Value Added: The technology community’s latest hot spot — D.C.
By Thomas Heath,
I am touring the dimly lit offices of LogicBoost at 23rd and M streets in the District, where Jonathan Cogley, a diminutive 35-year-old native of South Africa, commands a lucrative enterprise.
On a nearby table is a group of T-shirts with “Passwords are like underwear” emblazoned on the front. On the back: “1.) Don’t leave them in the open. 2.) Change them regularly. 3.) Don’t loan them to strangers.”
That pretty much sums up most of Cogley’s business: password protection.
I wonder, as I walk around the slightly spooky headquarters, with its floor-to-ceiling windows, glowing terminals and wall clocks reading Sydney, Los Angeles and London, if one of the reasons they are profitable is their savings on the light bill.
Easier to see the screens, said Cogley, who is all business despite the relaxed atmosphere — which includes a lava lamp on his desk.
LogicBoost grossed about $3.3 million last year and expects to increase that to $4 million by the end of 2012. Cogley’s net — including his salary and the company’s profit — is well over $500,000 but less than $1 million. He is pouring a big chunk of that back into the business for more engineers and a bigger sales staff.
I was curious about why he was in the District. Why not Tysons Corner or in Bethesda?
“We are in the District so we can get the best programming talent in the area,” Cogley said. “We used to be in Virginia in Tysons Corner. We got a lot of superstars who interviewed with us from Maryland. But they wouldn’t take the job.”
I was surprised to learn that the District has become a hot spot for tech, but Cogley said it’s true.
His typical programmer lives in the District, is about 26 years old, doesn’t own a car and earns between $50,000 and $120,000 — depending on talent. Many of the 20 or so employees live in Adams Morgan or DuPont Circle like Cogley, who is married with two children.
There are exceptions, he says, but “by having the D.C. base, you get the best programmers because they want to live in the city or very close by. It’s very counter-intuitive. Most technology companies are in Alexandria or Reston, but they only attract a certain type of progammer. Suburban. Older. Family. Settled down.
“On the tech side, young people is really where it’s at. A lot of people don’t even want to do programming after they are 30. They want to go do management.”
These are good jobs. Cogley’s employees receive annual bonuses of up to 7 percent of their salary, 401k matches, four weeks vacation, full health care for the employee and family, and even catered lunches every Wednesday.
To get the pick of the litter, job candidates go through a day-long tryout and interviews on real software projects. Prospects sign a non-disclosure agreement and a one-day intellectual property agreement that says anything they make that day is owned by Cogley.
The business has two parts. One, called LogicBoost, offers services and training seminars for software development teams at client companies. The other, known by the jawbreaking name of Thycotic, makes software that protects corporate passwords from bad guys. Thycotic has become the more lucrative side of the business, responsible for about two-thirds of the revenue.
The secret sauce is software that makes it easy for companies to keep track of the zillions of passwords that govern accessibility to everything from handheld devices to their accounting department to executives’ files.
Thycotic’s 3,100 clients range from USAirways to Netflix to Yahoo. The password software costs from $3,000 to more than $25,000 depending on the requirements of the clients, plus an annual payment that starts at 20 percent of the initial fee.
His journey from Johannesburg to a sweet spot in the District is a lesson on entrepreneurism and networking.
He went to college in South Africa, where he studied microbiology and genetics, and earned a master’s degree in computer science in London. He met his American wife on a visit to Pittsburgh.
They moved to the United States in January 2000, and he worked the contacts he made as a specialist in Microsoft products to drum up consulting work. He networked like mad, giving speeches and presentations at industry meetings.
“In Pittsburgh, I worked with user groups and they have community evangelists who are Microsoft employees. Then I was able to leverage my Microsoft contacts to get to D.C., where the market was much bigger than Pittsburgh.”
His first gig in the District was in 2004, a three-month project for a law firm that paid $50,000. He was soon getting so much work that around 2004 he hired another programmer he found through his Microsoft network.
Word of mouth led to more contracts. One lucrative revenue stream came from hiring out employees to train companies, for which he charged up to $3,000 a day.
The password business began from necessity. “As we were getting more customers, we had more passwords to manage for those customers and we needed a good place to store and manage them,” he said. “We looked at tools that were out there, and we couldn’t find anything good. So we made our own.”
In late 2005, he launched Secret Server through Google adwords. It was slow to take off, but started getting traction in 2007 when the company promoted it at technology trade shows.
The company is doing well enough to get calls from venture capital firms about once a week. Business is so good that he plans to add another four or five engineers by the end of the year.
So Cogley is on the hunt for bigger office space.
In the District, of course.
“We are not going to move more than a few blocks,” he said. “We are staying here for the same reason we are here in the first place: to get the best talent.”
Follow me at addedvalueth.