Originally published April 10, 2007.
Washington DC is a great city if you like a number of things: free museums, great public transportation, the federal government, perpetually losing sports franchises, and – surprise! – entrepreneurial ventures. While DC sometimes gets a bum rap for bureaucracy due to the inescapable presence of Uncle Sam, it turns out that the greater DC area has a strong and somewhat intimate venture community with a few distinguishing characteristics that set the city apart from its west coast peers. (In a spirit of full disclosure, I will be interning at a metro DC startup this summer.) I was able to learn more about the possibilities of starting a company in the DC area through a truly special Darden program called the Batten Venture Bootcamp, a three day drink from the firehose that draws students from MBA programs at Darden, Michigan, Maryland, and Georgetown.
The Batten Venture Bootcamp ultimately pits students in teams as mock VC firms pitching investment terms to a prospective portfolio company (in our case, a real-life company preparing for its Series B fundriasing). To prepare us for our competition, we spent two days with entrepreneurs, VC investors, and legal counsel in sessions of lecture, interactive panel discussion, and social networking. To cap it off, Updata Partners - our VC hosts for the event – sat side by side with entrepreneurs they’ve invested in and grilled us to defend our proposed term sheets for Series B financing. It became a fully ingrained lesson that 80-90% of your work as a venture capitalist truly needs to be done by the time you get to the table. This event provided exactly the kind of education you hope to get during business school but are not likely to find in any classroom environment. (Other firms participating in the Batten Venture Bootcamp are listed at the end of this post.)
I was also fortunate enough to meet with Phillip Merrick, the humble, Australian founder of webMethods – a business system integrator and optimizer that foresaw the tremendous cross platform potential of XML. WeMethods made history as the biggest IPO of 2000 and recently was sold to Software AG for $546 million (not too shabby for a dot-com bust survivor). He offered a few excellent insights on the strategic positioning of Washington DC as a home for excellent startup opportunities:
- If you’re going to sell to businesses, it’s hard to pick a better location. DC gives you access to three major airports (two of which service international destinations), day-trip access to the two biggest financial centers in the US (New York City and Charlotte, NC), and proximity to dense concentrations of Fortune 500 copmanies and international business hubs as well. Not to mention one of the biggest purchasers of products and systems: the federal government.
- The workforce in Silicon Valley is somewhat fluid and (pardon the crude inference) institutionally inbred in the tech sector, meaning folks over at PayPal may have worked together at Yahoo! and Adobe previously, and Google folks may have crossed paths at HP or Microsoft. It almost seems like most folks taking a paycheck are just waiting for their next big startup idea to come before they try it on their own as well. Contrast that with the DC workforce, which is exceptionally well-educated but demonstrates, on the whole, a more stable commitment to the workplace.
- The DC venture community is something of a close-knit network of entrepreneurs, angels, and venture capitalists, making it easy to meet the stakeholders who will commit an interest in the success of the startup. The area is home to some of the very best investors and practitioners in the world.
Not to see the world strictly through rose-colored glasses, DC area term sheet valuations tend to fall below those of their west coast peers, and east coast venture capitalists tend to demonstrate a stronger proclivity for financial management than startup management.
2007 Batten Venture Bootcamp participating firms:
- Updata Partners
- New Vantage Group
- New Enterprise Associates
- Novak Biddle Venture Partners
- Arlington Capital Partners
- Intersouth Partners
- H.I.G. Ventures
- Valhalla Partners
- New Markets Growth Fund
- Toucan Capital Corp
- Cooley Godward
- Allpoint Network
- Opus 8
- Lockheed Martin Investment Management
- Network Alliance
- Harmony
- CMWare
- Appfluent Technology
- Object Video
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