Washington is for lobbyists, not entrepreneurs
By Morris Panner, contributing writer
Morris Panner is the CEO of group text messaging service GroupFlier.
I am sitting near an elevator on the second floor of the Barnes & Noble in Bethesda, Md., which has free Wi-Fi and a quiet spot for phone calls. I'm also approximately four miles from the White House.
Welcome to the world of startups in our nation's capital.
I am a software entrepreneur who sold my last venture to Larry Ellison's on-demand software company for $31 million. Instead of staying in a corporate position in Silicon Valley, I've struck out on my own again from where I live.
It's an unlikely place to launch a new company. A hot Silicon Valley startup recently ran a discussion thread entitled: "What stops Washington, DC from becoming a startup hub?"
There are lots of reasons, but I think it comes down to culture and priorities.
For all its talk of change, Washington intoxicates people with the power of "bigness."
President Obama asks the head of GE to be a "jobs czar," even though entrepreneurial companies -- that is, new companies -- have been responsible for almost all new job creation since 1980, according to U.S. Census data. GE has dumped 34,000 workers in the U.S. since 2000. Still, it was able to borrow billions from the Federal Reserve in 2008 as part of the bailout at rock-bottom rates -- at a time when small companies found themselves completely cut off from the credit markets.
What would be acceptable behavior in Silicon Valley just doesn't cut it in status-conscious Washington.
My neighbors are firmly convinced that I must be unemployed. I don't wear a suit. I "work" from home a lot. My daughter's classmate's father called me the other day and asked if maybe I wanted to do some consulting for him.
Venture capital is scarcer here, too. There are only a handful of VC firms in our area, compared to the hundreds that fill Silicon Valley. It makes sense. Washington is a region where capital can better be deployed starting a lobbying firm or bidding for government contracts.
Lobbying alone was a $2.6 billion industry in 2010, according to the Center for Responsive Politics. All that spending just sucks the oxygen out of the room for people trying to do true entrepreneurship.
I am one of the lucky ones. Based on our team's track record and cool idea (group texting), we landed a $500,000 seed round from local VC firm Novak Biddle -- which, by the way, is not far from the Barnes & Noble.
PR is tougher here, too. Getting the business press to pay attention to a cool new product is hard because, by definition, we are small and fragile. A $500,000 seed round seems like small potatoes compared to a multi-billion dollar appropriations contract. We aren't even a rounding error in the crazy budget math of Washington.
As an example close to home: The federal government recently leased 70,000 square feet of office space in Bethesda at the rate of $51.41 per square foot. The going rate had been $27 per square foot. Government officials justified paying so much more (and making it a lot pricier for the rest of us) because they said they needed to "get the operation running."
Maybe it would help all of us if the powerful folks in fancy suits came out to Barnes & Noble (BKS, Fortune 500), sat on the floor, and learned what it takes to create something from nothing.
Credit: CNN (www.cnn.com)
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