20131126 dc entrepreneurship and innovation v slideshare

@maxwellelliot

Building Washington’s Startup Ecosystem Existing challenges and a framework for solutions

November 26, 2013

1 the forum for growth and innovation

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


Since 2007, the pace of entrepreneurship has

increased rapidly throughout the US

However, this increase in early stage activity doesn’t

necessarily translate to competitiveness

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%

Source: AOL Crunchbase data, Team analysis.

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


Despite early stage gains, survival is less common

outside of technology hubs

Percentage of companies receiving a second VC financing, by founding year

Source: AOL Crunchbase data, Team analysis.


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


In reality, talent, capital, and liquidity events are

scarce in the District relative to traditional hubs

Many tech jobs exist in DC, but

raw talent is limited1

Venture capital in CA, MA, and

NY outweighs DC area 16:12

DC area businesses are not

active buyers1

Asse

ts U

nde

r M

ana

ge

me

nt 2

01

2

Population is only

a factor of ~4.4:13

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

private market data. Observations are better thought of as directional accuracies as opposed to strict realities

Companies based in DC,

Maryland, and Virginia

have only acquired

11 businesses since 2006

Percentage of Companies Acquired In-

State vs. Percentage of Total Companies

#19

#25

#38

#94

University of Maryland

Johns Hopkins

University of Virginia

GW University

No DC, Maryland, or Virginia

school ranks in the top 10

universities producing venture

backed entrepreneurs from

2010-2013

BEST SCHOOLS IN REGION

BEST SCHOOL IN WASHINGTON


3

Few local IPO’s mean lack of watershed events

for investment in subsequent companies

0

50

100

150

200

250

300

350

400

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

1

Longer to raise initial funding

outside of SF Bay1

2

Exits create cash rich investors, with deep

knowledge of industry problems

Successful founders provide connections to

venture capitalists and potential acquirers

Investors with relevant experience can find

talent and develop channel partnerships

more likely to exit with savvy angels1

~50%

~2x

Source: 1) AOL Crunchbase data, Team analysis.



None of the top 10 Alma Maters for VC funding

are in the greater DC area

Source: Pitchbook analysis


0

20

40

60

80

100

120

140

160

180

200

Schools by number of founders backed from 2010-2013

http://blog.pitchbook.com/top-universities-producing-vc-backed-entrepreneurs/




4 categories should be considered as policy

makers consider government’s role in support

Capital

Availability

Talent

Acquisition

Liquidity

Facilitation

Risk of

entrepreneurial

endeavor

Summary

Programs run in differing geographies

(not comprehensive)

Capital can be made more

readily available through

matching, tax policy, and more

Localities must reduce friction

for growth companies to

recruit and hire relevant talent

To drive ecosystem growth

regions should work to bridge

buyers and sellers of high

growth businesses

An opportunity exists to de-

risk the act of

entrepreneurship to drive

business creation

• 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

20131126 dc entrepreneurship and innovation v slideshare

Economy & Finance