Building a Business-Friendly City

By Ilan Mochari

The City of Somerville was incorporated in 1872, in the midst of a 6-fold population boom. During this time, the processing of textiles and the manufacturing of brass and copper tubing and bricks carried Somerville into the American Industrial Revolution. At the height of Somerville’s brick making industry, over 24 million bricks were produced a year.

The Ford Motor Company moved its Cambridge plant to Somerville in 1926, constructing a model assembly plant on filled land at the Mystic River near the reputed launch location of the “Blessing of the Bay.” This factory was engaged in military contracts between 1942 and 1945. In 1957 it was used for the assembly of the company’s new line of Edsels.

The following year the Somerville plant closed.

Flash forward to 1993: Another promising manufacturer moved from Cambridge to Somerville. Fresh out of MIT, a startup called iRobot relocated from 238 Broadway in Cambridge to Twin City Plaza (14 McGrath Highway). “There was a space above the stores there,” recalls cofounder Rodney Brooks, who still sits on iRobot’s board. “There was a high bay in our studio and it was great for testing out robots.”

Today, iRobot is a $307-million NASDAQ corporation (IRBT) based in Bedford, Mass. Scan its official history at irobot.com, and you’ll find scant evidence it spent a fruitful, formative decade in Somerville. It was at Twin City where iRobot bloomed from a startup of fewer than 10 employees to a fast-growth entity of more than 100. It was at Twin City where iRobot first developed its top-selling Roomba and PackBot lines. As the company grew, it knocked down walls within and occupied more and more square feet. “We had one office, then another, then another, and then pretty much the whole floor,” says cofounder Helen Greiner, who also remains on the board.

Both then and now, it was common for high-tech startups with MIT roots to locate in Kendall or Central Square. But iRobot couldn’t afford those digs. “We were not a venture-funded company at that point. We operated on a shoestring,” says Brooks. In addition to its reasonable rent and adequate space for testing robots, Twin Cities offered proximity to the Lechmere T-stop and plenty of parking. Employees – largely drawn from the MIT community – had an easy commute.

But when iRobot ran out of room at Twin Cities in 2003, it departed for Burlington, where it stayed until last year’s move to Bedford. By that time, iRobot had plenty of venture capital. By all counts, it could have afforded larger space in Somerville – or anywhere in the Boston area. Yet it chose Burlington. The rent was lower, and the workforce – fewer MIT peeps, more grownup engineers – didn’t mind the distance from Boston. “Our average employee got older – buying houses, having kids,” explains Greiner. All told, she says, iRobot’s exodus from Somerville reduced overhead – without affecting recruitment and retention. After 13 years in the city, the company bolted for the burbs.

What does it mean to Somerville when a company like iRobot, which now employs more than 400, goes away? Any way you slice it, it’s a blow to local employment and revenues. More than 85 percent of Somerville’s tax base comes from residential property taxes, as opposed to commercial taxes; so any beefy commercial presence bolsters the city’s coffers and alleviates its fiscal reliance on residents.

In the second quarter of 2009, iRobot turned a $16.4-million profit – 27.6 percent of $61.3 million in sales. In the midst of a recession, what city couldn’t benefit from a piece of that action? When you consider that only 12 percent of Somerville’s 4.1 square miles is devoted to commercial use (see chart below), the need to maximize revenues from that 12 percent becomes all the more pronounced.

Then there’s the jobs angle. Despite a recent uptick, Somerville’s local employment has decreased in the 2000s (see chart below), from 22,948 jobs in 2001 to 21,451 in 2007 (most recent data). Somerville also ranks low among neighboring cities in terms of local employment per capita (see chart). In fact, most of Somerville’s resident labor force – 84.2 percent of it – works outside of Somerville. “We’re a net exporter of labor – our daytime population shrinks,” notes Rob May, the city’s Director of Economic Development. The city estimates that 37,266 residents leave Somerville each day to work elsewhere, while 14,359 people commute to Somerville jobs from other towns – resulting in an overall export of 22,907 jobs a day.

All of which explains Somerville’s interest in attracting and retaining growth companies. In recent years, the city has aimed to address its lack of biotech. According to the Massachusetts Biotechnology Council (MBC), there are more than 400 biotechnology companies in Massachusetts, employing nearly 43,000 people. None of those companies is in Somerville, save for the administrative offices of Bedford Stem Cell Research Foundation (260 Elm Street).

In July, MBC gave Somerville a “silver” rating as a bio-ready community. The designation indicates that Somerville’s zoning allows biotech laboratory and manufacturing facilities by right; and that Somerville has identified sites (the Assembly Square district and the Boynton Yards) for biotech uses in its municipal planning.

However, Somerville still lags behind a majority of the 50 other Massachusetts municipalities with MBC designations. Of the 50, 18 earned the highest platinum grade while nine earned the penultimate gold. Eight cities in addition to Somerville merited silver while another 15 garnered fourth-place bronze.

It was more than two years ago that a Boston Globe headline proclaimed “Somerville rolls out biotech welcome mat.” It was more than three years ago that the city announced the formation of the Somerville Life Sciences Collaborative. Its purpose was “to develop strategies to support life-science ventures already based in Somerville as well as attracting new research and business activity in the life science field,” according to a press release. Today, Bedford Stem Cell remains the city’s only biotech presence. “We have not made as much of an impact as we want to,” says May.

If the biotech dream remains unrealized, the city still deserves high marks when it comes to easing the red-tape burden of its entrepreneurs. John McQuillan, founder and CEO of Triumvirate Environmental (61 Innerbelt Road), has nothing but praise for Somerville’s interactions with his company. “The city has a very healthy approach to business,” he says. “It has regulations, but they set it out in a straightforward way. It is clear what the expectations are.”

