Atlas Venture is doubling down on New England

While Silicon Valley is hailed in the press as the epicenter of technology innovation, it is not the only booming high-tech economy. New England has long been a region where innovation thrives and industry-leading businesses are built; and it is experiencing another upswing.

The boom is paying off for entrepreneurs and investors. Of technology S-1s filed in the first quarter of 2007, most were for East Coast companies, and more than half of those were from Massachusetts.

Innovation leadership is also found at the core ideas around which companies are built. The Massachusetts Institute for Technology (MIT), which has consistently been one of the top three patenting universities, received 136 patents for invention in 2005, second only to the University of California system.

New England’s entrepreneurial robustness and leadership in emerging sectors has set the stage for a rousing future in technology business creation.

Building on success

Breakthrough technologies don’t just fall out of the sky. The region’s leadership builds upon a long history of innovation. From textiles and machine tools to shipbuilding, radar and jet engines, advances have built upon one another.

You can see the textile-manufacturing lineage in Timberland and LL Bean. And lessons of manufacturing-process and material-science advances are apparent in Raytheon and in the “magic” of Polaroid. This expertise and the pool of talented workers eventually gave rise to companies such as Analog Devices. Mainframe computer giants Wang, DEC and Apollo were the forefathers of the likes of EMC, RSA, Bay Networks and Akamai.

Examples of “tech built on tech” in New England are virtually endless, and the trend shows every sign of continuing. Take a spin around Cambridge and get a glimpse of the future. Note the new tech companies and outposts of big corporations compelled to install offices near MIT and Harvard. Look closer and see incubators and think tanks, the next wave in technological advancement flourishing in this innovation ecosystem.

Innovation engines

Commercializing innovation requires a partnership of university research institutions, entrepreneurs and financiers ready to build companies from the ground up.

One notable participant is the MIT Deshpande Center for Technological Innovation. Since 2002, it has funded 64 research projects led by MIT faculty, creating 10 new companies. More than a third of Deshpande projects are building new businesses, raising venture capital or seeking licensing arrangements.

Deshpande does more than just provide money for these nascent technologies. It selects promising projects and provides direction, matching the research team with a VC/entrepreneur mentor who helps determine the best market application.

According to Prof. Charles Cooney, faculty director of the Deshpande Center and longtime Genzyme Corp. board member, the last step is “connection,” and that’s where there’s a distinct advantage to location.

We see three areas poised for healthy expansion: the convergence of IT and life sciences, the innovation of mature industries, and network and IT infrastructure.”

Jeff Fagnan, Partner, Atlas Venture

“It’s like being a kid in a candy shop. We have all this technology bubbling up around us and this wonderful opportunity to select those that could really benefit from funding,” he says. “In the Cambridge area, it works so well because we have so many VCs and entrepreneurs who understand how to connect early stage technology to interesting markets and grow companies.”

Research institutes at Boston College, Dartmouth, Harvard, Tufts, the University of Massachusetts and Yale are also leading innovation initiatives fostering new companies. At New England universities, it’s acceptable, even expected, that faculty members interact with the industrial community.

Atlas Venture has spent a lot of time immersed in the New England technology community, determining which assets represent opportunities for building great companies. We see three areas poised for healthy expansion: the convergence of IT and life sciences, the innovation of mature industries, and network and IT infrastructure.

Convergence

There’s no dearth of interesting companies creating buzz in the space, from medical devices to technology solutions for improving efficiency. Myomo, a medical device maker, could revolutionize the lives of stroke victims. Brontes Technologies, a provider of high-speed 3D dental imaging, was acquired earlier this year by 3M.

Dr. Robert Langer is one of 13 Institute Professors at MIT, the highest honor MIT awards to a faculty member. (He was also named to Forbes’ 2002 list of “15 People Who Will Reinvent Your Future.”) The Langer Lab at MIT is the largest academic biomedical engineering lab in the world and technologies developed there have led to dozens of companies.

One of those companies, MicroCHIPS, which is based in Bedford, Mass., develops implantable, programmable drug-delivery devices that could revolutionize the treatment of chronic diseases. “The outstanding colleges and universities and the people that come to them and want to stay make this the best place to do this research and the best place for these businesses to be built,” Langer says.

