1. MITX
DIGITAL STATE OF
THE STATE
Babson MCFE Team: Carlos Acosta, James O'Connor,
John Skayne, Mahmoud Mattan, Niket Anjaria
2. Table Of Contents
I. Introduction
II. Overview of the Digital Ecosystem
III. Investment Activity
IV. Exit Activity
V. Economic Indicators
VI. Leading Voices in the Sector
VII. Recommendations
VIII. Summary
IX. Scope, Objectives & Methodology
3. II. Introduction
Boston’s digital ecosystem is continually being measured through comparison. Some
have suggested the ecosystem faces an inferiority complex as a result. This report, The
MITX Digital State of the State, illustrates that while comparisons offer relative
benchmarks, there is little reason for this subsector to feel inferior. Boston’s digital
ecosystem is on the move and growing in virtually all its forms. Through our research, the
strengths of this ecosystem’s infrastructure have become readily apparent and have led
us to conclude the sector is poised for future growth.
This is not to say that gaps and weaknesses do not exist. This consulting team hopes to
illuminate these areas for improvement and provide a set of recommendations to bolster
the gaps that we have observed. Through implementation of these suggestions, these
improvements will solidify and catalyze further growth in Boston’s digital ecosystem.
-Babson MBA MITX Consulting Group, Class of 2013
4. II. Overview of the Digital Ecosystem:
Boston’s Strength in Diversity
Diversity of Industries
• Analytics
• Big Data
• Health
• Marketing software
• Robotics
• Social Impact
The City
• Public
Transportation
Unique Talent Pool • Schools
• 1st in US with a four- • Salary/Cost ratio
year college degree
or higher Experienced VC community
• Diverse • Operational
backgrounds knowledge
• Dense • Hands-on
• Better talent for less
5. III. Investment Activity:
New England 2nd Largest VC Hub in US
Percentage of VC Deals by Region
(2009 - Q3 2012)
(all sectors)
4% 3%
Silicon Valley
2% 4%
New England
5%
New York Metro
Los Angeles
6%
46% Midwest
San Diego
8%
Southeast
DC/Metroplex
9% Northwest
Colorado
13%
Source: PWC MoneyTree Report 2012
6. Still Room for Improvement…
Venture Capital Investment Activity in the US
(all sectors)
$14,000
$12,000
$10,000
$ in MM
$8,000
2009
$6,000
2010
$4,000 2011
Q1-Q3 2012
$2,000
$-
Source: PWC MoneyTree Report 2012
7. Digital Investments Garner Bigger
Slice of Investment Pie
Boston Digital VC Investments
1,400.00
Total $1204.2
1,200.00
$301
1,000.00 CAGR 23%
$ in MM
800.00
600.00
$971.3 $903.1
400.00
$523.0 $464.7
200.00
0.00
2009 2010 2011 2012 (as of Q3)
Actual Projected
Source: ThomsonOne Banker
8. YOY Increase in Digital Deals
Boston Digital VC Deals
600
Total 505
500 CAGR 6%
126
400
300
469
200 400 426
379
100
0
2009 2010 2011 2012 (as of Q3)
Source: ThomsonOne Banker
Actual Projected
9. Boston Ecosystem Attracting
Outside Dollars
VC Origins
Year Out of State In MA
2009 62% 38%
2010 63% 37%
MA Based 2011 64% 36%
Investments
37% 2012 (as of Q3) 63% 37%
Out of State
Investments
63%
• Data based on 4,200+
firms making investments
in MA based companies
• Analysis based on location
of firm headquarters
Source: ThomsonOne Banker
10. IV. Exit Activity:
Strong M&A Activity in Boston
10/2011
$1075 MM
11/2010
$1032.69 MM
7/2010
$700 MM
10/2009
$350 MM
Source: S&P Capital IQ
11. Linear Growth in Digital Exit Values
Total Value of Exits in New England
$1,200
Total $1054
$1,000
CAGR 14%
$800 $522.5
$ in MM
$600
$400 $854.9
$621.8 $696.5
$522.5
$200
$-
2009 2010 2011 2012
Actual Projected
Source: PWC MoneyTree Report 2012
12. Linear Growth in Digital Exits
Total Number of Exit Events
200 Total 188
180
CAGR +8%
160
140 94
120
100
80 154 165
138
60
94
40
20
-
2009 2010 2011 2012
Source: PWC MoneyTree Report 2012
Actual Projected
13. 2012 Companies, Jobs and
Revenues by Sub-Sector
# of Companies per Sector
2012 Bre a kout by T e ch Ca te gory
Digital
Content
10%
Jobs R e ve nue
Ca te gory (thousa nds) ($ MM)
Technology Digital
50% Marketing
Digital Content 11.4 $ 2,684
25% Digital Marketing 29.4 6,074
eCommerce 7.5 2,349
Mobile & Social 9.8 2,507
Technology 58.9 17,659
Mobile & Total 116.9 $ 31,273
Social
8% eCommerce
7%
Source: LexisNexis Company Dossier, Mass High Tech database, Capital IQ and CrunchBase
