1. Building Washington’s Startup Ecosystem
Existing challenges and a framework for solutions
November 26, 2013
@maxwellelliot

2. Executive Summary
Despite prominence of high potential technology firms to the story of DC
growth, the region lacks a robust startup ecosystem
• Like most nascent ecosystems, DC lacks capital, talent, and liquidity opportunities
• Data invalidates many analogies to the technology hubs of the United States
To overcome these issues, regional leaders must acknowledge challenges and
engage in non-traditional maneuvers to differentiate or jumpstart development
• Offering incubators and streamlined permitting systems should be considered
“par for course” with most other major cities engaging in the same reforms
• Differentiation will be easiest building from our competitive advantage in
government, cyber security, and systems integration
In discussing potential solutions, policymakers should address fundamental
deficiencies in:
• Capital availability, Talent acquisition, Liquidity facilitation, & Entrepreneurial risk
the forum for growth and innovation
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3. Since 2007, the pace of entrepreneurship has
increased rapidly throughout the US
Companies with at least one round of VC by
founding year (outside of CA, MA, or NY)…
15%
…followed closely in suit by companies
founded in DC, MD, and VA
11%
However, this increase in early stage activity doesn’t
necessarily translate to competitiveness
Source: AOL Crunchbase data, Team analysis.
the forum for growth and innovation
Note: Biases and incomplete data are intrinsic to the private market data. Observations are better thought of as directional accuracies as opposed to strict realities
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4. Despite early stage gains, survival is less common
outside of technology hubs
Percentage of companies receiving a second VC financing, by founding year
16% fewer businesses have
made it to subsequent
funding in DC, MD, and VA
than in CA, MA, and NY
For entrepreneurial firms to create jobs, they must
progress well beyond the seed stage of activity
Source: AOL Crunchbase data, Team analysis.
the forum for growth and innovation
Note: Biases and incomplete data are intrinsic to the private market data. Observations are better thought of as directional accuracies as opposed to strict realities
3

5. In reality, talent, capital, and liquidity events are
scarce in the District relative to traditional hubs
No DC, Maryland, or Virginia
school ranks in the top 10
universities producing venture
backed entrepreneurs from
2010-2013
BEST SCHOOLS IN REGION
#19
University of Maryland
#25
Johns Hopkins
#38
University of Virginia
Venture capital in CA, MA, and
NY outweighs DC area 16:12
Population is only
a factor of ~4.4:13
DC area businesses are not
active buyers1
Percentage of Companies Acquired InState vs. Percentage of Total Companies
Companies based in DC,
Maryland, and Virginia
have only acquired
11 businesses since 2006
Assets Under Management 2012
Many tech jobs exist in DC, but
raw talent is limited1
BEST SCHOOL IN WASHINGTON
#94
GW University
Source: 1) US News and world Report, BLS 2) NVCA data 2) US Census Estimates, 2012
4) AOL Cruncbase Data Note: Biases and incomplete data are intrinsic to the
the forum for growth and
private market data. Observations are better thought of as directional accuracies as opposed to strict realities
innovation
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6. Few local IPO’s mean lack of watershed events
for investment in subsequent companies
Active angels who have sold
companies by state of sale1
Low numbers of Angels with relevant experience
suggests capital may come from less credible investors
400
1
Exits create cash rich investors, with deep
knowledge of industry problems
2
Successful founders provide connections to
venture capitalists and potential acquirers
3
Investors with relevant experience can find
talent and develop channel partnerships
350
300
250
200
150
100
50
~50% Longer to raise initial funding
outside of SF Bay
~2x more likely to exit with savvy angels
1
0
Source: 1) AOL Crunchbase data, Team analysis.
the forum for growth and innovation
Note: Biases and incomplete data are intrinsic to the private market data. Observations are better thought of as directional accuracies as opposed to strict realities
1
5

7. None of the top 10 Alma Maters for VC funding
are in the greater DC area
Schools by number of founders backed from 2010-2013
200
180
160
140
120
100
80
60
40
20
0
Source: Pitchbook analysis
the forum for growth and innovation
Note: Biases and incomplete data are intrinsic to the private market data. Observations are better thought of as directional accuracies as opposed to strict realities
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8. 4 categories should be considered as policy
makers consider government’s role in support
Programs run in differing geographies
(not comprehensive)
Summary
Capital
Availability
Capital can be made more
readily available through
matching, tax policy, and more
Talent
Acquisition
Localities must reduce friction
for growth companies to
recruit and hire relevant talent
Liquidity
Facilitation
To drive ecosystem growth
regions should work to bridge
buyers and sellers of high
growth businesses
Risk of
entrepreneurial
endeavor
An opportunity exists to derisk the act of
entrepreneurship to drive
business creation
•
•
•
•
•
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Virginia’s CIT GAP funds offers early stage financing
within a less active state to drive entrepreneurship
Texas offers policy incentives in order to drive
investment and business location within the state
Chicago is forgiving student debt for technologists
who work for the city
Stanford partners with institutions like Accel Partners
to retain STEM talent with fellowships
Michigan’s Coolhouse Labs imports advisors and
investors to its location in Harbor Springs
Washington DC’s Acceliprise flies its entrepreneurs to
Palo Alto in order to generate interest in early stage
businesses
Investment in school systems, public transit,
connectivity, process simplification, and more all
contribute to de-risking entrepreneurship
PPPs with firms interested in bringing in startup
experience could create secure jobs for founders
the forum for growth and innovation
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