5 investors discuss Boston’s resilient tech ecosystem

Boston has had a thriving tech startup ecosystem for a while, but things can change fast. After setting records in 2021 as “Zoom investing” took off, how are local startups faring in 2023?

To find out, ahead of TC City Spotlight: Boston, an extended TechCrunch Live event during which you’ll get to hear from local leaders on how startups can take advantage of Boston’s extensive resources, we gathered insights from five investors active in the area.

It seems Boston is faring well, and part of the reason for that appears to be that remote pitching is still a trend. “Fundraising has changed significantly and founders at all stages are now taking many first meetings on Zoom,” said Russ Wilcox, a partner at Pillar VC.

Attend the TechCrunch City Spotlight: Boston event on February 27, 2023.

Register for the free virtual event here.

However, in-person gatherings have also made a return and are sometimes preferred. “In-person events have picked back up in Boston, particularly around the innovation hubs across campuses, so we expect more serendipity to come back into the equation,” said Underscore VC general partner Lily Lyman.

‘Serendipity’ accurately describes a lot of what’s going on in Boston’s tight-knit tech community. As our very own Brian Heater previously noted, startups are often located in “a five- to ten-block radius a stone’s throw from MIT (and, for that matter, Harvard).”

That also explains why Boston startups are associated with ‘tough tech’. “Boston, world-class universities and hard tech all go together,” said Sanjiv Kalevar, a partner at OpenView.

This combination is also arguably what makes Boston more resilient in the current downturn. According to Rudina Seseri, founder and managing partner at Glasswing Ventures, “Boston remains a vibrant startup and VC market in 2023 […] Despite tough markets, a recessionary economy, and overall business pessimism, I am confident Boston will see a new wave of founders starting new companies.”

We spoke with:

Rudina Seseri, founder and managing partner, Glasswing Ventures
Lily Lyman, general partner, Underscore VC
Sanjiv Kalevar, partner, OpenView
Katie Rae, managing partner, The Engine
Russ Wilcox, partner, Pillar VC

Rudina Seseri, founder and managing partner, Glasswing Ventures

How would you describe the pace of venture capital dealmaking in Boston this year so far?

Boston remains a vibrant startup and VC market in 2023. The overall pace of funding has declined since 2021, but we are continuing to see high-potential companies and founders secure funding today.

We especially see this in the AI and security markets. Recent data published in the Pitchbook-NVCA Venture Monitor shows that Boston had roughly the same share of the number of VC deals in the U.S. between 2021 and 2022, and we expect that trend to continue or improve in 2023.

For a Boston-based founder, does fundraising in 2023 still involve a lot of Zoom calls? Does it depend on which stage their startup is at?

We continue to use Zoom calls during our diligence process. They give us the opportunity to be efficient with a founder’s time and meet them where they are.

Having said that, it is a priority for us to meet in person when we can. The founder-investor relationship is a lasting one. We enjoy building close bonds with our founders while also giving them the opportunity to meet our building partners.

Have Boston-based tech workers been as affected by layoffs as their peers in the Bay Area?

Every corner of tech has been affected. Yet, despite tough markets, a recessionary economy, and overall business pessimism, I am confident Boston will see a new wave of founders starting new companies.

Innovation shines the brightest in dark times, and it is in these times that transformative ideas are born. Among the technologists laid off from big tech companies recently, we expect many will find a fire in their bellies and build incredible products. Now is an excellent time for early-stage founders to implement their ideas.

Have in-person networking and startup community events in the Boston metropolitan area returned to pre-pandemic levels?

We have seen the number of events in the broader community tick up and are excited to keep bringing the community together as we head into the spring and summer. We host a wide range of ecosystem events, from networking for the AI and cybersecurity industries, to thought leadership sessions on making your first marketing hire. We will continue to push our ecosystem forward with gatherings at our office in the heart of Back Bay, around the area, or online.

What link do you see, if any, between two of Boston’s strengths: “Tough tech” and university spinouts?

These are inextricably linked. Boston’s academic rigor is a critical ingredient in delivering the transformative technology that pushes our economy and society forward.

We work very closely with universities and research labs in the area (including, but not limited to, the MIT and Harvard ecosystems) and back leading founders building AI and frontier technology products for the enterprise and security markets.

What’s the most interesting Boston-based company you’ve invested in recently?

One of our latest investments is in FeatureByte, an AI startup founded by the team that built the backbone for DataRobot. FeatureByte is a platform built specifically for data scientists to simplify the creation, serving, managing and monitoring of machine learning features.

Are you open to cold pitches? How can founders reach you?

Yes, we are open to cold pitches, but prefer warm ones if a founder is able! We are looking for strong founders leveraging AI and frontier technology to build applications and infrastructure for the enterprise and security markets. My email is: [email protected].

Lily Lyman, general partner, Underscore VC

How would you describe the pace of venture capital dealmaking in Boston this year so far?

Looking across the data, it’s clear that the pace of venture dealmaking in Boston slowed in Q3 and Q4 of last year, like everywhere else, as investors and founders were trying to get a sense of the market dynamics.

But thus far in Q1, we are seeing strong, high-quality investment opportunities at the earliest stage. It’s a great time to invest in early-stage startups. Great founders are starting businesses that are cash-efficient and thinking about business models from Day 1, which helps them attract strong talent at a more affordable rate, face less competition, acquire customers more affordably and solve big problems.

What has changed, particularly at the later stages, are the length and depth of diligence processes. We are no longer seeing the hasty timelines we saw in 2021. Late-stage investors are digging deeper into business fundamentals and projections. Price discovery is harder in this market and late-stage investors are afraid to overpay.

For a Boston-based founder, does fundraising in 2023 still involve a lot of Zoom calls? Does it depend on which stage their startup is at?

5 investors discuss Boston’s resilient tech ecosystem by Anna Heim originally published on TechCrunch