Tuesday, December 1, 2009

Tech Start-Up Envy: Why Does the Capital Region Come Up Short?

Driptech, Scribd, SolarCity, Zynga, Fitbit…they are all interesting technology start-ups recently included on BusinessWeek’s list of the “Most Intriguing New Businesses.”

There’s a problem with the list though: not a single company based in the Washington, DC region made the cut.

How can that be? Where I call home has all of the ingredients to nurture a world class community of entrepreneurial technology companies.

For starters, the largest buyer of information technology products and services has centered most of its decision-making here. That’s right, the US federal government spends billions of dollars each year on a broad set of products, services and capabilities.

In fact, the federal Chief Technology Officer (CTO) recently unveiled a Web-based IT dashboard that tracks a fair amount of this annual spend.

This strong government footprint has attracted a myriad of systems integrators that cater to the technical and innovation requirements of government agencies worldwide. Lockheed Martin is based in Bethesda, Maryland. SAIC recently relocated to McLean, Virginia. CSC moved last year to Falls Church, Virginia.

These government contractors – often referred to as “Beltway Bandits” – serve as a training ground for technical and management talent.

Moreover, they often develop interesting products and applications with potential to be spun out as distinct companies. Systems integrator Mantech did just that two years ago with the successful creation of information security vendor Netwitness.

The potential for robust technology transfer also resides in the Washington, DC region’s research institutions, including George Mason University, George Washington University and the University of Maryland, College Park. All have outstanding engineering and business programs.

And finally, there is a mile-high stack of smart, experienced money in this town. Venture capital firms like NEA, Novak Biddle and Valhalla Partners, as well as private equity shops like Carlyle Partners are all well versed in helping start-ups successfully grow and mature.

So, again…I ask…why is the Washington, DC region a tier two player when it comes to technology start-ups?

You can’t put us in the same sentence as Silicon Valley without snickering. And we fail to measure up to technology hot spots in Boston, Austin and New York City.

Perhaps it’s about ego and attitude.

Are we in the DC business community content with modest success rather than aspiring to create the next Apple or Google? Are we too comfortable and conservative because of the government presence?


Don said...

Does seem like locals including ClearSpring or LivingSocial might have been candidates for this list? Hmmm, your points are well taken but it might also be solved by more local tech reporters.....

Beth Davis said...

Having lived & worked in the DC area for 18 years I can tell you what I have seen. It's too easy to get a high paying job. But when you live in a place like Tulsa... you have to scramble to make big bucks. On top of that, when you do get a cutting-edge awesome idea, the Tulsa business community will give you a leg up, not a knock down. The best business minds are more than willing to help you with little or no compensation.

Beth Davis - Gold Star Referral Clubs

Tangozuulu said...

Simple. The DC area isn't a technology-creating area. It's a tech-using area. We don't have the infrastructure and environment for developing new tech here. There are plenty of applications of technology here, but little new development.

Government and government consulting is the key industry here, so applications are in most demand. But places like Silicon Valley and Austin are originally based around Universities and other institutions that create knowledge and technology. They tend to spawn startups. We tend to spawn new consulting companies.

Eddie Schwartz said...

You are very correct in your assessment of the lack of appreciation for DC-based start-ups in the business press, but we'll fix that!

Eddie Schwartz
NetWitness Corporation

Robin said...

The problem with D.C. is actually something you identified in your post! We're way too reliant on federal funding to bankroll our businesses and research. Federal funding does not encourage start-ups. Start-ups are created and encourage by entrepreneurs. We need to become a culture less dependent on federal funding and more dependent on entrepreneurs and the private sector.

Marc Hausman said...

Hey everyone -- thanks for the excellent comments.

A few thoughts:

@Don - more DC-focused tech journalists would certainly help. I miss now defunct publications like the Potomac Tech Journal, Tech Capital and Washington Business Forward.

@Tangozuulu -- interesting point...DC is a heavy user of technology solutions, therefore no motivator to be an innovator.

@Robin -- yup...there is no business case for a financially comfortable entrepreneur to make bold moves.