Green vision

While the past 20 years have seen technology advancement in new industries, established markets have progressed at a much slower rate. Some large, mature industries are now poised to leverage technology given the economics of globalization and environmental and regulatory pressure.

Advanced Electron Beams¹ (AEB), based in Wilmington, Mass., has harnessed the power of electrons to create an efficient, clean form of industrial energy. Its technology has been positively received by such industries as curing/polymers, food packaging, pollution abatement and more.

“Mature industries need a good reason to change,” says Mitch Tyson, CEO of AEB. “Rising energy prices, market pressures to be more ‘green,’ and coming caps on CO2 emissions are increasing interest in our technology, which can reduce energy and chemical consumption by 90% even though it requires a redesign of their manufacturing processes.”

“I wouldn’t want to build this company anywhere else,” added Tyson. “New England is a great place to recruit talent. We’re surrounded by many other high-tech companies and great people. The quality of life and environment are attractive, which makes it easy to recruit the right kind of talent with the right outlook from around the world.”

Another force pushing the region’s companies toward a clean tech/energy future is the New England Energy Innovation Collaborative (NEEIC), a non-profit working to accelerate energy innovation by fostering collaboration between the investor community and industry and government thought leaders.

Sure, the people of New England are known for quirks, like Yankee frugality. But that resourcefulness, combined with the ingenuity often attributed to our residents, results in an entrepreneurial energy you won’t find anywhere else.”

Jeff Fagnan, Partner, Atlas Venture

In that environment, Evergreen Solar, a developer and producer of efficient, low-cost solar cells, doubled its workforce and built a $150 million plant in Massachusetts.

The clean tech/energy trend also drives new companies leveraging material science or nanotechnology, such as A123, developer of next-generation lithium-ion batteries, and Seldon Labs, which offers chemical-free instant water purification.

Infrastructure resurgence

Traditionally, infrastructure has been the strongest technology area in New England. Today, companies such as Airvana, Cedar Point and Starent Networks are leading a resurgence of network infrastructure. One of 2006’s hot IPOs, Massachusetts-based ACME Packet, created a new category for delivery of voice, video and multimedia sessions.

Infrastructure for enabling the monetization of video and content on the Internet is another focus area. Brightcove and Gotuit Media¹ have developed broadband video/Internet TV platforms, while companies such as Extend Media¹ develop tools for content providers to securely deliver online content over many devices.

One of the region’s serial entrepreneurs in infrastructure, Cheng Wu, recently left Cisco to form yet another startup here, this time in storage networking. [The company is in stealth mode.] Wu previously founded three companies, including ArrowPoint Communications, a content networking startup, which he sold to Cisco for $5.7 billion.

“This region has played and will continue to play an important role in data networking and any new innovations that require data networking as one of the underpinning technologies,” says Wu. “For instance, storage virtualization is moving into the network. Doing that well requires an innovation based on the integration of storage systems and networking. Only two places have existing talents in both areas—Silicon Valley and New England.”

Other East Coast companies are pioneering the next wave of IT infrastructure. Marathon Technologies¹ has developed virtualization solutions providing infinite availability for enterprise applications, ensuring continuous operations even amidst hardware failures. More examples include Netezza, a next-generation data-warehouse appliance maker, and Equalogic, a provider of storage solutions.

This vibrancy, fueled by some of the finest minds in the world and a tradition of building businesses from new technologies, has led to Atlas Venture’s commitment to the region.

VCs and entrepreneurs here play together better than anywhere else and have formed a community where reputation matters and partnership is the rule.

Sure, the people of New England are known for quirks, like Yankee frugality. But that resourcefulness, combined with the ingenuity often attributed to our residents, results in an entrepreneurial energy you won’t find anywhere else.

Though there is promise and energy elsewhere, Atlas Venture is doubling down on New England, anticipating a future filled with next-generation, category-leading businesses built in our own backyard.

Jeff Fagnan is a partner in the technology sector with Atlas Venture and focuses on emerging companies in enterprise and Internet infrastructure, as well as alternative energy technologies and advanced material science. He may be reached at JFagnan@atlasventure.com.1. Company has received financial backing from Atlas Venture.