Note: The views expressed here are the author’s own and do not reflect the views of Energy Impact Partners.
Tech hubs
There are two basic theories about the geography of technological innovation.
The first is that innovation should be geographically distributed. There are brilliant technical minds everywhere, and now that more people in more places have access to digital infrastructure, global supply chains, educational opportunities, and lower cost of living, great new technology companies will spring up in places they haven’t before: Stockholm, Sydney, Miami, and so on.
The second is that innovation should be geographically concentrated. While there’s talent everywhere, the concentration of talent in specific places leads to cross-pollination and idea generation that wouldn’t have happened otherwise. Access to capital and established industries create strong feedback loops, and support from local governments lifts all boats. Silicon Valley, New York, Boston, and so on.
There’s merit to both, and it’s not hard to find evidence pointing in both directions. But I think the second theory is much stronger. I’ve written about this several times before.
Today, I want to focus on Boston — the tech hub I call home — and why it’s the world’s great center of innovation in climate hardware. When I moved here four years ago, it was clear to me that there was a multi-trillion dollar opportunity to build the physical technologies we need to combat climate change. I didn’t see enough of that happening, but I saw the greatest potential in Boston. There was something special about the area’s combination of universities, tech talent, capital, infrastructure, and culture. So I voted with my feet, and now I’d like to show you how things are going.
Here’s why the future of climate hardware is in Boston.
Boston has unparalleled universities
You could say “MIT” and be most of the way there. MIT has been a tech juggernaut for decades, and most venture capitalists’ portfolios (ours included) are over-indexed in MIT spinouts. But it’s not just MIT: the Boston area is loaded with strong universities. Of the city of Boston’s 650,000 residents, about 150,000 are university students – nearly a quarter! If you zoom out to the metro area, that figure goes up to 346,000 – the country’s fourth-largest student population, despite only being the 10th largest metro area. And while MIT and Harvard dominate mindshare, they only award 8% of degrees in the state, barely more than Boston University by itself.
Why does it matter that there are so many strong universities? Well, unlike software startups, hardware (and biotech) startups typically require more resources to get off the ground – fume hoods, expensive analytical equipment, high voltage electrical connections, and so on. University labs have these resources. Students who work in those labs develop new technologies, and a subset decide to found or join startups commercializing those technologies. There are too many examples to count, but to highlight a few examples from our portfolio at EIP:
Sublime Systems: A cement decarbonization company founded in MIT Materials Science Professor Yet-Ming Chiang’s lab. Former postdoc Leah Ellis now serves as CEO.
Transaera: An air conditioning efficiency company founded in MIT Chemistry Professor Mircea Dincă’s lab. MIT grad and Greentown Labs co-founder Sorin Grama now serves as CEO.
There are of course many STEM grads minted in the Boston area every year, but what has really started to change in the past three or four years is the volume of MBAs entering climate tech. If you look at Harvard’s and MIT’s 2022-2023 MBA employment reports, employers of interns and new grads now include a huge range of climate tech venture capital firms1 and climate hardware startups.2 Of course, many of these MBAs don’t stay in the Boston area. But quite a few do! In MIT’s case, about 25% — about as many as move to New York, a city 15x the size. Building climate hardware means building climate hardware businesses, and Boston benefits immensely from its concentration of universities.
Boston has hardtech talent
The venture capital firm Powerhouse recently released a report called The Geography of Climate Tech. In it, they report that Massachusetts has the largest number of climate tech startups per capita, as well as the highest concentration of hardware startups. While California is still the largest ecosystem, Boston is the one most focused on building in atoms rather than bits. That’s a remarkable result.
A big part of this result is the professionals who call Boston home. Maybe they’re repeat founders; maybe they’ve bounced between large corporates and startups; maybe they’re role players in HR or finance looking to work for an impactful company. Whatever the type, Boston has them. Global manufacturers with major Boston presences include P&G, Boston Scientific, Siemens, Bose, Raytheon, GE, Schneider Electric, Cabot, Rockwell Automation, Analog Devices, and Philips. But it’s not just large corporates: newer hardware upstarts that call Boston home include Boston Dynamics, Whoop, SharkNinja, iRobot, Locus Robotics, and Formlabs. This is a massive talent pool.
Additionally, there’s increasingly strong infrastructure for funneling some of that talent into climate tech:
Greentown Labs: A 100,000 square-foot incubator and co-working space dedicated to supporting and accelerating the development of clean technology and sustainable innovation. Greentown frequently hosts free events, which are in my opinion the best way to break into the Boston climate tech ecosystem.
The Engine: A venture fund and incubator dedicated to “tough tech,” which includes climate. They have two spaces, including a massive new lab and office space in Cambridge.
