Washington DC Potomac River vs. California Silicon Valley

Every one is talking about change these days. As a serial entrepreneur who would like to position our nation’s capital as the technology hub and center for entrepreneurship, I have been thinking of the changes I would like to see take place.

My proposed changes are based on my educational and professional background as a Washingtonian since 1986 – working for startups like Yurie Systems (acquired by Lucent for $1.23 Billion in 1998), Newbridge Networks (acquired by Alcatel for $440 million in 1999), working for a several government contractors, and dealing with a wide range of both venture capitalists and angel investors while raising a total of $7 million for my two internet businesses B2B telecom marketplace Telezoo in 1999 and social media & search company Searchles in 2006.

Let me address the problems first before I start talking change.

If you contact our census bureau, they will tell you that DC has the second highest technology population after Silicon Valley. In addition, we have the nation’s highest concentration of advanced and post graduate degrees – meaning there are more entrepreneurs in DC with advanced degrees than in Silicon Valley. So then, why are Washingtonians not even close to Silicon Valley in terms of technology, funded startups, and investment opportunities? Three reasons:

1. Our local media companies have not been particularily supportive of the little startups these past ten years. Take the Washington Post as a classic example – they don’t provide enough coverage of our local small ventures. They mostly cover the big boys with deeper pockets, possibly in anticipation of future advertising revenue. And when they do cover a couple of the larger players like Sprint Nextel or AOL, their coverage is hardly positive. They do a good job covering government contractors though, which I think explains why 80% of all businesses in our town originate from the US government and why our government ends up buying products and services that are “proven” and have been operational for years.

The other reason I think our local media holds back from covering the little guys is their bad experience from covering startups prior to the 2001 bubble. We all know what happened then – most of them ended up shutting down. Our media may have simply concluded that it wasn’t worth their while covering startups with no future. If that is the case, it is worth noting that the same situation existed in Silicon Valley during the Web 1.0 era. But you didn’t see it stop their local media from covering the startups popping up throughout their region.

2. Our VC (Venture Capital) Community has never been as involved with their portfolio companies. Their classic mistake is asking entrepreneurs the financial and business model question during the very first meeting.

Don’t bother. Most first-time, young entrepreneurs lack business and financial experience. They typically have an idea and have built only the prototype. If interested, like most VCs in Silicon Valley, you need to a) Do your own part to evaluate the market and its potential for the product, and b) Tap into your rolodex and help them bring in the business-minded management team to execute the company’s vision. This way, the entrepreneur/founder focuses on the technology. So, spare them the business questions. Unless they intend to stay as the CEO or you intend for them to stay on as the CEO.

3. There have been only a few great local entrepreneurs from Web 1.0 era like Mark Walsh, Steve Case and Doug Humphrey helping new entrepreneurs in the Web 2.0 climate, but given the number of potential entrepreneurs our local schools – University of Maryland, the George Washington University, Virginia Tech – matriculate annually, we need many more successful mentors active in the community. This “grooming” deficit has contributed to a shortage in quality managers who are supposed to run our region’s emerging growth companies.

I believe a combination of these factors have been killing the culture of risk that existed in the 80’s and 90’s in the DC area. We tend to be more conservative on this cost anyway – it doesn’t help that a budding entrepreneur coming out of our finest universities has to weigh the benefits of operating solo in this unpromising environment with tossing his/her hat in with an established firm offering a good starting salary. Referring to my earlier comment about DC with highest concentration in the country of advanced and post graduate degrees compare to the people in Silicon Valley, think about it. Why would someone who has invested many years of his or her life in an advanced degree program, wants to risk it to start a new company as supposed to working for a well established company with a much higher pay. It is easier for a person to take such risk if he/she has not gone through all that years of schooling. just a thought.

In terms of a solution, we need some robust team work between our universities, VCs, local media, bloggers and the Gov 2.0 folks. Here is my message to each one of them:

1. Local media – in particular, the Washington Post, the Washington Times, and Washingtonians – large and small alike – need to place more value on coverage of startups. They may not have the advertising dollars to help your revenue stream initially, but with your support, many of them will in future. So, think big PLEASE. We need you as much as you need us.

2. The VC community needs to lighten focus on Excel spread sheets and la-la land exit strategies and hone in on ideas, technology, market potential and entrepreneurial je ne sais quoi. Do your homework on our inventions and craft your own analysis of its business potential. Then, use your own business and financial experience to identify key executive hires like the CEO, CFO and VP of sales. As an entrepreneur – particularly a first time entrepreneur – don’t depend on our vision of an exit strategy to close your deal. We have probably never done it, and are dreaming a Google dream on your dime.

3. Washingtonian Bloggers… if our online media and VCs drop the ball, it is your job and mine to create the buzz desperately needed by our startups – blog, baby, blog. Stay positive though. We need to work with our local universities on this.

4. Local universities – particularity the University of Maryland, the George Washington University, Virginia Tech, and George Mason University – all offer some sort of entrepreneurial program. Well, please ramp it up. I myself am a member of the GWU NAC (George Washington University National Advisory Council) and am working on several initiatives on this matter.

5. Washingtonian Gov 2.0 gurus – Mark Drapeau, Alec Ross, Federal CIO Vivek Kundra and Federal CTO Aneesh Chopra – you heard the problem. There’s a way to figure out how Gov 2.0 efforts and initiatives can fundamentally shake up DC’s startup environment, and there are some best-practice examples across the country for you to draw on. Do it quickly and efficiently please. Our region needs an injection of entrepreneurial opportunity, fast.

I look forward to working with all of you to make our nation’s capital a truly Awesome technology town.

For start, someone has to tell our DC CTO, Chris Willey to smile a little bit when giving speech in front of a large audience or speak with enthusiasm as supposed to putting them to sleep

Feel free to connect with me via awesomize.me