The Boston tech ecosystem has always played second fiddle to Silicon Valley, but Pillar VC prefers it that way. Founded in 2016 by Jamie Goldstein, a long-time venture investor who got his start in tech at an artificial intelligence speech recognition startup in the 1990s, Pillar finds about three-quarters of its deals in the Boston area, which Goldstein says is still ignored by Bay Area VCs. “They think everything great happens in California,” he told me. “We’re happy to have them stay there, and they can leave [Boston] to us.”
As recently as the 1980s, Boston still challenged Silicon Valley for the country’s tech hub crown, thanks to its cluster of computer companies along Route 128 and the twin giants of MIT and Harvard. Boston was left behind during the PC revolution, but its rich tech culture remained, especially in sectors like biotech and robotics. (I still see Boston Dynamic’s “dogs” in my nightmares.) Boston is home to a variety of multibillion-dollar public companies from deep tech to consumer, like Akamai, HubSpot, and Wayfair.
While Silicon Valley investors might find market-ready startups coming from Google alumni or Y Combinator, Pillar takes a unique approach by mining Boston’s rich fabric of university research, as well as other campuses like the University of Pittsburgh. Goldstein said that about three-quarters of Pillar’s investments come out of academia. Other firms might find it too risky a process to turn PhD students and professors into entrepreneurs, but that’s Pillar’s sweet spot. “We just love rolling up our sleeves and helping them find a market,” said Goldstein.
Tony Kulesa, an investing partner at Pillar, said that other VCs underestimate the rate of innovation happening in tech right now. He pointed to the speed of ChatGPT’s launch, just 5 years after a landmark academic paper introduced the architecture breakthrough that facilitated its development. “What VCs have overlooked is how fast research products can go at scale,” he said.
Pillar helps serve as a bridge between academia and industry, partly supported by its network of “pillars,” or executives, mostly from the area, who have ownership stakes in the firm and help serve as advisors. The first fund started with 16 founding CEOs, including from Wayfair and DraftKings, and the number has doubled to 32. Four new ones are joining the fourth fund, including Mike Salguero, the founder and CEO of the food subscription startup ButcherBox, and Dr. Shiv Rao, the founder and CEO of the health tech startup Abridge, a Pillar portfolio company.
With the latest fund—its largest yet—Pillar has $500 million of assets under management. Goldstein says the firm has generated returns for its investors through two recent exits, including February’s acquisition of Zilla Security by CyberArk for $175 million. They’ve also been actively selling their “first capital in” stakes to other investors on secondary markets, which has been an increasingly common way for firms to generate distributions. “When I got in the business a long time ago, if you sold a single share, you were considered a traitor,” Goldstein told me. “That has completely changed, and everyone acknowledges that having money recycling in this ecosystem is very helpful.”
Pillar is preparing to start investing from its new fund after making the final investment from its third fund last week.
Leo Schwartz
X: @leomschwartz
Email: leo.schwartz@fortune.com
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This story was originally featured on Fortune.com
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