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What drives the growth of DC's tech sector?

DC has lavished attention and subsidies on a few tech companies to bolster its economy. But the growth of tech firms in and around Dupont Circle suggests that investing in an attractive urban space is a more effective way to grow a local tech scene.

Mayor Gray visits 1776. Photo by the author.

DC has a flourishing tech scene, as seen in the growth of several coworking spaces, where startups can get work done and find community. There are 5 in DC, 4 of which are in or near Dupont Circle, as are several other tech companies and the Acceleprise incubator.

Mayor Gray has visited one of these spots, 1776, 4 times, and given it $380,000 in grants. 1776 is a fantastic coworking space whose leadership is committed to supporting startups.

But does the District attract tech companies because we subsidize firms like 1776 and LivingSocial that claim to be hubs of talent and capital? Or is it because we have invested for a decade in urban amenities and density that attracts talent and capital to places like Dupont Circle, as Richard Florida argues?

Dupont Circle has emerged as the hub of the DC tech cluster. Besides Canvas and 1776, Affinity Lab on U Street, and PunchRock in Adams Morgan provide coworking space. Several tech companies and the Acceleprise incubator also reside in the Dupont Circle area.

This cluster emerged without government assistance or backing. 1776 is an exciting coworking space that I hope is successful, but the startups laboring in these other coworking spaces seem to be just as critical to diversifying our tax base.

Florida, who opposed Gray's subsidy to LivingSocial last year, argues that our urban core is responsible for attracting the talent and capital that have made our tech sector thrive:

Today venture capital investment and startup activity also reflect the turn back to the urban core; nearly half of the [Washington] region's total (47.5 percent), or $600 million, went to the District of Columbia proper. Most of that was concentrated in a single zip code (20005) that spans McPherson Square, Thomas Circle and Logan Circle.
While Gray expresses support for DC's tech sector, it sometimes looks like a search for a North Star he can follow, like Living Social, by providing subsidies and personal encouragement. Rather, tech clusters naturally emerge in dense urban areas that attract smart young people, with no single company as the hub.

Dupont-area Tech Firms. Green: Coworking spaces. Blue: Incubators. Red: Tech Startups.

I work 2 days per week at Canvas, a coworking space in Dupont Circle. I see startups there working all-nighters to build their businesses.

At minimum, it would be incredibly encouraging for more of DC's startups to get a visit from the mayor. After all, we are relying on all of these startups to diversify DC's economy beyond dependence on the federal government. After a recent tweet from Gray about visiting 1776, I replied asking why he hadn't visited any other coworking spaces.

However, DC angel investor and entrepreneur Glen Helmen recently questioned whether Gray's involvement in the tech sector is broad enough.

It's great that Mayor Gray is looking for investment opportunities in DC tech. And we all want 1776 and LivingSocial to be wildly successful, as they are prominent contributors to the local tech sector.

But most startups came here or decided to stay here because they like DC, not because of subsidies or Living Social or 1776. Doesn't that tell us what our strength is that we should build upon?

A better way to support and nourish the city's tech scene would be to encourage the creation of a great urban environment, by continuing the same investments in transportation and public amenities and housing and commercial space that the city has been doing for the past decade. That way, companies will have even more reasons to come here, and those who already like it will have more reasons to stay.

In the meantime, Mayor Gray would do well to show his support for all local tech companies, not just those he has strategically invested in. If he wants to visit other coworking spaces and tech firms, the mayor has a standing invitation from Canvas, and presumably from every other coworking spot.

Ken Archer is CTO of a software firm in Tysons Corner. He commutes to Tysons by bus from his home in Georgetown, where he lives with his wife and son. Ken completed a Masters degree in Philosophy from The Catholic University of America. 


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I'm sure our urban environment and population density is a contributing factor, but I think the primary driver of tech in this region is the federal government which today regulates and influences so many industries including healthcare, finance, energy, intelligence, communications, education, transportation, commerce and others.

Mayor Gray often refers to this city's startup innovation as an "independent economy" but in reality it very much depends on the government and everything it supports to be able to thrive.