McQuillan has some basis for comparison. His business was based in Quincy and South Boston before it moved to Somerville in 1994, when a growth spurt took it from 18 to 40 employees. “We’re a service company, and we needed good access to our customers in Boston and Cambridge,” he says.

The owners of 2N + 1 (35 McGrath Highway), a data center launched in November, 2007, also praise the city’s manner. “I’ve done projects in Boston and you get much more personal attention in Somerville. And no attitude,” says cofounder Vincent Bono. “We had a problem with our sprinkler system and the fire chief was really helpful getting it corrected. We’ve also dealt with inspectional services and they are really good.”

Like McQuillan, Bono has a basis for comparison. He has opened businesses in New York City and a few other New England cities he refuses to name. He says Somerville is the easiest municipality he has ever worked with. In fact, 2N + 1 has a 25-year lease at 35 McGrath, an address that was literally off the post office’s map before Bono and cofounder Will Locandro arrived.

How much control can Somerville – or any city – exert over where any business owner chooses to locate? The arbitrary factors and market forces behind these decisions – rent costs, personal preference – often operate without regard to City Hall. “A lot of times you find that companies locate based on where the founder lives,” observes Barry Horwitz, who teaches strategy and entrepreneurship at Boston University School of Management.

That’s the case for Mark Sullivan, who founded Voter Activation Network (48 Grove Street) in 2001. VAN, a software maker with 40 employees, began in Sullivan’s Porter Square residence. In 2003, when the business outgrew his house, Sullivan moved to Davis Square. While the location suits Sullivan’s young workforce, his choice to keep VAN in Davis Square is born of personal preference. “I wanted office space I could walk to in a great neighborhood that’s right on the T,” he says.

CJ Johnson, cofounder of software startup 3Play Media (27 Ellington Road), runs the business out of a converted apartment. He and his three cofounders – who met at MIT’s Sloan School of Management – opted for Davis Square for the same reason iRobot opted for Somerville, back in the day: “One Kendall Square is an extremely expensive place to operate,” he says. Davis Square was also an easy commute from the founders’ respective homes.

Somerville is a happy home for Sloan startups like 3Play and established small businesses like VAN, but can it become – eventually – a home to larger corporations too? Since 2006, both Google and Microsoft have established footholds in the Boston-metro area. Both opted for Kendall Square. “Someone looking for 20,000-50,000 square feet of prime office space in Somerville can’t find it because it doesn’t exist,” explains May.

Ask Google and Microsoft how Somerville – in the absence of vast 
tracts of office space – can improve as a high-tech destination, and their suggestions have a social flavor. “A lot of our folks live in Somerville, and I don’t hear them talking about going to a techie event in Davis Square,” says Microsoft’s Gus Weber.

Steve Vinter, who heads Google’s Cambridge office, agrees that social events are vital. In fact, Vinter is part of an effort to build the Venture Café, a large, late-hours hangout in Kendall Square where students and entrepreneurs can schmooze about ideas, funding, and projects. “It’s important to get people interacting across disciplines and socializing when you’re trying to stimulate new companies,” he says.

One force behind the Venture Café project is the Cambridge Innovation Center (CIC), which since 1999 has leased office space to high-tech startups at One Broadway. Geoff Mamlet, CIC managing director, says officials from other cities often ask him, “How do I create in my own setting what you’ve done here?”

While other municipalities lack CIC’s proximity to universities and research hospitals, the CIC still has wisdom to offer when it comes to luring and retaining entrepreneurs. The CIC also knows a thing or two about large companies: When Google first came to Cambridge, it was housed there. But Mamlet says the CIC has had its brain picked by only one other city in Massachusetts. He declined to say which, but he did say that it was not Somerville.

Nor is CIC the only entrepreneurial entity in Cambridge that Somerville has yet to reach out to. Though Somerville has relationships with MIT’s School of Architecture and Planning, it has none whatsoever with Sloan, according to May. “We need to build a better relationship with them,” he says. “We need to become more involved.”
If the city has not yet reached out to some key Cambridge resources, doing so is on its to-do list. One of the city’s more immediate goals is a program to match entrepreneurs with loans and credit lines from regional lenders such as Winter Hill Bank and Central Bank. David Guzman, the city’s Business Development Specialist, is leading that effort. Guzman also coordinates regular workshops for the city’s entrepreneurs on topics such as “Tools to Enhance Social Networking” and “Requirements for Licenses and Permits.”

The city is also exploring “leveraging federal dollars for storefront improvement programs,” says Brad Rawson, Economic Development Planner. In addition, the team has literally marked its turf: Each member is responsible for walking a particular portion of the city – and getting to know the businesses therein. Guzman is responsible for Porter Square and Somerville Avenue; Rawson handles West Somerville, including Davis Square and Ball Square.

On August 19, Rawson and Monica Lamboy, Director of Strategic Planning and Community Development, visited Powderhouse Productions (212 Elm Street). Powderhouse’s television programs have appeared on Discovery Channel, History Channel and Animal Planet, among other places. Says Rawson: “It was fascinating to see them at work.”

Founded in 1994 and with $12 million in sales according to the Boston Business Journal, Powderhouse has become a high-profile staple of Somerville commerce. Perhaps not since the appearance of Gentle Giant Moving Company boxes in Martin Scorsese’s The Departed (2006) has a Somerville business (29 Harding Street) gone so national. Gentle Giant, for its part, was founded in 1980. It goes to show: Not every business that comes of age in Somerville equates maturity with a flight to the suburbs.