Lots of entrepreneurs in DC – including the team at Tech Cocktail – are skipping happy hours and giving up time we’d otherwise spend sleeping to pursue our dreams and help build Washington’s startup ecosystem. But are we doing it wrong?
According to a new report from FounderCorps and StartupVirginia, we may be. The way to become a startup hub, it argues, is not to imitate Silicon Valley piecemeal – creating a local Stanford, attracting more VCs, opening coworking spaces, and fostering that elusive startup culture – but to focus on M&As.
“Success means growing numbers of entrepreneurs starting businesses, selling them, and then starting another,” writes author Jonathan Aberman. Aberman is the founder of McLean, VA-based Amplifier Ventures, cochair of StartupVirginia, and founder of FounderCorps (so he has a stake in these findings).
Aberman wants to show that the Greater Washington Region (GWR, including Virginia, Maryland, and DC) has the ingredients necessary for startup-scene success. Looking at industries other than hi-tech – like health care, media, telecom, financials, and industrials – GWR has more M&As than Silicon Valley from 2006 to 2011: 1,188 to the Valley’s 1,007.
Beyond that, M&As in GWR already include a fair number of local purchases (37% to Silicon Valley’s 45%). Aberman looks at this figure because he believes local acquisitions are more likely to be successful, since founders should be able to work better and more closely with acquirers. (This is supported by the data, he thinks, as hard-hitting Silicon Valley has more local acquisitions in most sectors.)
The conclusion? To grow Washington’s startup ecosystem, we need to build startups that local, successful companies want to buy.
But how do we get that to happen? While I can personally open a coworking space, or convince my VC buddies to come here – impacting perhaps hundreds of entrepreneurs – I can only build one startup that might be acquired by a local company two years down the road. Aberman’s advice may be a good catalyst for debate (as it was intended), but we’ll need another report to figure out how to execute it.