There is a tremendous opportunity here to create a tech community in a symbiotic relationship with the nexus of global power and influence.

For all of New York and SF's great urbanism, they don't have the federal government at their doorsteps. Unfortunately I'm not so sure Vince Gray has the wherewithal to embrace this opportunity that has been handed to him. He is spending a lot of political and financial capital propping up LivingSocial when the public sector, and everything that feeds off it, is crying out for more innovation and is willing to pay a lot to get it.

by Scoot on Aug 23, 2013 12:35 pm • linkreport

Considering that the tech industry skews younger and more affluent, it's kind of a chicken and egg question. Which comes first the demographics or the tech jobs. Probably both. I'm guessing most tech start ups actually start as side projects in universities or while holding down other jobs, you probably need a relatively robust economy to draw people in the first place. Established tech businesses can of course relocate to whereever they want, but that goes for most profesional industries.

by BTA on Aug 23, 2013 12:48 pm • linkreport

Hmm, out of the 600M isn't something like 575 of it Living Social?

by charlie on Aug 23, 2013 12:52 pm • linkreport

I agree, I think general efforts to improve the DC community has far greater effect than tax subsidies or other directed efforts and also benefit a wider public.

by Niklas Munck on Aug 23, 2013 1:37 pm • linkreport

When the patient has enough Oxygen and not enough Blood, the patient still dyes if you give it more Oxygen and no blood. This Mayor displayed no understanding of what it takes to grow a startup community. He has how ever figured out how to get headlines so startup novices think he's engaged in a better tomorrow.

by Glen Hellman on Aug 23, 2013 3:40 pm • linkreport

DC startups are anemic in raising capital. Just look at Q2 as a typical example:

DC Companies Funded 07, Dollars: $14,564,000
MD Companies Funded 12, Dollars: $329,169,200
VA Companies Funded 10, Dollars: $74,477,900

The DC region (MD, VA, DC, WV) had a strong quarter last quarter. Normally we are the 8th region in startups raising money, well behind, Northern CA, New England, NYC Metro, Southern CA, and Texas

by Glen Hellman on Aug 23, 2013 3:50 pm • linkreport

I agree with you Ken but I don't think you're seeing the full picture.

You said:

"A better way to support and nourish the city's tech scene would be to encourage the creation of a great urban environment."

1. Part of doing so is ensuring there are strong hubs/nodes in that environment. 1776 is one of them. Having a 1776 certainly don't make the urban environment any less great!

2. An ecosystem is merely a petri dish for growing things in right? It's clear DC has done a fantastic job of this over the past 20 years. Why is investing a little money in promising new seeds a bad thing? They're not mutually exclusive. You can do both and they are.

3. And as far as where you said "Mayor Gray would do well to show his support for all local tech companies" I would say he certainly does. Not only did he keynote DCWEEK two times, he went to SXSW to promote the entire ecosystem.

So...yeah...I'm not sure what this article is actually about. DC gov is doing this...

by Peter Corbett on Aug 23, 2013 5:07 pm • linkreport

Look back at the "economic development" plan produced by a committee of DC's business schools. It was pretty weak. E.g., it ignored transit and many other sectors, the concepts weren't particularly engaging. (I think by contrast you thought the report was decent.)

In 2012 I wrote a long piece about Arlington's real estate market and the "open air" innovation district they have along Wilson Blvd., anchored by NSF and other institutions. I also wrote about this in the context of the new _Metropolitan Revolutions_ book.

WRT the Arlington piece, I contrasted the Wilson Blvd. corridor to DC's land form and opportunities, which are more traditionally campus like (AFRH, CUA's potential research park, St. E's).

But I was just in Seattle and I went by Amazon's campus in SoDo (there is also some medical/biotech operation nearby), and I was thinking of the contrast between this district and Amazon vs. say the Mars Discovery District in Toronto.

Amazon is kind of anti-connection with other tech businesses but pro-connection to the city, which is a contrast to Wilson Blvd or Mars or the complex developing around MIT in Kendall Square, etc.

