Fintech finds new friends

When Michael Bloomberg gave the commencement address at Stanford in 2013, towards the end of his tenure as mayor of New York, he couldn't resist selling the graduates of Silicon Valley's elite university on the benefits of moving east, to the "Silicon Alley" of his own city.

"I believe that more and more Stanford graduates will find themselves moving to Silicon Alley, not only because we're the hottest new tech scene in the country," he told them, "but also because there's more to do on a Friday night than go to the Pizza Hut in Sunnyvale - and you may even be able to find a date with a girl whose name is not Siri."

Part of the Bloomberg mayoral legacy is New York's vibrant start-up scene and behind his cheerleading and his jokes there is a serious point: keeping talented entrepreneurs and technologists away from the gravitational pull of California.

It is the same war for talent that Google, Microsoft and Facebook fight among themselves every day, being played out at municipal level. In cities across the US and beyond, the fight has been joined not only by local political leaders but also by the municipalities' wealthiest citizens. The Pritzkers in Chicago and the Johnsons in Boston have taken a keen interest in their local start-up scenes.

For minimal outlays, businesspeople and philanthropists might help galvanise a home-grown entrepreneurial community that, while it might pale in comparison with that in Silicon Valley, could be enough to make local talent think twice about going west.

A particularly ambitious initiative just got off the ground in Boston, using money and expertise from Devonshire Investors, the private investment arm of the Johnson family, who own asset management giant Fidelity.

Boston is the historical home of the "buy side" of the finance industry, hosting investment institutions such as Fidelity, State Street and MFS, which established the first mutual fund in the US in 1924. By rights, the city should be streets ahead in developing a financial technology, or fintech, start-up scene. Yet "robo-advisers", the latest trend in investing, are springing up elsewhere: Betterment is in New York, Wealthfront hails from Silicon Valley and WiseBanyan just relocated from New York to Las Vegas.

Fidelity Labs, an in-house incubator, has stepped up its efforts to look outside the company for ideas.

"We want to hear those ideas and we need to keep thinking about the next generation of investors. We know we need to disrupt our own internal processes to break that chain of inertia that can happen when you have a big company," Abby Johnson, the third-generation Johnson family chief executive of Fidelity, told a start-up conference last year.

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Devonshire has created a non-profit that will offer data for free to entrepreneurs, from partners that include Thomson Reuters, to help them build and test their investment models and software. Although entrepreneurs anywhere can apply, those in Boston have access to a shared office space. The aim, says Devonshire partner David Jegen, is to establish some "connective tissue" between the disparate fintech start-ups in the city.

What gives the project, called FinTech Sandbox, an ambitious twist is that developers and entrepreneurs will be asked to feed back technical expertise and lessons from the data to an online forum. It could create a large resource for the world beyond Boston. The model is similar to a site Abby Johnson's father, Ned, founded to share news and scientific papers on experimental treatments for Alzheimer's disease (slogan: "Alzforum: networking for a cure").

The start-up scene gives wealthy individuals invested in the success of their local economies a chance to make an exceptionally large impact, whether it be funding incubators, as JB Pritzker has done with Chicago's 1871 (a venue named after the year of the city's great fire), or trying to fashion a whole start-up district, as Dan Gilbert, founder of Quicken Loans, is doing with the Madison Block in downtown Detroit.

New York's tech scene, meanwhile, is in quiet mourning for the end of the Bloomberg mayoralty and the return to private business of the man they called New York's "entrepreneur in residence". Who will lure the Stanford grads of the future?

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