The Salad Days of 1999
In 1999 the DC startup community was raging. Monthly “Coffee and Doughnets” were packed, AOL WAS the Internet, the telecom industry was on fire, and “dotcommers” flush with VC capital rubbed elbows at the Indian CEO High Tech Council.1 DC had finally emerged as a startup hub.
Well, at least we thought so.
The DC Startup Winter
In April 2000 the NASDAQ started falling and by September 12, 2001, the startup party was officially over for DC.
The defense, real estate, and government services sectors took off, telecom companies lost $1 Trillion in value, and anyone with money or talent followed the market. Most “startup networking events” disappeared or were only attended by service providers. Some of us tried to stay active (as I did at In-Q-Tel), but for the most part it was a long, cold winter for entrepreneurship in DC. 2
Too many of us sat around complaining longingly for the salad days.
The Thaw Begins
In late 2009 things finally started turning around for our region.
Over the past year a bunch of us have organized a Lean Startup Meetup Group3 for entrepreneurs interesting in applying the emerging strategies advocated by Eric Ries, Steve Blank and others. What started as a few of us in a bar has grown to an event that fills up weeks in advance. Entrepreneurs from Baltimore to Georgia are attending and we’ve had high-profile visitors like Eric Ries and Dave McClure present.
Best of all we’re starting to build a cohesive group of entrepreneurs who share best practices, offer advice, and help each other.
I never would have imagined DC would become such an active Lean Startup community.
Me neither. So what’s going on?
We’ve always had assets for becoming a startup hub: the largest IT customer in the world, government grants, great engineering programs at our regional universities, the most educated workforce in the country. What we have NOT had is early-stage, risk based capital.
Without seed capital startups couldn’t get started. Until now.
Today on-demand computing and platforms like WordPress, Twitter and Facebook have changed everything. A startup can get customers and traction for a few thousand dollars; even people with access to capital delay raising and spending because it is more efficient to test your concepts with the market first.
In retrospect, it isn’t surprising that Lean Startup concepts would resonate in our region – an entrepreneur who learns the skills for efficient execution has everything she needs in DC to get going. Our strong tech services sector makes DC a bootstrapper’s paradise. 4
The Coming Spring for DC Startups
Other macro forces are driving our revival.
- The balance of power has dramatically shifted to talented teams from investors.
- The startup scene in NY is booming and we’ll benefit from the capital and talent that comes to DC to work at LivingSocial or fund the next one.
- Entrepreneurs are realizing they can’t compete in the FaceBook-Google war for talent in Silicon Valley so they are setting up shop in emerging markets like ours. 5
- The government sector is slowing and engineers will start looking for new opportunities. 6
But it’s Still Too Chilly
Let me be clear – we are at the BEGINNING stages of this revival. We have a long, long, long way to go.
Most of us still toil in isolation, we don’t have a strong seed investment community, we have no geographic center of talent, and we desperately lack mentorship despite some good intentions. It is getting better, but it still NOTHING like it could be.
If you don’t like the status quo, you have a few options:
- Continue complaining about our geographic fragmentation, shadow of the government, shortage of seed-stage capital, and the many problems that have traditionally hampered us.
- Move to SF or NY and become another one of many.
- Do something about it.
I’ve made my choice.
It happened before, it can happen again.
In my next post I’ll outline what we need to start doing. Ideas? Please leave comments below with your suggestions.
Thanks everyone else who has been helping to get things going. I apologize in advance to those whose contributions I’ve overlooked. In no particular order:
Patrick Smith, Ken Yarmosh, Michael Mayernick, Yoav Lurie, Jared Goralnick, Paul Singh, Frank Gruber, Jen Consalvo, Stephanie Hay, August Jackson, Zvi Band, Alex Murphy, Nip Zaladvia, Greg Coyle, Sean Glass, Scott Messinger, Nate Gilmore, John Correlli, Luc Castera, Sean Murphy, Scott Day, Chris Bucchere, Errol Arkilic, Jim Chung, Larry Robertson, Marco Rubin, Daniel Klaussen, Nic Perez, Andrew Warner, Rusty Klophaus, Patrick Sheridan
1 You may not have heard of these organizations if you weren’t an entrepreneur in DC in the late 1990s because they disappeared so quickly. I tried to get into the Indian CEO High Tech Council but wasn’t accepted because I wasn’t a CXO at a venture-backed startup at the time. At its peak their events would draw 500+ people despite the exclusivity. Can you imagine a startup event in DC today that draws 500+ CXOs? Heady days, indeed.
2 Of course I meant PRODUCT startups. Services took off and entrepreneurs built some great companies. For the most part our economy has been the strongest in the country for the past 10 years. San Francisco’s unemployment rate is much worse than Arlington, VA.
4 Ash Maurya’s upcoming book Running Lean lays out a step-by-step process for how you can bootstrap with Lean Startup strategies. I predict it will be a huge hit in the DC community.
5 I’ve been hearing grumblings from entrepreneurs in Silicon Valley that they MUST raise an A round to have a prayer of recruiting talent. Even Jason Calacanis recommended in his most recent email newsletter that entrepreneurs move out of the Valley or New York. Every region has its pros and cons.
6 How many great software engineers could you pull from government contractors with $6M? Want to bet how fast they could learn Rails, SEM, or HTML5 if given an opportunity?