14. MA Leads New England’s Digital
Ecosystem
# of Companies # of Jobs (000) Revenue ($MM)
3,600 120.0 $32,000 VT,
VT, RI,
VT, $161
RI, 1.1 RI, $605
103 NH, 2.3 NH,
133 6.2 $1,036
3,200 NH, ME, ME,
303 2.1 $394
100.0
ME,
2,800
130 $24,000
2,400 80.0
2,000
MA 2,830 60.0 MA 105.4 $16,000
MA $29,104
1,600
1,200 40.0
$8,000
800
20.0
400
- - $-
Source: LexisNexis Company Dossier, Mass High Tech database, Capital IQ and CrunchBase
15. 2012 Study Results
New England’s Internet Business & Marketing Industry
2012 2010 2009 2008
Study Study Study Study
Number of 3,499 2,880 2,169 2,122
companies
Number of 117,090 87,045 86,742 67,000
employees
Revenue $31.3B $27.8B $28B $23B
16. The Hub is Attractive for Tech Jobs
In 2001 In 2009 In 2011
• Annual tech wages • Annual tech wages • Tech jobs accounted
averaged $77,314 averaged $100,208 for 1 of 10 workers
• Compared with • Compared with • 20% of all wages in
wages that wages that the state were
averaged $45,561 averaged $56,659 attributed to tech
for all other sectors for all other sectors • Each of the tech
• Tech wages were • Tech wages were industries were
70% above the 77% above the concentrated more in
average average Mass than found
nationally
• Overall conversion
rate for turning
interns into full-time
hires hit an
all-time high of
58.6%
Source: Bureau of Labor Statistics, National Association of Colleges and Employers
17. VI. Leading Voices in the Sector:
Primary Sources - Interviews
Investor Community
Jeff Bussgang - General Partner
Gus Weber - Principal
Antonio Rodriguez - General Partner
Larry Begley - Managing Director
Chris Sheehan - Managing Director
18. Primary Sources - Interviews
Founders & CEOs
Steve Vinter – Director
Greg Selkoe – Founder & CEO
Tim Rowe - Founder & CEO
Brian Halligan - CEO
Dave Balter – CEO
Jennifer Lum - Co-founder
19. Primary Sources - Interviews
Accelerators/Incubators
Reed Sturtevant - Managing Director
Walter Somol – Director
John Harthorne - Founder
Govt & Academic Institutions
Greg Bialecki - Secretary of Housing & Economic
Development, MA
Len Schlesinger – President
20. Opinions of Key Players in Boston’s
Digital Ecosystem
“Great startup environment. It has real
stuff”
“More measured environment than others.”
“Companies that should get funded, are
getting funded.”
“Diversity is a key driver.”
“Dense cluster of innovative people, Nobel
Laureates, world class universities.”
21. Opinions of Key Players in Boston’s
Digital Ecosystem
“Needs to leverage diversity”
“It should be more aggressive/edgy”
“Disadvantages (of Boston) are all
about perception”
“Lots of ideas – youthful population.”
22. VII. Recommendations
Talent Development – Retain and Attract
Talent
• Internship Programs
• Executive Training and Development
• Company Policies – Attractive to Gen Y?
Attractive to students?
• Engage diverse skillsets
23. Recommendations
Media Coverage
• To be at par with San Francisco, New York
City
• Partner with national media organizations to
create better visibility for Boston
• Feature Boston in more publications – Have it
on the global digital startup map
24. Recommendations
Business Development for startups
• Integrate startups in the value chain of larger
companies
• Create events/platforms for startups to pitch
their products and services
• Events to focus more on selling and creating
value
• Bring together inter-industry professionals
25. IX. Scope, Objectives & Methodology
Project Scope & Objectives
Create a report that maps the digital ecosystem in
the greater Boston area and build a database of
all the digital companies. Including information on:
• Public Companies
• Private Companies
• Startups
• Venture Capital and Private Equity firms
• Accelerator/Incubator programs
Develop recommendations about ways to help
drive growth to create a stronger innovation
ecosystem.
26. Methodology
PRIMARY: Interviews with prominent members
of the digital ecosystem in the greater Boston
area.
SECONDARY:
o Electronic Databases: Mass HighTech Directory,
LexisNexis, CrunchBase, Capital IQ, MITX Member
Database
o Web-hosted information on companies that fell
within the scope of the report
o Further Sources: See Bibliography