There are two levels of tech promotion. Ground up small new businesses, and attracting more established businesses. Ideally we could attract both types.

But for the most part, we don't have the kind of building stock and price points that are attractive. (E.g. an article in the Sunday Seattle Times discussed skyscraper construction there and how new tech firms are more interested in old buildings--although this is no longer the case for Amazon.)

Me, I'd move UDC to St. E's and also make it a research park. I'd move fast with CUA and begin developing some research buildings there, beefing up their engineering school (a la Bloomberg), etc.

What is DC's biggest tech firm? I'd say Blackboard, but I could be wrong. Living Social is just a direct marketing company that uses the Internet.

by Richard Layman on Aug 23, 2013 5:14 pm • linkreport

Totally agree with Richard Layman -- I will never understand why anyone considers Living Social a tech company. They sell coupons. So they use the internet, big deal. Who doesn't? The Nationals sell their tickets on the internet; does that make them a tech company?

by Joe M. on Aug 23, 2013 5:33 pm • linkreport

wrt the funding ecosystem, yes, we need to do more.

wrt various incubators, the issue is that there are different types of incubator spaces that are required, and we probably ought to help develop more of them.

and Joe M. -- speaking of baseball/sports teams and tech, I was really blown away by an article about this, I thought, in USA Today. This isn't the article though:

by Richard Layman on Aug 23, 2013 5:44 pm • linkreport

@Peter Corbett

Good points. The problem from the perspective of folks like Richard Florida and me is this: Economic development officials like DMPED regularly tell the Council of dire damage to our tech sector if we don't give money to Living Social, to tech investors, or to whoever else DMPED thinks anchors DC's tech sector.

That's why it's important to be clear that what anchors our tech sector is the attractive urban space that creates multiuse density, which results in lots of creative, young people in the same place. Do you fundamentally believe that? I do. Or do you think that if 1776, LS and Fortify disappeared that DC's tech sector would be mortally wounded? To be clear, these are great companies THAT I'M NOT CRITICIZING and that I want to succeed - but they aren't the lifeblood of DC's tech sector is, our attractive urban space is.

Investing in and sustaining this attractive urban space doesn't just happen. We have to fight for the money every year, and fight battles every day about bike lanes, sidewalks widths, streetcar routes, zoning rewrites, and so on. The 1776 & Fortify money isn't much, but the tech investor tax cut and LS tax credit would seriously cut into our ability to invest in this attractive urban space.

It would be great if DMPED saw this as an economic development issue like economic development officials in other cities do - instead smart growth advocates fight these battles with DDOT and OP alone. Meanwhile DMPED seems to have one strategy for building our tech sector - give money to people and firms they think anchor the sector.

by Ken Archer on Aug 23, 2013 5:44 pm • linkreport

Ken, DC Device Lab is also based out of Canvas Co/Work and got confirmation earlier this week that we will receive both financial backing from Mayor Gray's office, as well as a probable visit to the co-working space when we open on September 27. I have found his staff to be nothing but highly approachable and very willing to work with such a small but mighty start-up such as ourselves. After speaking with them, I can see that they most definitely have a holistic view of the local tech scene and are not myopically focused on only a few of the larger businesses (who just happen to shout louder than the rest of us). Also, I think what many people don't realize is that the Mayor needs a specific event or opening in order to attend, not just a general open invitation. In fact, all it really took on our end was a decent amount of preparation and a willingness to ask (nicely).

by MKDale on Aug 23, 2013 6:07 pm • linkreport

Our company has had this very conversation with the Montgomery County Department of Economic Development something we're all heffed up on -- Techonlogy and Entertainment hubs and they suggested we submit a plan about this to the Council for further study. We did try to talk to the District and only found tin ears which considering the District's recent five year plan only mentioned Music twice and both times in an off hand manner shows that it's an uphill battle there.

