DC tech execs ask for better spaces for startups

7 owners of DC technology companies sent a letter to the DC Council and Deputy Mayor Victor Hoskins today proposing aggressive new initiatives to build the DC tech sector. The executives ask DC to prioritize helping startups find space and to create vision like New York’s Innovation Island.

The letter comes as the DC Council prepares to give final approval to property and income tax breaks for LivingSocial and capital gains tax breaks for investors in tech companies. Greater Greater Washington and tech blog InTheCapital sat down with the executives to brainstorm ways to best help the tech sector, and this letter is the result.

Owners of tech startups expressed that District office rents make it hard for them to locate in the city and network with other founders, engineers and funders. Small startups have to pay the same rents as law firms and lobbyists, and won’t benefit from property tax breaks like LivingSocial’s.

One way DC could help is to promote below market rate rents for tech startups. This could include using office spaces that are more temporarily empty, as startups often need space for short timeframes as they are getting off the ground or growing rapidly before they rent larger spaces of their own.

This could also bring startup founders together in a large space that creates opportunities for networking, collaboration, and getting to know potential investors. DC could help a large number of small startups, and if a small percentage survive to become larger DC-based companies, it will have been worth the investment.

But should this happen downtown? Much of Washington has lower rents than downtown. The second idea is to create an innovation center in one of the large unused parcels in DC, such as St. Elizabeths or Poplar Point.

Mayor Bloomberg offered a large portion of New York’s Roosevelt Island, between Manattan and Queens, for a university to build a graduate technology campus. Cornell University submitted the winning proposal, and New York hopes the new campus will anchor technology growth in New York as Stanford or MIT have in Silicon Valley and Boston.

The St. Elizabeths East Campus master plan already notes that one section of the 183-acre campus would make an ideal academic quad. The growth there would also create job opportunities for Ward 8 residents, from software engineering for the most highly skilled to administrative or maintenance jobs at the school and tech companies for the least skilled.

Will start-up founders and employees be willing to commute to a location like St. Elizabeths? It’s actually right near Congress Heights Metro. Plus, a critical component of Innovation Island is $100 million to increase transit and pedestrian links to and within Roosevelt Island. DC’s planned streetcar line from St. Elizabeths to Anacostia Metro, downtown Anacostia, and over the bridge to Capitol Hill and beyond, could become a Tech Line serving just this function.

The letter is below.

Dear Council members and Deputy Mayor Hoskins,

The purpose of this letter is to thank you for your recent support of the growing technology sector in Washington DC, and to offer some encouragement and feedback as owners of DC technology companies.

As the contraction of federal agencies and contractors begins to affect the DC economy, we believe the DC tech sector is well situated to replace lost jobs and demand for office space. Your efforts to support and invest in the growth of the DC tech sector are therefore very much appreciated. The legislation currently before the DC Council, which provide property and income tax breaks to LivingSocial and capital gains tax breaks to investors in DC tech companies, demonstrate your leadership in this regard.

As the DC government’s investment strategy in the technology sector matures, we would endorse an even more aggressive strategy that supports a broader array of companies at multiple stages of growth. An aggressive, transparent, policy-based strategy that targets companies at all stages has the best chance of growing a real ecosystem of technology firms that would provide long-term economic stability for the District.

DC attracts young, talented innovators who are driving this growth. This is a strength to build on, but unfortunately the current Net-2000 incentives provide minimal support to startup technology firms.

Below are some proposals for your consideration that may provide more targeted support to a broader range of DC’s tech sector.

Minimize entrepreneurial overhead Finding affordable places to work and network is a central obstacle faced by startups in DC. While large companies can take advantage of property tax breaks, startups pay the same rents as law firms, lobbyists and federal contractors.

The Mayor is able, through his ability to sign master leases, to sublease commercial office space to selected companies at below-market rates. By leveraging this ability to slash office space costs for startup tech firms in the District, conceivably hundreds of startups could receive the type of real estate subsidies that are currently only available to large property owners. If a small percentage of these startups grow, the city would generate a substantial return on this targeted investment.

Replicate NYC’s Innovation Island in DC Universities around the world bid for the opportunity to build a world-class technology campus on NYC’s Roosevelt Island, what Mayor Bloomberg called Innovation Island. The winner, Cornell, will develop this campus on city-owned land, which will be upgraded with $100 million of public transportation improvements.

DC is currently evaluating options for the development of St Elizabeths, Poplar Point, and other parcels of city-owned land. A major strategic investment like Innovation Island would bolster the city’s supply of talented engineers and entrepreneurs. DC’s own innovation campus could be used for technology education, startups, incubators and co-working spaces.

Incentivize IT innovation in sectors with local customers and acquirers The IT executives of many sectors, particularly hospitality and law firms, are in Washington DC or its inner suburbs. Just as DC’s new workforce intermediary will target workforce development investments in the hospitality sector, we should target technology business development investments in sectors with clusters in the DC area.

We should consider expanding our economic development relationships with major DC sectors like hospitality and law to support IT innovation in those sectors. These are the natural replacements of technology providers to the federal government whose contraction will challenge our economy.

We are excited about your leadership in initiating a private-public partnership to build our tech sector, and provide these proposals for an aggressive, broad-based investment in this sector in the spirit of that partnership.

Sincerely,

Michael Goldstein, Principal

Endeavor DC

Dave Sandrowitz, Principal

Fortify

Jonathan Lunardi,CEO & Co-founder

VeteranCentral.com

Stephanie Hay, Co-founder

FastCustomer.com

Andrew Mason, Co-founder

Eventstir.com

Daniel Kleinman, Founder

MegaPixel Software

Navroop Mitter, Co-founder & CEO

Gryphn Corporation

Lindsey Mask, Founder

LadiesDc.com

Update: Michael Goldstein, principal at the Endeavor DC accelerator, has added his signature to the letter.