Boston suddenly finds itself the state’s tech startup capital

By Kyle Alspach, Beta Boston | April 6, 2014

Seemingly overnight Boston has become the new startup capital of the state’s tech community, with entrepreneurs moving here for the same reasons many newcomers do: It’s a compact, busy city with convenient public transportation, good restaurants, and lots of people like themselves.

Last year, in fact, Boston accomplished a previously unheard of feat in the tech world by having more venture capital deals than Cambridge — for years the center of gravity of the startup scene in Massachusetts. And a large number of those deals went to companies located outside the Innovation District, in neighboring business zones such as the Financial and Leather districts and Downtown Crossing.

“If you went back even a couple years, it would have been unthinkable,” said Jean Hammond, a longtime backer of startup companies in the Boston area. “The parts of town where you never thought you’d see startups are now working for them.”

One factor driving the shift is that for all its pricey real estate Boston is still less expensive than tech-centric Kendall Square, where office rents have been at the stratospheric level for several years. Moreover, despite all the efforts of former mayor Thomas M. Menino to create an irresistible environment for startups, going so far as to rename the city’s Seaport area as the Innovation District, it turns out entrepreneurs are often drawn to Boston by the basics.

“There are more subway lines, and it’s a little hipper in the downtown in many ways because there’s better food,” said Raj Aggarwal, chief executive of Boston startup Localytics, which relocated to Boston from Kendall Square in late 2012. “Even if the prices were the same in Kendall, we would stay downtown.”

In 2013, companies located in Boston closed 97 deals for venture capital financing, compared with 66 the year before, according to CB Insights, a data firm that tracks the venture industry. The amount of money flowing to Boston companies is also on the rise, some $593 million last year compared with $508 million in 2012.