BTW the District and the greater DMV are home to thousands of artists, bands, hundreds of labels, We have all the rights societies, lawyers and enough managers, recording studios and engineers to make it happen NOW since we're already the #2 Live Music & #5 Music Purchased in the US this is not a long shot and other areas like Austin, Nashville and Seattle are well on their way to developing this part of their economy. I've started a FB group and would love to see others join it.

by Nelson on Aug 23, 2013 7:17 pm • linkreport


That's great news Mariesa! Obviously I didn't hear about this around the office. How much money did DMPED grant to DC Device Lab?

But think about this: You say that companies just need to approach the city nicely with a proposal. Is that how economic development should really work?

First of all, how did you know who to contact? The Mayor's call center doesn't exactly connect you to David Zipper and Jen Boss. Should economic development be made through subsidies to companies that know how to work the system?

Second, shouldn't economic development be proactive, not reactive? Shouldn't it be based on a clear identification of the sector's strengths (to build on) and constraints (to remove)?

Thus far, nearly all the activities supporting the tech sector have been in response to proposals made by firms who know who to talk to in DMPED. LivingSocial said they would leave without a tax credit. Tech investors threatened to move without a tax cut. 1776 made proposals to DMPED.

So it's natural that DMPED's view of the tech sector would be shaped by these proposals and those making them - that is, that a handful of firms are essential anchors to the DC tech sector. Economic development that is done by bureaucrats always lends itself to being coopted by those who know how to work the system.

Just to repeat - I'M NOT CRITICIZING LivingSocial, tech investors or 1776. I'm friends with execs from all three organizations/groups.

What I'm criticizing is an economic development strategy that isn't proactive, based on a clear identification of our sector's strengths and constraints. If it were, supporting investment in an attractive urban space would be seen as an economic development priority.

The better way to organize sector-specific economic development is through a public-private partnership - as exists for tech sectors all over the country and the world. Ann Arbor Sparks is one example that many point to as a best practice, but there are dozens if not hundreds of other examples.

by Ken Archer on Aug 23, 2013 7:43 pm • linkreport

"Living Social" seems well on its way to imploding. The model simply isn't a good one over the long-term and the subsidy probably was a waste of money. Providing an environment is more than subsidies. I'm not sure that moving UDC makes as much of a difference as making UDC and its community college function better, and years of hiring marginal faculty gets in the way of that.

Having appropriate space where people want to be and a capacity to expand is part of it. DC has attracted creative types, but they're usually not on K St. They're more likely to be in emergent neighborhoods where space is cheap. The federal government is one driver, but not the only one. There is a huge nonprofit sector. there are businesses that are more concentrate here than elsewhere like law firms and research firms. Non-defense govt works and these various niches aren't necessarily going to attract the highest tech, but they are going to need areas of broad application related to things like large scale data management that could require more than than just existing data entry and stat software packages. There's also a lot of small tech that's likely to be attached to setting up research projects, conducting surveys, doing brief educational interventions, etc.

by Rich on Aug 23, 2013 8:39 pm • linkreport

I invested in SmartThings on kickstarter, and was very surprised to learn that they actually are based in DC. They had an event to hand out their products at Canvas; perhaps they also work there. I can definitely see DC as a great place for tech startups around the Internet of Things, and I'm curious to see where that goes.

by Gray on Aug 23, 2013 8:42 pm • linkreport

@Ken Archer et al.

1. You know very well the the DC government gave $0 to Living Social.

Let's just be clear about that.

Their tax credit was a FREE option that kept them here and cost not a single dime and only drove tax revenue in the form of personal income tax and sales tax from employees.

You should a applauding them LOUDLY for such a savvy move. Go ahead. Try it!

2. You said: "What anchors our tech sector is the attractive urban space" > wrong. What anchors it are smart humans. Mountain View, CA and Herdon, VA are unattractive suburban/exurban sprawls and have some of the biggest/best tech companies in the world. They're successful because of the people.

So no. I don't believe it. I believe in people. Space attracts and retains great people, but so do great companies in and of themselves.

3. You said: "The 1776 & Fortify money isn't much, but the tech investor tax cut and LS tax credit tax credit would seriously cut into our ability to invest in this attractive urban space"

I say: Prove it!

Show me the numbers.

The LS tax credit never happened and never will happen. The move was only positive for the city!