Activate Boston: A fellowship program that trains technical founders to become well-rounded startup CEOs. About two-thirds of Fellows focus on climate tech, and the vast majority are developing hardware. Originally founded in Berkeley, they expanded to Boston in 2020.
Cleantech Open Northeast: The New England branch of the largest clean technology accelerator program in the world. This year, they brought 47 new startups into their program.
MCJ Collective: Originally a podcast, MCJ is now “a broad community of people united by the common desire to step up and do something about the climate crisis,” with a venture fund attached. MCJ is best at bringing talent from elsewhere into climate tech.
InnoVenture Labs: An incubator North of Boston that houses and provides shared equipment to biotech and climate tech startups.
Notably, none of these organizations are software-specific. Quite the opposite: all but one have an explicit hardware or biotech focus.
Risk capital was pioneered in Boston
Not many people know this, but venture capital started in Boston. Founded in the 1940s, the American Research and Development Corporation was the first closed-end fund to pioneer a venture-like model. The firm invested in risky technologies such as particle accelerators and ion-exchange water purifiers, with the idea there was a long tail of outcomes to the upside. Most notably, it invested in a circuit board manufacturer called Digital Equipment Corporation, which ended up being the first great success of the venture model.3
Even further back, the very idea of risk capital was pioneered in New England, through an industry you might not expect: whaling. As laid out in Tom Nicholas’ book VC: An American History, there are uncanny parallels between whaling and technology startups. Like startups, whaling ships and crews are expensive, so both generally need external financing. Like startups, there’s a lot of risk in any one expedition, but also a lot of upside. In startups, this can mean the difference between bankruptcy or billion dollar valuations. In whaling, this can mean life or death. Literally and figuratively, risk capital is in the water here.
Today, Boston is consistently the #3 market across all venture investment, coming in at $22.5B of funding in 2022. Many hardware and climate investors today call Boston home.
New England is revitalizing its industrial infrastructure
New England could have been the rust belt. It has a legacy of manufacturing that goes back to the 18th century, and parts of the region have indeed gone through deindustrialization. But where large parts of the country suffered factory closures without much to replace them, New England has managed to reinvent itself several times. Coming back to the early days of venture capital, Digital Equipment Corporation illustrates this point quite well: upon incorporation in 1957, the founders set up shop in a former textile mill in the town of Maynard, Massachusetts.
Among today’s climate tech startups, we’re starting to see the same trend. Hood Milk, founded in 1846 in Charlestown, just north of Boston, has seen its 1920s-era manufacturing facility converted to mixed-use real estate. Today, tenants include climate hardware and biotech startups Indigo Technologies, Mori, ArkeaBio, and Advent Technologies.
The suburb of Woburn came to prominence in the 19th century through its rubber and tanning industries. Charles Goodyear (yes, that Goodyear) invented vulcanization in Woburn. In parallel, the town’s leather industry attracted labor from as far as Canada and Europe. Today, Woburn’s stock of industrial real estate provides an attractive home for climate tech startups as they scale out of smaller facilities in Cambridge and Somerville. To name a few: Boston Metal (EIP portfolio company), Emvolon, Factorial, Gradiant, Guardian Agriculture, Verdox, and ZwitterCo.
Boston models climate culture
Boston has long attracted innovators, but what makes it a good climate city? This one’s hard to pin down, but you know it when you see it.
Like the Bay Area, science and engineering permeates the city. Like the Bay Area, there’s nearby natural beauty that attracts young people who care about the environment: the coast of Maine, mountains in Vermont, beaches on the Cape. And like the Bay Area, there are the trappings of educated millennial types: bicycle traffic during rush hour, plant-based restaurants, breweries stocked with IPAs, startup hoodies at dog parks, a massive climbing gym. But unlike the Bay Area, there’s a cohesive center to the city’s climate tech scene: you can meet founders, investors, city councilors, mayors, and even occasionally royals by hanging out at Greentown Labs.
Zooming out one level, local and state politicians have proactively funded climate initiatives that have helped build this culture. For example, the Massachusetts Clean Energy Center, or MassCEC, funds internships, develops the local workforce, and even invests in climate tech startups through a dedicated fund. We’ll come back to them shortly.
Last but certainly not least, Boston is in the midst of adapting to climate change. Several highways and the newly built Seaport district are known to flood. Summer high temperatures now reach 99 ºF, yet not everywhere has air conditioning. Hurricanes are an increasingly large threat. The city got its first whiff of wildfire smoke this year. Even the New England lobster population has migrated north to colder waters. The city is taking these threats seriously, but residents are beginning to notice climate change affecting their lives.
Where can Boston go from here?
