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I had the honor last evening to participate on a panel at the Charles River Ventures Entrepreneur Exchange, held in Boston, Massachusetts, at the Intercontinental Hotel. Hats off to the Charles River team for bringing out over 200 entrepreneurs and technologists to attend the event. Jon Auerbach kicked off the evening in an appropriate way - citing the challenges of the day but also outlining that many of our greatest technology companies have been started in market downturns. We might have our challenges as a nation and in the east but as entrepreneurs we must continue to do what we do as there is great opportunity in this turbulent market.

The theme for the panel was centered around the decline of innovation coming from east coast start ups and businesses. Rather than innovating it is widely believed that east coast ventures are “incrementalizing” on existing innovation rather than driving new ideas forward. The group of distinguished entrepreneurs vigorously discussed many innovations currently in process but also discussed a macro environment that is pervasive on the east coast that is probably slowed the rate and quantity of innovative businesses setting up shop:

- the population of the New England region has been static while California has been growing. Today there is roughly 5 million people in the metro Boston area versus 15 million people in the Bay area. This aids in hiring which is so critical to launching and building a successful venture. Coincidently West coast VC investing is roughly 3:1 over East Coast so this is one point in relation to funding. In relative terms maybe our rate of investment in the East is not that out of whack but the mix of this investment probably is.

- the entrepreneurial community on the west coast is more open and transparent about ideas in a way that is supportive whereas their East Coast colleagues are too “stealth” afraid that someone will steal their idea. This limits hiring to smaller networks, not enough debate on the substance of ideas and a lack of “buzz” which can create momentum which is crucial for launching businesses. Mike Hirshland of Polaris Ventures, also known as VCMike, blogged on the value of PR recently. Having myself worked to grow a company from 1 to 175 in the last few years I can attest that you need buzz to attract talent.

- the East Coast Venture Capital community seems to have changed since the bubble. The large funds have forced these VC’s to put bigger sums of money to work on fewer deals which has limited the number of deals being funded and there is not enough attention being focused on seed and early stage companies which is what venture captial is supposed to be all about. This risk averse behavior has also been evidenced in East Coast Venture Capitalists being biased to fund executives who have succeeded before with proven teams. The acid test is not good ideas with passionate committed energy as much as it is proven teams with a conservative model.

- The overall community has not enabled the vast number of students to get involved in starting businesses while in school and then staying here to build them. We talked at length about the “Zuckerberg Effect” with Mark Zuckerberg fleeing Boston to build Facebook out west. This also includes the state and cities being asleep at the wheel to incent and promote technology start ups to build here.

Om Malik, the distinguished journalist and blogger who operates GigaOM, was the moderator for the panel and he shared his experiences on the East and West Coasts from firsthand experience. Om surely supported the notion that there is a conservatism that has always existed in the East but it is more prevalent now. Om also shared his view that great entrepreneurs are risk takers and lets face it anything with risk has a chance to fail for many reasons. In the East Om was “scared to fail” as I believe many of us are. It is rooted in this culture. Out West Om indicated for himself operating in a culture that was free of this pressure has allowed him to be more free wheeling and creative and this has contributed to his ability to succeed. I fully agree with Om on this point as we often learn the greatest lessons in failure. If an entrepreneur is afraid to fail due to future consequences on funding and the community he or she will not maximize their learnings and probably never reach full potential for their ideas.

We discussed the rise of various technology sectors in the past here, Route 128 was and I still contend is, “Americas Technology Highway.” This label was bestowed on the region when the big defense contractors were leveraging connections to the colleges and government funding to design and build large systems right here. At the same time we had some gutsy entrepreneurs like Ken Olsen, An Wang, Edson deCastro who founded and built the mini computer industry right here with Digital, Wang Labs and Data General. These companies spawned many start ups and their ranks went onto guide new ventures in other technology related sectors.

I am a product of this era as I began my career at Wang Labs. During my tenure at Wang where I worked for Bob Davis who later went onto found Lycos. The Web 1.0 world spawned many ventures in this region with Lycos and Monster sitting at the top of all of this activity. Monster served the business market to gain job listings but it became an enormous success as a consumer brand. Lycos was one of the four horseman in the early search wars with Yahoo, Excite and Infoseek and clawed its way the the #4 spot in Internet Traffic. Of course the bubble burst on all of the Internet in the early 2000’s. Monster weathered the storm and the new owner of Lycos was not equipped to do so. Many start ups in this region evaporated as well. Jeff Taylor, Monster’s founder and now the founder of Eons was present last evening, and made his presence felt as an audience contributor.

For many reasons we have not been able to spawn the next Lycos or Monster yet. All of the factors above are the contributors to this. I am an optimist and I am committed to the East Coast. I contend that we have the ingredients in this area to be much better than we are. I do not subscribe to the fact that the way forward is to “copy cat” west coast ideas, methodologies or culture. We have to be who we are and celebrate this. As one member of the audience said last evening, the reason we don’t all hang out in cybercafes at night is that in Boston we have a more diverse lifestyle, we have winning sports teams, we have theater, we have museums we have a life here. He is right we have all these things and this is what makes the Boston area so rich. Having said that we need as a community to look, embrace and act on several at several factors for the future:

- Entrepreneurs need to come together more, not only in events sponsored by VC’s, but as a community to share and support each other. There are several groups that are splintered, we need more of a concerned effort to unite and help each other. We need to celebrate ideas and create buzz around them for the betterment of our whole community. I look to the Boston blog network that has emerged for sharing of information and ideas. I point you to Scott Kirsner’s blog on the Innovation Economy in New England and his blog roll as a good launching pad and encourage others to join in on this activity.

- Enhanced ties to the colleges.  The kids at these schools are the source of the future. As an entrepreneurial community we must embrace these students and get them involved in ventures and welcome them into this community so they will want to stay here.

- VC’s need to shift their approach and models. In a world where a cunning entrepreneur can mash up open source leveraging off shore resources, smart marketing and build a viral audience quickly, there is no need for huge sums of capital. VC’s need to spread their investments around to stimulate these efforts. All the effort cant be on the “deal” it should be on how do we do entrepreneur friendly agreements and get lots of activity going. Now is not the time to hunker down and do nothing for the next two years. Now is the time to be bold and help create the next billion company in the East.

-The state and cities must be interested in keeping a technology base here. It appears that all the talk is on green and biotech. Great we need to focus there. We should not turn our back on the tech community though as this can be a rich source of employment and tax dollars for the future

It is great that Google and Microsoft have set up shop here. It is testament that there is talent in this region still. I caution all about this though. These companies are going to “tie up” talent with Massachusetts arcane noncompete agreements and be a detriment to our entrepreneurial future. We must not let them over run our community by saying that they will be great sources of jobs and stimulation. All I hear is the beginning of a large sucking sound taking our talent to benefit their stock price. We need to support home grown businesses so we can help support a whole generation of new companies right here that aspire to be Microsoft and Google.

As we look around the region we cited many stories that are unfolding that have great promise. The glass is more than half full. We must as a community though look to the future and redefine how we work together so that we can enable and support more ideation, smaller investments and the launch of more ventures.

Joining me on the panel were Andy Miller the CEO of Quattro Wireless, Rich Miner who is VP Mobile Technology of Google, Andy Payne the Co-Founder of Lab256, and Jim Scheinman the Co-Founder of Bebo and now Executive-In-Residence at Charles River Ventures. I represented the consumer Internet based on my role as President of NameMedia and formerly Lycos.

Thank you to Charles River Ventures for hosting a very interesting evening.

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