The tech investor tax cut? Come on - if there's even $10m in exits in a year, capital gains on that is $900k total on that normally. You really think given up $600k if the rate were at 3% would "seriously cut our ability to invest in attractive urban space."

Really? Wait...didn't the city have a $400m in surplus this past year? What a joke....

4. Regarding proactive economic development…I agree with you. It should be and THEY ARE. The DMPED efforts we've seen have 1000% more proactive than under any other administration prior to with regard to tech. Man - you've got to start somewhere. Give your public servants some credit. They work hard and are trying to get some things done. This takes time.

5. I'm all for public-private partnerships. They can work for sure. I'm also all for the DC gov working with specific for profits to accelerate things.

6. Regarding "having to know someone in DMPED" > all things happen because people know how to get them done. I'd much rather have points of content in the city government who are known and responsible, than for the government to blindly issue RFPs or just work with big orgs (like Universities). DMPED's approach is absolutely fantastic and should be applauded.

All in - I think DC is dramatically UNDER investing in tech/creative industries. I think DMPED is doing a "good job" and needs to do even more investing in things like 1776, Fortify, Device Lab etc.

@Rich There was $0 spent on Living Social by DC gov. No money wasted.

@Gray if you like that checkout the Internet of Things projects we've been working on:

by Peter Corbett on Aug 23, 2013 9:11 pm • linkreport

Edward Tufte would have a fit if he saw your "map" there.

by LI on Aug 23, 2013 11:02 pm • linkreport

Here are the reasons why DC's tech sector is growing:

1. It has a large number of tech workers. The Metro area typically ranks two or three in tech employment. It has the labor pool.

2. Although the government isn't thought of as a VC entity, it funds an amazing array of new technologies. Whether it's through the DOE, DARPA or NASA, many people in government tech are advancing science and technology. It's getting easier for them to migrate to the private sector.

3. Education: The Metro area has the one of the largest, if not the largest, percentage of people with advanced degrees.

These three elements have put DC in a great position. What DC has been building is the infrastructure to support start-ups, including access to VC funding. The recently created 1776 incubator is a great effort. The DC Public Library's Digital Commons, which provides shared spaces for people in pre-start-up mode, is just wonderful -- I wish it well.

Does government assistance play a role? Yes, but not via tax breaks, which, perhaps with the exception of the R&D tax break, are not critical.

The most important thing that government can do is to fund basic research, which, sadly, we're now retreating on. Not to be critical, but on this question, it's parochial to frame tech development as a regional issue. It won't matter if the U.S. fails nationally.

The more pressing issue isn't whether DC's tech sector is growing. It is whether the U.S. tech sector can continue to grow. The DC tech won't grow if the U.S. gives up its tech lead to Asia or Europe for that matter.

The U.S. advantage in tech isn't a given, and the U.S. is a peril, largely because of what's going on in Congress.

by kob on Aug 24, 2013 11:43 am • linkreport

Nelson, for years I have mentioned in blog posts about cultural development-arts development, how other cities do planning for the music sector and DC does not. Chicago and Seattle have such plans.

Even though my culture district writings focus on "culture" they are very much relevant to tech development. The points about the types of spaces, anchoring institutions, and discipline-supporting organizations, and the difference between supporting individuals/businesses and disciplines.

I am doing a writing project related to a European Community culture districts project in Baltimore, and so I am learning a lot about various cultural districts in Europe, and it's making me read a lot more stuff on the issue, including writings I hadn't previously been introduced to.

One paper referenced in my blog entry (since expanded into a book, The New Wealth of Cities) is online here:

With regard to culture and economic development, the writings of Walter Santagata and Luciana Lazzeretti, both of Italy, seem particularly relevant.

by Richard Layman on Aug 24, 2013 1:29 pm • linkreport

This article really misses the point in a lot of ways. Of course the primary attraction of tech startups to DC is the fact that its a great urban environment. But that just gets the hopefuls to rent their apartment here; it doesn't give them a business idea or the infrastructure to run with it.

