After Boom and Bust, Diversity and Maturity

"If there's a been a drop-off, I haven't noticed," said George Newstrom, Lee Technologies' president and chief operating officer, who also served as Virginia's secretary of technology from 2002 to 2004. "Just look at all the office buildings going up along the Dulles corridor. That doesn't look like a slowdown to me."

Still, he acknowledged that a well-rounded customer base helps insulate companies from economic blips. After the stock market took a nosedive a few months ago, he pointed out, local tech stocks rebounded more quickly than the rest of the market.

And firms are merging and buying at full force, which "means our companies have value," said Bobbie Kilberg, president of the Northern Virginia Technology Council.

Local companies may be getting bigger, but they're hardly at the level of Microsoft, Oracle or Google. It's mid-size firms that drive the area's technology industry, analysts said.

Vispi Daver, a partner with Sierra Ventures in Menlo Park, Calif., has invested in five local firms, including Sourcefire, a Columbia network security firm that recently went public, and Approva, a Reston software company. He said Washington area firms lack relationships with the West Coast power players that are crucial in forming partnerships and striking deals.

"There's really no overlapping network of resources between the East and West coasts," he said. "That is extremely valuable to an early-stage company trying to grow."

Tech workers have benefited from the area's tight labor market. Many are able to move seamlessly from a government contractor to a start-up or software firm and back again.

In fact, while California dominates the tech employment scene numerically, Virginia has a higher concentration, with the most private-sector tech workers per 1,000 employees in the country, according to the most recent Cyberstates report by the American Electronics Association. The District gained almost 4,000 high-tech jobs between 2000 and 2005, and Maryland posted the highest growth in research and development spending in the country.

John Slye, an analyst at Input, said that as more federal workers retire, government agencies will rely more heavily on private contractors for their technological needs. "There's so much work to do in the federal space, and they're overstretched now as it is," he said.

In addition to being the largest purchaser of technology, the government is also a significant incubator for ideas and entrepreneurs. Federal research labs churn out as much talent for this region as Stanford does for Silicon Valley and the Massachusetts Institute of Technology does for Boston, venture capitalists said.

Unlike West Coast start-ups or New England universities, however, government labs and private contracting firms "typically aren't places where an entrepreneurial culture thrives," said Jonathan Silver, who founded District-based Core Capital Partners. "These institutions don't have the culture to nurture entrepreneurs to spin out of these places," he said. "The real value is in the spin-out."

Others argue that plenty of entrepreneurs have spun out of marquee companies. AOL alumni have formed start-ups in droves and the co-founders of WebMethods and MicroStrategy have parlayed their know-how into new ventures. And those who found success starting businesses before the dot-com era are trying to do it again.

It's even happening at Blackboard. Chasen said he's seen half a dozen start-ups spin out from his company over the past few years to take advantage of the area's educational resources.

"I think the tourists have finally gone home," said Art Marks, who co-founded Valhalla Partners in 2002. "We're on the steady upward slope with a self-sustaining entrepreneurial community."