How the Lean Startup Movement is Reviving DC Entrepreneurship

Entrepreneurs are using falling capital costs and emerging management strategies to rebuild the startup community in DC. An early movement, to be sure, but one moving in the right direction.

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.
-Eric Ries.

Me neither. So what’s going on?

Why DC?

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:

  1. Continue complaining about our geographic fragmentation, shadow of the government, shortage of seed-stage capital, and the many problems that have traditionally hampered us.
  2. Move to SF or NY and become another one of many.
  3. 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.

Thank you

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

Notes

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.

3 How to Join

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?

27 Comments

  1. kevindewalt November 27, 2010 at 6:34 pm #

    How #Leanstartup Movement is Reviving DC Entrepreneurship, http://kevindewalt.com/blog/2010/11/27/w… #leanstartupdc

  2. Peter Corbett November 27, 2010 at 2:15 pm #

    Nice post Kevin…though I think most people in the DC Tech scene would agree that the thaw began as early as 2005 or 2006.

  3. Jared Goralnick November 27, 2010 at 4:36 pm #

    I look forward to your thoughts on how to move ahead, Kevin. I’m also really glad that you started a lean startup group, as it’s definitely one of the many events that’s helped the community.

    As for late 2009 being the thaw, I seriously disagree. As Peter mentioned (and I’m sure you meant to include him on your list above), 2005 and 2006 is when things began, and I’d say the height of the new excitement was probably in late 2007 and early 2008. I wrote about this a bit before and it’s actually kind of amazing how much our scene has changed since then. At the time people like Peter, Frank, Justin Thorp (also belongs on your list), Jesse Thomas, Robert Neelbauer, myself and others were meeting to try and bring some cohesion to it all.

    That didn’t happen, but what shook out was lasting events like mine (Bootstrap) that were focused on the business, Frank’s (Tech Cocktail) that were focused on promotion of startups, Justin and Peter’s (Bar Camp) that brought developers and ideas out, and a zillion one-offs from Peter and many others, from Startup Weekend to the Geeks event from SV that came here, etc. You did a great job bringing together the business sense to the developer community. And of course Launchbox and eventually Founder Institute gave some solid, tactical advice.

    I just mentioned a few of the pieces, and I think where things are now in DC is pretty commendable. Then drive 45 minutes north and Baltimore has its own thriving community centered around the Beehive and Dave Troy, with their angels events and dozen regularly occurring conferences an inspiration to any community what’s possible when they’re more cohesive (than DC).

    I’m excited to see your plans and suggestions come together tomorrow. I believe the biggest pieces missing are still a culture of a risk and an angel community, I just wanted to shed a tiny bit of history on what’s going on. There are so many people who have given so much to this region, and I’m really excited that you’ve given, too. I hope you’ll look to how we got here and who’s available to help as you construct your suggestions.

    • kevindewalt November 27, 2010 at 8:10 pm #

      There certainly have been individuals and programs that kept our “startup winter” from slipping into an ice age. Hopefully I didn’t give anyone the impression that people don’t appreciate the efforts of those you mention and others.

      But unfortunately none have been able to leverage a larger (in retrospect, short-lived) movement to make an impact the way Mario Morino used the overcapitalization frenzy in the dotcom era to build Netpreneurs. In the absence of a larger trend, programs succeed or fail based on individual efforts.

      Why late 2009? That’s when I observed the larger trend starting: Lean Startup management practices combined with falling capital costs that will allow us to overcome the scarcity of early stage capital.

      If the DC Lean Startup Meetup dissolved tomorrow something else would quickly step in to ride this trend. I don’t think this has been true in the recent past.

      Regardless, I think we can all agree that we have a long, long way to go but that we’re moving in the right direction.

  4. Sean November 27, 2010 at 8:06 pm #

    Kevin,
    DC is my home for good and I’m consulting now to make money while I work on my own lean entrepreneurial venture. But I have already been putting some thought into your question. Here are some of my ideas…
    In Boston, the mayor has set out to create an “Innovation District” within the city as part of developing the South End waterfront area and promote new tech and green jobs. DC has several development projects around that are great candidates for an innovation district (eg. Anacostia, the area around the new Nationals Park). I think it would take commitment from the new Mayor but there is potential to bring new tenants to some of these development projects, and bring new high quality jobs to the district. Such a neighborhood within the district would only complement the technology corridor in Northern Virginia.
    But the geographical grounding to support entrepreneurship would only be one aspect. The city should look to attract the sponsorship of some of the groups that really make DC a uniquely well suited location for entrepreneurship. From a government/military standpoint, DARPA and In-Q-Tel are always eager to find and support new technologies and would be obvious sponsors. Servicemen and women returning from duty have often gravitated toward entrepreneurship and gaining further support from the military to help those individuals would make a great deal of sense. Another obvious government sponsors could be the USPTO and SBA. Not to mention the EPA and DOE, who are desperate to promote new green energy technologies and startups (such as Gridpoint, which started in DC).
    There are actually many private equity groups in DC, including The Carlyle Group, that could hopefully be lured to open seed-stage offices in the new innovation neighborhood. DC also has plenty of wealthy individuals but few organized angel groups as people tend to invest individually. A couple different groups with different models to support the individuals’ investment style could go a long way to supplying more capital to the area and making it more transparent to startup companies on how to get in front of the potential investors.
    There are some obvious charitable organizations in the DC area dedicated to promoting entrepreneurship that could be attracted to the area, such as BUILD and SCORE.
    The DC area also boasts some of the leading experts on how to apply for government grants. And the hundreds of associations, think tanks, and research groups could set up free libraries for entrepreneurs to perform valuable research.
    Ultimately, my vision for an innovation neighborhood in DC would include plenty of flexible lease office space that is easy to expand and contract, an entrepreneurship library, central meeting places where angel groups and charitable organizations could hold meetings, trainings and events. It would also include many open spaces with free wifi and cafes for people to meet and exchange ideas. And finally, some affordable housing options for aspiring entrepreneurs could be a big benefit as well. An important piece would also be on how to include not just high tech entrepreneurship, but more light manufacturing to engage some of the lower skilled work force. I know that seems like a lot, but those are just some of my ideas, believe it or not. Please feel free to contact me if you want to discuss further.

    • Peter Corbett November 29, 2010 at 6:25 pm #

      Sean, I certainly share your vision and have been promoting the idea of a “Digital District” in DC…it’s needed and would be very interesting for sure.

  5. Nelson Jacobsen November 28, 2010 at 9:44 am #

    Having been part of that Netpreneur community I and so many other entrepreneurial folk greatly benefited from the “Coffee & Dough” events that the Morino Institute provided to the community, I want to give a shout out to the folks there that put this together.

    BTW, Mario Marino, still leads by example by moving from Netpreneur to Socialprenur and many of us followed him into this area.

  6. Andrew Skotzko November 30, 2010 at 11:56 am #

    This is great to hear. As a native of NoVA who left to pursue college & startup dreams out in CA, it’s great to see this happening back home. Will definitely look for any community events / chances to contribute whenever I’m back!

    • kevindewalt November 30, 2010 at 9:55 pm #

      Please do! We welcome anyone who comes home from CA.

      (I did my grad work at Stanford…so I totally hear you)

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  1. Washington, D.C.: What stops Washington, DC from becoming a startup hub? - Quora - January 27, 2011

    [...] from becoming a startup hub AGAIN?" Answer: Nothing. It is happening.As I tried to explain, http://kevindewalt.com/blog/2010…, I believe our startup winter is coming to an end. Summary:-We were an emerging growing hub in 1999 [...]

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