Promotion and support of incubators and coworking spaces is the perfect way to do the latter. These incentives help ANY budding entrepreneur go from the working-out-of-my-living-room phase to the steadily-doing-business-as-a-one-person-shop phase. Getting more startups to that second phase is critical to get the public benefit we really want -- small tech companies that can provide salaries for actual employees. Its especially great because, unlike grants to companies like LivingSocial, it doesn't help one business, but ANY "business" that makes use of the incubators or coworking site's services.

You are correct to point out that one service should not be singled out over others. The best way to provide such incentives is a citywide grant program, not one-time bequests. But in terms of personal visits, city officials have their schedules. The grants, which should be structured in a way to reduce costs for clients, not pad service providers' bottom lines, are worth far more than photo-ops.

by Vinnie on Aug 24, 2013 4:05 pm • linkreport

You are correct to point out that one service should not be singled out over others. The best way to provide such incentives is a citywide grant program, not one-time bequests.

This is a great idea Vinnie - creating a kind of "affordable coworking space" program that qualified tenants at ANY space can participate in - and I proposed just that to DMPED a couple months ago.

I hope it happens, but they said they didn't know if they have the manpower to process applications and prevent fraud. (This raises the question whether they have the manpower to monitor compliance with the conditions of all their one-off grant agreements and, should Living Social be around in 16 months to get their tax credits, Living Social's commitments.)

This seems like a solvable problem - and if you have ideas how to set up such a program that would minimize fraud without creating expensive bureaucracy please let me or DMPED know.

by Ken Archer on Aug 24, 2013 7:54 pm • linkreport

Look at the example of the 3rd Ward space in Brooklyn. They have since expanded to Philadelphia. The rehabilitated Wonder Bread building would have been perfect for them in DC.

by Richard Layman on Aug 25, 2013 12:16 pm • linkreport


Nikki Peele here. I run The HIVE & The HIVE 2.0, two co-working spaces in historic Anacostia (btw an Enterprise and HUBZone). Combined we have about 7,000 square feet of furnished private offices, dedicated desks, and meeting space. We are also the only co-working spaces in Ward 8 (and possibly all of east of the river).

At The HIVEs we don't consider ourselves a "tech startup" by any means of the word, we are a co-working space that provides affordable office and meeting space, small business services, and free technical assistance. We consider ourselves a home for ANY small business owner or entrepreneur in need of co-working space and a sense of community.

We are also almost entirely self-funded through our nonprofit ARCH Development Corporation. The HIVEs receive a very small grant from DHCD for technical assistance and we have been luckily enough to receive a grant from Capital One to provide more technical assistance and to support our Entrepreneur Lab but we haven't received a grant or "incentive" from DMPED, DLSBD. or the Mayor's Office (though not through a lack of trying). We too haven't received a visit from The Mayor either in the three years we have been open but maybe that will change.

I understand that tech is very sexy right now (and always will be) but I just wish someone, somewhere would still see a priority in supporting our micro-businesses (sometimes just one or two person shops), people those that are making the transition from employees to entrepreneurs. I wish there could be significant appreciation for those small business owners -- despite their industry. Those people matter too.

Your regular run-of-the mill small business owner are the people I see in need of the most support on the most basic level. They are also the most likely to employ those in need of the most basic types of jobs which is why we welcome them with open arms at both of our locations.

I agree with the person here who said that what we need is financial support for co-working spaces so we can subsidize rent for new and emerging entrepreneurs. Both of our incubators are in in "emerging" neighborhoods and so while the rent is cheaper in comparison to most incubators (but definetly not those with strong DC funding support) we still have to cover the cost of infrastructure, services, utilities, and staff through our membership fees. We also have to be wary of those who attempt to cheat the system by wanting to say they have a Ward 8 office without really having a Ward 8 office.

Again, not to begrudge the efforts of others and I understand DC's current hyper focus on the tech industry but it would be nice if the view (and support) was more all encompassing and not so laser focused --whether that focus is on Dupont Circle or K Street right now and Saint Elizabeths later (the later which is less than 2 miles from our incubators).

by Nikki Peele on Aug 26, 2013 8:35 am • linkreport

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