Massachusetts business and political leaders are framing California’s proposed billionaire tax as a rare opening to redirect AI talent and companies toward Boston.
Of the 20 most valuable venture-backed U.S. AI companies, half have co-founders who attended MIT or Harvard, according to PitchBook data, yet none are headquartered in Massachusetts.
California’s proposed one-time 5% wealth tax on individual assets exceeding $1 billion, intended mainly to fund healthcare, is headed for the November ballot.
The measure could be especially damaging for startup founders who have yet to realize the value of their businesses through an acquisition or public offering, according to Ankit Gupta of Y Combinator.
“There are startup founders that can just straight-up go bankrupt from this,” said Gupta, who was hired last fall as Y Combinator’s first general partner in the Greater Boston area in more than a decade.
Gupta drew a contrast with Massachusetts’ existing 4% surtax on annual personal income exceeding $1 million, describing it as far more manageable for founders to absorb.
“It’s not like we don’t believe in taxes or something like that,” he said. “Having the taxes based on income and not unrealized gains is sane.”
Y Combinator CEO Garry Tan said the firm is “investigating” opening an office in Cambridge, citing MIT engineering talent as a key draw over other startup hubs like Austin.
California investors are in Boston this week for Andreessen Horowitz’s Tech Week, the first time the Silicon Valley venture capital giant has brought its tech-focused panels and gatherings to the city.
Massachusetts Governor Maura Healey met last month with Anthropic PBC, Y Combinator and Genentech during a San Francisco trip, accompanied by economic development secretary Eric Paley, who previously led venture firm Founder Collective.
“If there is a possibility that states are going to start taxing illiquid assets, that will be very frustrating and concerning to innovation leaders, and I do think Massachusetts could be quite advantaged in that scenario,” Paley said.
The gulf between venture capital funding raised in California and Massachusetts more than quintupled between 2005 and 2025, according to National Venture Capital Association data, illustrating the structural challenge Boston faces.
Boston Mayor Michelle Wu has said she is in talks with San Francisco Mayor Daniel Lurie about convening a bicoastal business development summit, as local CEOs provide her with pitch lists of companies to target.
At a recent innovation summit held at Harvard’s new David Rubenstein Treehouse conference center, Wu floated the idea of making the university’s land in Boston’s Allston neighborhood “the campus for applied AI.”
“Our proximity to the best talent in the world, and the institutions that produce that talent, and the communities that are the most determined and passionate about making a difference in the world — that is a real value proposition for any company,” Wu said.
The cofounders of Cursor, an AI-powered code editor that struck a $60 billion deal with Space Exploration Technologies Corp. in April, were MIT students, yet the company is based in San Francisco.
Scale AI, founded by Alexandr Wang after his freshman year at MIT, sold a 49% stake to Meta Platforms Inc. (NASDAQ: META) last year for more than $14 billion, and is also headquartered in San Francisco.
HubSpot Inc. (NYSE: HUBS) cofounder Brian Halligan captured the frustration bluntly, saying, “If those were here, it really changes the economy,” referencing the concentration of Boston-educated AI founders building companies elsewhere.
A group of Boston-area businesses including Whoop Inc., DraftKings Inc. (NASDAQ: DKNG) and AI music startup Suno launched the Massachusetts AI Coalition with a goal of doubling the state’s roughly 120 tech and biotech unicorns within five years.
The coalition is launching “founder starter parks,” offering free AI-enabling GPUs, co-working space and founder introductions to those who commit to remaining in Massachusetts for six months or more.
