic about 2019?
Gesmer: If Amazon had moved here, its need for engineers and managers would have killed the rest of the entrepreneurial community here for five years. . . . Boston is in great shape for an entrepreneurial 2019.
Brandt: Avoiding the tech influx from HQ2 doesn’t hurt when we already have a housing shortage. I’m increasingly optimistic that Boston is not on the Bay Area’s unsustainable path . . . The City of Boston has ambitious plans to build 69K new housing units by 2030.
Newer [investment] funds like [MIT’s] The Engine are a huge win for Boston, to double down on our biggest assets in deep tech and world-class university talent.
Jordan: I agree. Sometimes, though, I wish we had more money here for what I see as the “king-making” going on in the Valley. King-making can be a double-edged sword. It can work if the big dollars give a company time to grow into its valuation.
Fagnan: We had three Boston tech companies raise $100 million rounds in Q4.
Jonathan Gworek: Let’s not forget the local bellwether of traffic volume on 128, which I am looking down at right now, and the MA Pike.
Dagres: Traffic is a lagging indicator. Besides, half are Uber and Lyft zombies driving around in endless loops.
Jordan: While we are on the transportation digression . . . quite a few people this morning [were] riding the Bird and Lime scooters around D.C. Do you think we will see a spike in adoption in Boston or are our pot-holed terrible roads and narrow sidewalks too great a deterrent?
Dagres: Boston will embrace on-demand personal transportation. The mayor will support them, but with controls. . . . I’m personally waiting for my jet pack. Prediction: MA leads 3D bio-printing, printing organs and other body parts. If we don’t, we should be fired.
Jordan: We should also own the human-machine interface, as well as empathetic AI and robotics . . .
Dagres: I’m fascinated with the area of exoskeletons, combining man-machine interfaces, robotics, and AI. We have all three, not to mention the best medical minds.
Kirsner: My last question . . . I’ve noticed that the startup center of gravity feels really dispersed these days. Used to noticeably be in Kendall. Is there a center of gravity now? Where do you schedule most of your coffee/lunch meetings?
Balter: With all the discussion on scooters and Ubers, my sense is that’s a big part of the reason for dispersion. It’s just plain easier to get everywhere. The results have been many startup neighborhoods, as opposed to just one or two central spots like five-plus years ago . . .
Clément Cazalot: It feels like La Colombe under WeWork by South Station is becoming the new [gathering place] for tech, given its central location and awesome draft latte. Kendall and Central Square are still pretty much the center of the world for everything life science-related.
Gworek: We have offices [in Kendall Square and Downtown Crossing] because things are so dispersed. We will probably end up with one at the Seaport as well. Believe it or not, there are still meetings taking place in MetroWest. I’ll buy this group lunch at the Green Papaya if you want to see it for yourself.
Palmer: Most of my meetings/events these days are either [Back Bay’s] St. James area, La Colombe [by South Station], or the Seaport. It seems to revolve around WeWork hubs . . . I’ve spent surprisingly little time in Kendall Square lately.
Jordan: It was great chatting with you all. Maybe we should try this as a dinner sometime, too.