Punk rockers The Clash perfectly captured the inner monologue of many entrepreneurs mulling where to launch their new businesses with the line: “Should I stay or should I go?”
The lure of Silicon Valley is as strong as it has ever been, with multibillion-dollar deals on the West Coast seemingly as common as traffic camera tickets here in the District. But if you’re willing to look beyond a few headlines and objectively evaluate the best places to start your business, you’ll notice that — rather quietly — D.C. has become an incredibly hospitable place for entrepreneurs.
Key 1: Diversity
Diversity, for instance, has become an increasingly important part of the workplace. No reasonable person could argue against its value. Question is, how do you achieve diversity in a way that gives your new venture the best chance to succeed?
One approach is to start with some guidelines for what an acceptably diverse company looks like and work backwards. Many tech giants have released diversity reports (and should be applauded for their transparency) and seem to follow this approach. This is largely a function of the success or failure of the ecosystem to date — thus, they’ve been unable to build diversity from the ground up. So, many companies in the Valley have retreated to this top down approach, which can feel forced and counterproductive.
Here in Washington, we are fortunate to have the highest percentage of female-owned businesses of any metropolitan area, per a recent AmericanExpress Open report. Being the nation’s capital, we also have many different nationalities flowing through our public and private institutions. Talent from these institutions spills over into the D.C. tech scene, allowing founders to take a more natural approach to building diverse teams. Companies can focus on hiring the best fit for a given role, and when blended with D.C.’s inherent diversity, you get the best of both worlds.
Our company employs only 35 people, yet we have more than a half dozen nationalities represented. We hired the best candidates, and diversity happened organically. This feels like it is more the rule than exception when you look around the D.C. start-up community.
Key 2: Culture
A second important element to building a sustainable company is culture. Every company, no matter how meteoric, will go through hard times. So how do you ensure you’re building a culture that will keep you going during those rough patches? My team talks about building a company that we will want to work at for the rest of our lives — a mindset that’s borderline heresy in the start-up world.
If you want to buck the trend, the most important element to strive for is stability. Hire slow, fire fast, and once you find a great fit, keep those people around for as long as you can. No matter how good your onboarding materials may be or how well-articulated your company values are, the reality is new people learn culture by observing the existing team.
If you’re dealing with a talent pool that turns over once a year — as recent studies have shown is typical for some well-known West Coast tech companies — it becomes nearly impossible for young companies to establish an identify that new hires can learn from existing employees. Conversely, Washington lacks that gun-for-hire mentality, at least relative to other markets. As a result, it’s a far more welcoming place to try and build that enduring, meaningful company culture.
Key 3: Talent
Diversity and culture are necessary inputs, but they are insufficient unless you have the right talent. “Talent is the number one driver of success for start-ups, and that’s one aspect where the D.C. region really shines,” Caribou Honig, a founding partner at Alexandria-based QED Investors, recently said. Honig also keenly asserts that “a peer network of fellow entrepreneurs” represents an essential component to start-up success.
This may have been a relative weakness of Washington in the past, but that is all changing thanks to “anchor” companies with mentors who can teach their craft to a new wave of talent. Companies like LivingSocial, Opower, CEB and Capital One have begun to spin out young professionals who are well trained across product, marketing, sales and analytics — ones who can then take those skills to smaller organizations.
Great start-up ecosystems also have institutions that churn out otherwise rare talent. Historically, those institutions have been universities like Stanford and the Massachusetts Institute of Technology.
In D.C., we have a different but equally rich talent pool that comes from consulting firms, federal contractors and government organizations. Smart young professionals are lured to the region either by their idealism or promises of large paychecks and corporate perks, only to quickly become disenchanted by the bureaucracy.
Start-ups make incredible landing places. At VideoBlocks, we have everything from former lawyers to NSA employees comprising our engineering team. You may be forced to mine uncommon industries, but for entrepreneurs who are willing to exercise some patience and discretion, there are more than a few diamonds waiting to be found.
Key 4: Capital
Now you have a diverse, talented team that has rallied around an incredible corporate culture—but how are you going to make payroll? No start-up community can be successful without proper funding, and D.C. offers a number of advantages on this front.
Salaries and company valuations in Silicon Valley have continued to climb to levels that crowd out many investors and make it difficult for founders to stay competitive for top talent. Consequently, they are looking to other parts of the country for better value on their dollar. The proof lies in recent statistics that suggest D.C. is a market on the rise. From 2008-2013, the State Scientific and Technology Institute ranked Washington second in terms of venture capital per capita, behind only Boston.
Additionally, D.C.’s share of U.S. venture dollars grew from 1 percent over that five-year period to 2.3 percent in the first quarter of 2014. Still a far cry from Silicon Valley, sure, but more than enough to fuel your new company and a great sign of things to come, especially when you consider that D.C. now boasts more start-ups per capita than any other metropolitan region in the country, according to Inc. Magazine.
With all of these reasons to build or move your start-up here, don’t expect for D.C. to remain under the radar much longer.
Joel Holland is the founder and chief executive of Reston-based VideoBlocks, a subscription-based provider of stock video and the second fastest-growing tech start-up in the D.C. region, according to Deloitte Technology Fast 500.
Follow On Small Business on Twitter.