Living in the greater Washington region means you are probably not the smartest person at that cocktail party. That’s a plus. Yet being close to the federal government is often seen as an impediment to entrepreneurial activity.
The truth is, this region is intensely entrepreneurial; many are surprised to hear that over the past several years, more new businesses are formed here than in both Silicon Valley and Boston.
Entrepreneurs here know how to build an emerging industry within government regulations. We here acknowledge that in a highly complex post-industrial society, rules will always exist and government will likely set them. Some suggest that entrepreneurs should ignore rules and regulation and “disrupt” them. The point is more nuanced, though, because even when a business seeks to disrupt existing practices, it needs to understand the regulatory environment it is entering. Uber may be disrupting the taxi industry by not working within existing regulations, but it is fully aware of them. It defines its business model and practices by offering more than its regulated competitors.
An entrepreneur who ignores existing regulations fails to understand the competitive environment within which he or she operates. It’s what sets our region’s entrepreneurial successes apart: the differentiator is that many founders here actually played an active role in shaping rules and thinking ahead of them. It’s about both proximity and insight — insight that comes from being part of the ecosystem that regulates the entire country’s economy. Our entrepreneurs live in the same communities as the advocates, politicians and government employees who shape the rules for commerce and business.
This cross-pollination is especially valuable when evolving industries allow our region’s entrepreneurs to be domain experts and resources for policy makers at opportune times. When new technology trends occur — if they are in industries that require some sort of rule set to grow — our region’s entrepreneurs have a distinct competitive advantage.
Many of our most successful start-up stories can be understood through this interplay. Look at the Internet and telecommunications expansion in our region in the late 1990s. The creation of the protocol for the world wide web by the national security agencies is an example of how the federal government seeded innovation in our region. And, in part, it did.
Just as important is how companies like MCI, WorldCom, PSINet, Network Solutions, AOL and others understood — and reacted to — regulatory changes to grow their businesses. This was more than proximity; they were able to shape deregulation of the telecommunications industry and capitalize on the evolving environment.
Consider the growth of our cyber industry in the region over the last 10 years; understanding privacy rules meant a boom in commercial opportunities. Add to that our government contracting industry and how it works within Federal Acquisition Rules to capture business.
Proximity to policy makers also allows our region to shine in areas such as digital advertising and behavioral targeting. Take CapitalOne and its expertise in working within emerging rules for consumer credit. And, the same has been true for healthcare. AmeriChoice Corp., a highly successful if less-known minority entrepreneur-led business, became a national leader for managed healthcare for Medicaid recipients because its founders recognized changes in healthcare regulation.
As our region stands at a 21st century crossroads, and we look for where to place our bets for job growth and new companies, the key to our success lies in appreciating the benefits of our proximity to government. We can rise above the political dogma dissuading us from jumping on economic opportunities. There is nothing wrong with helping to shape industries and growing great businesses based on valuable insight.