So Boston has the right combination of universities, infrastructure, talent, capital, and culture. Where can it go from here? Here are a few things that state and local governments can do.
Nurture the industry growing in its backyard. The state could increase the budget for MassCEC’s clean energy employment programs. In a prior role, I hired interns with funding through MassCEC’s internship program. It was a great resource, it didn’t cost the state very much, and it helped expose students to a wide range of careers in climate tech. But it was always a mad dash to secure one of the limited slots for funding, and in recent years the state has reserved half of the slots for students interning outside the Boston metro area. While I get the political calculus behind this idea, the state is leaving a lot on the table by making funding scarce in the regions where most startups are. State funding helps cash-strapped hardware startups compete for talent alongside big software companies.
Mobilize more of the area’s workforce. Local governments can help bring more people into the world of climate hardware by making it easier to build companies in more of the metro area. The vast majority of climate tech startups are on the North side of town – Cambridge, Somerville, Woburn, Everett, Chelsea, and so on. There are almost none in Boston proper or South of the city.
Local governments can mobilize more talent across the region by getting the easy things right: electrical infrastructure, lab space, and straightforward permitting. The northern suburbs do this.
Make Boston the obvious choice for talented people. This comes down to housing and transit infrastructure.
The housing stock in the Boston area is both old and in high demand. On the one hand, that makes sense – New England wasn’t built yesterday. But on the other, it means that it’s hard to find housing that is both decent and affordable. Take Somerville, the home of Greentown Labs, versus a comparable city in the DC area: Alexandria. They’re both upper-middle class, both next door to a major city, both on the Eastern seaboard, and both over-indexed in the technology industry. But when you start looking for homes, the two couldn’t be more different.
Whereas homes under $1MM are abundant in Alexandria, they’re virtually nonexistent in Somerville. When you look more closely, the differences get more stark. $1MM in Alexandria gets you a colonial in a tree-lined neighborhood, while $1MM in Somerville gets you an “opportunity for investors, developers, and end users to customize [a] two family residence” — a fixer-upper at best.
If this reads like a personal gripe, you’re not wrong. I’m from the DC area, and my wife and I hope to buy a house in the Boston area soon. It feels like downgrading. But it’s not just me: one climate tech startup executive recently said that a lot of their hiring discussions end when candidates start looking for housing. That’s embarrassing for our city. We need to build more and better housing.4
When it comes to transit infrastructure, Boston has a decent base: there are T and commuter rail stops covering most of the area. But the system is notoriously unreliable. Many lines regularly grind to a halt or shut down on weekends. The Red and Orange lines are known to catch fire. Going anywhere other than downtown is an hour-long journey on public transit. The Globe covered the MBTA’s woes in detail last year, finding that Boston’s rail system lagged Buenos Aires’, despite having similar service areas. Getting the basics right would pay dividends.
Final thoughts
Boston has already saved the world once this decade. When we look back in 2050, I think we’ll find that Boston played an outsized role in doing it again — this time through it’s climate hardware industry. It’s one reason that we at EIP have 10 portfolio companies in the area, and it’s why I’ve decided to bet my career on it. The future will be built in Boston.
Elsewhere:
Thanks for reading!
Please share your thoughts and let me know where I mess up:
Venture capital: Anzu Partners, Blackhorn Ventures, Clean Energy Ventures, The Ecosystem Integrity Fund, Energize Ventures, Energy Impact Partners(!), The Engine, Fifth Wall, Fontinalis Partners, G2 Venture Partners, Kapor Capital, Leaps by Bayer, Pangaea Ventures, Piva Capital, Plug and Play Ventures, SOSV, TechEnergy Ventures, Toba Capital, Valo Ventures, and Workshop Venture Partners.
Climate hardware startups: Alga Biosciences, Atacama Biomaterials, David Energy, Electric Hydrogen (EIP portfolio company), Electrified Thermal Solutions, Equilibrium Energy, Ginkgo Bioworks, GPR, Impossible Foods, Indigo Ag, Infinite Cooling, Izuba Energy, Kairos Power, Meati Foods, Nth Cycle, nZero, Osmoses, Patch, Project Canary, Quaise Energy, Rebellious Foods, Redwood Materials, Saildrone, SCiFi Foods, Skycool Systems, Solugen, Spare-It, SunCulture, Syzygy Plasmonics, Tender Foods, Tesla, Turntide Technologies, Via Separations, Volta Trucks, and Watershed.
There’s much more to the ARDC/DEC story, and I’d recommend VC: An American History for anyone looking for a deeper dive into the origins of venture capital.
To its credit, Somerville has begun replacing old industrial facilities with multi-unit buildings and even the occasional high-rise.