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What Brightcove, Facebook tell us about Mass. start-up climate

Innovation Economy

THIS STORY APPEARED IN

February 12, 2012|By Scott Kirsner

Jeremy Allaire kept Brightcove in Cambridge. (Globe Photo by ZARA TZANEV )

Two start-up companies were taking shape in Harvard Square in 2004. One was founded by Jeremy Allaire in the offices of venture capital firm General Catalyst Partners. The other was being built by a quartet of Harvard College students in their dorm rooms. One targeted the about-to-explode Internet video market, and the other targeted social networking, which seemed to have potential, but hadn’t seen a major success.

Mark Zuckerberg and Eduardo Saverin, two of the founders of TheFacebook, had their first meeting with a venture capitalist at The Charles Hotel. In General Catalyst’s office space next door, Allaire, a successful entrepreneur who’d sold his previous company for $360 million, was sketching plans for Vidmark, short for “video marketplace.’’ The following year, both start-ups attracted funding from Silicon Valley’s Accel Partners. And now both are heading for initial public offerings.

But the companies, now known as Facebook and Brightcove, evolved very differently, and they’ll have very different IPOs. In 2004, Facebook left Boston for California; Brightcove remained in Cambridge. The growth of the firms says a great deal about the kind of companies the soil supports in Boston, versus what germinates out West.

When Facebook’s founders pitched Battery Ventures, the Waltham investment firm, an earlier social network called Friendster was going down the tubes - and taking millions of dollars of Battery’s money with it. Here were Zuckerberg and Saverin pitching a social network targeted at a niche audience - college students - and insisting that Zuckerberg, then a sophomore, would run the company.

Battery decided to pass, and the Facebook crew decamped for the Bay Area, raising their first money from a California investor, Peter Thiel. Thiel had made much of his fortune as part of the early team at PayPal, the online payments company now owned by eBay. And interestingly, he also was watching an investment in Friendster swirl down the drain.

Thiel simply didn’t believe social networking was a passing fad, and he bet that Zuckerberg could get it right. He bought 7 percent of Facebook for $500,000.

Facebook pulled in talent from fast-growing consumer Internet companies like eBay, LinkedIn, PayPal, Google, and even Friendster. By designing an elegant and easy-to-use site, Facebook persuaded people to invite their friends to join and to regularly post updates, pictures, and videos. Very quickly, the site started acting like - and replacing? - water cooler conversations, alumni newsletters, vacation slideshows, high school reunions, and birthday cards.