Paul Maeder, Highland Capital Partners: Kendall Square attracts players large and small to support innovation

November 23, 2011

In 2010, researchers from MIT and Harvard University found that while new communication technologies have transformed the way collaborations can be made around the world, physical proximity “continues to play a critical role in predicting the impact of scientific research.”

This bodes well for MIT’s neighborhood, Kendall Square, home of the densest cluster of technology and biotechnology research in the world. The area is within a short bus or subway ride of some of the largest research hospitals in the world: Massachusetts General Hospital, Brigham and Women’s Hospital and Beth Israel Deaconess Medical Center, among others. These medical centers are where many future therapies are tested and validated, providing a direct pipeline from the lab to the clinic.

Martin Schmidt, MIT’s associate provost and professor of electrical engineering, says that easy access to world-class resources is particularly helpful for startups. Schmidt himself has founded several companies, and says in the early days, it was especially important for them to be located within walking distance of his MIT office.

“The timescale of decisions for a startup can be really short,” Schmidt says. “You’ve got a small organization that needs to react quickly.”

Entrepreneur Pritesh Gandhi remembers the early years of starting his own company, Ambient Devices, an MIT Media Lab spinoff that designs digital information displays. Gandhi, who founded the company along with two MIT graduate students, says having offices near MIT helped the startup gain credibility in its early days. Gandhi often brought potential investors to the Media Lab, where the group’s work was displayed.

“When somebody from the outside comes and looks at us and says, ‘You’re in this really start-up phase, with limited resources, but … you’re able to be so close to a burgeoning community of intellectuals,’ it’s a great feather in our cap,” Gandhi says.

That burgeoning community was an effective test bed for new ideas: Gandhi remembers getting feedback from other researchers, professionals and friends in the area just by tacking up designs in the hallways of his office building.

Within the past decade, Gandhi has seen Kendall Square blossom, not just with large and small companies moving in, but also restaurants and retail stores. What was once a “sleepy” community after 6 p.m. is now “abuzz” with after-work activity, he says.

“The fact that new buildings and restaurants and things are popping up increases the profile of Kendall Square as a cool, hip place to be,” Gandhi says. Indeed, 18 new restaurants have opened in Kendall Square in the last year and a half.

Venturing out

In the past few years, the area has attracted a number of venture capital firms, an essential ingredient in commercializing new ideas. In the late 1980s and ’90s, many of the VC firms in New England were based in suburban Waltham. Today, many of these firms have migrated to Kendall Square, in part to increase their profile among the entrepreneurial community.

Just last week, Highland Capital Partners, an international VC firm, relocated its East Coast offices from the suburbs to Kendall Square. Paul Maeder, a general partner in the firm, says in the days since the move, he’s bumped into a number of promising entrepreneurs just by chance.

“Geography does matter, and the reason it matters is because of serendipitous encounters,” Maeder says.

Along with venture capitalists, law firms and banks are moving into town, hoping to provide services to a rapidly growing biotech industry.

“They want to be seen as having ‘street cred,’” says Travis McCready, executive director of the Kendall Square Association. “It’s like having an address on Wall Street” for financial services firms.

Ben Hron, an attorney with the McCarter & English law firm, heads its Kendall Square office, just a 10-minute subway ride from the firm’s headquarters in downtown Boston. Hron says the firm took the Kendall Square address as a concerted effort to “become part of the ecosystem.”

“If we’re not out there meeting people, when are we going to learn about the hot new companies and budding entrepreneurs?” Hron asks.

Big moves

In the past decade, the robust ecosystem for tech and biotech innovations has drawn large multinational corporations to locate in Kendall Square, particularly those specializing in the life sciences. Since Novartis moved in, pharmaceutical giants Sanofi Aventis, Merck and Genzyme have erected research facilities in Cambridge. Biogen Idec, a biotech company co-founded by MIT’s Phillip Sharp, moved from Kendall Square to a suburban location seven months ago, and is now returning its headquarters to the square. And this week, MIT and Pfizer broke ground on a new complex that will house the company’s Cardiovascular, Metabolic, and Endocrine Disease (CVMED) and Neuroscience research units.

As Schmidt sees it, being in the midst of a vibrant startup environment gives large corporations a “front-row seat” to the next wave of acquisitions. In the pharmaceutical industry, the pipeline for drug discovery is famously hard to manage. Acquiring a startup’s new drug may speed a therapy through the pipeline and out into the world.

“I think there’s an inherent synergy there,” Schmidt says.

Geoff Mamlet, managing director of the Cambridge Innovation Center, cites Microsoft as a point of connection within the entrepreneurial community: The software company’s New England Research and Development (NERD) Center has hosted hundreds of events since opening in 2007 to facilitate relationships with up-and-coming innovators.

“They have placed this huge investment on the line for this strategy of, ‘If we can make Microsoft relevant to these companies, when they grow up, they might think of Microsoft as a partner,’” Mamlet says. As Pfizer and other pharmaceutical companies move to Kendall Square, he anticipates similar symbiotic relationships in the biotech industry.

“I think innovation really happens a little bit organically,” Gandhi says. “You have to sometimes be at the right place at the right time, and there’s probably no better chance of that than being right here in Kendall Square.”