Startup investment in the Boston metro area has been trending higher for the past couple years. Even so, the region’s funding gains haven’t kept pace with the massive AI-driven increases in overall U.S. venture investment.
So far this year, investors have put about $7.8 billion into Boston-area startups, per Crunchbase data. That puts the region on track for a moderate annual gain and the strongest tally in about four years, as charted below.
Invidious comparison
Under normal circumstances, such numbers might be celebrated as pretty strong. But many Bostonians don’t see it that way.
“For the first time, startups in Texas raised more VC money than those in Massachusetts,” lamented one Boston Globe headline this spring. Earlier this year, another correspondent collected concerns from local startup backers and builders that the tech startup scene is thinning out.
At root, the issue may not be that Bostonians are delivering so little investable startup talent, but rather that other places are swimming in unprecedented capital. This kind of invidious comparison is particularly stark in the AI realm.
Overall, North America venture funding hit a record high in the first quarter of this year, surging to $252 billion. Of that, more than 87% went to companies in Crunchbase AI-related categories.
Few of those AI mega-fundraisers were in Massachusetts. The biggest, most heavily funded names in generative AI, like OpenAI, Anthropic and others, are predominantly headquartered in the San Francisco Bay Area. That means Boston didn’t get a slice of history’s largest startup funding rounds.
By contrast, biotech, a traditional area of strength for the Boston area, hasn’t been on a funding tear. True, there’s no dramatic slump. But in a time when a single venture-backed AI company can snag $122 billion in a single round, biotech round sizes can’t compete for scale.
Standout rounds
Still, by pre-AI standards of venture funding, Boston has been scaling some heavy hitters.
Per Crunchbase data, at least 12 companies in the greater metro area 1 raised rounds of $200 million or more this year, listed below.
The largest round went to Whoop, a provider of wearable fitness technology and a subscription platform that raised $575 million in Series G funding at a $10.1 billion valuation in March. The company says it is powered by more than 24 billion hours of physiological data and purpose-built AI models to provide predictive, personalized health insights.
Cloaked, a provider of consumer privacy and security tools, came in second. It secured $375 million in Series B funding in March led by General Catalyst and Liberty City Ventures.
Next on the list is Devoted Health, which provides healthcare plans to seniors on Medicare. The 9-year-old company disclosed in January that it had closed on $366 million across two Series F funding tranches.
Biotech startups, meanwhile, didn’t make the top 3 but were heavily represented on the list. Overall, more than half of funded startups in the list are focused on biotech or healthcare.
Why compare?
Boston isn’t the San Francisco Bay Area, and it certainly isn’t Texas. So it’s worth asking: What is the point of comparing startup ecosystems? Is a metro area flailing if it doesn’t keep up with a particular major innovation cycle, even if it maintains core areas of strength?
At risk of over-generalizing, we’d conclude that competitive rank still matters. A metro area can retain its crown as a startup innovation hub only if it continues to produce transformative companies.
For Boston, there’s no indication the region is losing its edge in biotech and other sectors where it’s long been an established powerhouse. However, in the generative AI era, it’s also evident that the region has not produced one of the most high-valuation players in the space, and that’s put some ding in the city’s reputation as a leading innovation hub.
Related Crunchbase queries:
Related reading:
- North America Q1 Funding Surges Across Stages To Record Level
- Whoop’s Wearable Fitness Tech Lands $575M From Athletes, Celebrities, Institutional Investors To Reach $10.1B Valuation
We queried funding to all startups in the state of Massachusetts as the overwhelming majority are within the outer limits of what could be considered the Boston metro area. No major funding recipients that we saw were too far away to meet these parameters.↩
