Technology is a major driver of employment and innovation in DC. According to the Census Bureau’s classifications, the technology sector accounts for 31,000 jobs in DC, a figure that underestimates the influence of the industry, given that technology is also an important part of other industries such as consulting and life sciences. Historically, the federal government has attracted a large number of information and communications technology (ICT) businesses to the DC area, supporting the hardware, software, and data needs of federal agencies. Helped by a large federal client base, the DC metro region is an epicenter for cybersecurity and other security technologies, cloud computing, and digital services. Tech is a target growth area for DC, Maryland, and Virginia, creating intense regional competition for the location of new and existing tech companies, including through tax and relocation incentives, investment funding mechanisms, and university partnerships.
The District has also had business-to-business (B2B) technology successes that are less federal-dependent, such as Blackboard, a supplier of software and services for higher education, and HelloWallet, an enterprise provider of workplace financial wellness benefits. The DC area has climbed in nationwide rankings as a tech hub, growing jobs in the sector by over 50% in the last decade and attracting numerous tech startups, including Blackboard and Social Tables.1 As further evidence of the growth of the tech sector, the DC Tech Meetup has grown to over 18,000 members since 2011 and is now one of the largest Meetups in the world.2 In 2015, the software industry brought $94.5 million from 10 investment deals to the District, including a $52.6 million deal for MapBox Inc., a company that makes mapping software for developers. This lagged behind Northern Virginia, where $280.6 million came in through 35 different deals.3
Visit the initiatives page and filter Core Sector by “Technology” and “All” to see initiatives that support this sector. You can also filter Opportunity Area by “Smart Cities & Civic Solutions, Professional Services/Hospitality Innovation, Security Technology, and Data Analytics” to see additional initiatives related this sector.
Major Trends Affecting the Sector and Implications
The tech sector is dependent on access to a pool of specialized talent
Trends: Successful tech sectors are dependent on access to a pool of specialized talent. Witness the impact that Stanford and MIT have had on establishing Silicon Valley and Boston, respectively, as the leading technology centers of America. DC has a highly-educated population, many with STEM degrees, and the DC metro area has larger concentrations of computer and math occupations compared to the U.S. as a whole.4 However, the DC metro area is not home to many top-ranked computer science and engineering programs. This makes it harder for tech firms to find talent. The top-ranked computer science program in the region is the University of Maryland’s, which U.S. News and World Report ranks as 15th among American graduate computer science programs.5
Implications: Schools such as University of Maryland and Georgetown University are making progress in developing stronger tech portfolios, and there are high-quality local secondary school programs. However, there is room for improvement in the tech programs of local universities.6 DC could also help connect students at the District’s universities to paid internships at DC technology companies, in order to encourage tech talent to remain in the District.
The federal government provides an attractive foundation for growth
Trends: Despite the slowdown in federal expenditures, the government still remains an important partner in the development of tech in the region. Many agencies that shape the tech industry are located in the DC area, such as the National Institute for Standards and Technologies, the Federal Communications Commission and the Department of Homeland Security. Also, as the federal government develops its own in-house digital initiatives spearheaded by groups such as 18F and the U.S. Digital Services, and as agencies look for contractors to drive government-wide IT modernization efforts, large government contractors and civic-focused tech startups have incentives to locate in DC.7 One drawback of the dependence on federal clients is that the citizenship requirements that sometimes accompany federal contracts may make government technology contractors reluctant to hire skilled tech immigrants.
Implications: To grow the tech sector in DC, it may be useful to focus on areas of technology that leverage the large federal client base but can also apply to a private sector context, such as cybersecurity, advanced physical security technologies, or analytics of big data. Small and medium sized companies may need support scaling in size, particularly when it comes to figuring out how to access federal contracts.
Inclusiveness in the tech industry remains a challenge nationwide
Trends: The national tech industry continues to struggle with inclusiveness and diversity. Nationwide, less than 1% of venture capital-backed company founders are African-American8, less than 3% of venture capital firm employees are African-American,9 and minority-owned businesses were 22.2% less likely to receive investment from the venture capital industry.10 Income disparity between gender groups in tech is noticeably higher than it is for other demographics, with only 35% of female workers earning more than $80,000, compared to 51% of males.11 White men dominate the IT industry in the District as well. Of businesses surveyed for the Pathways to Inclusion report, white male-owned IT firms outnumber similar black male-owned firms by a rate of 34:1.12 Men also dominate the ownership of IT firms, with white male-owned IT firms outnumbering white women-owned firms by a rate of 3:1.13 That said, a SmartAsset study rated DC as the top city for women in technology with women holding 40% of tech jobs.14 Stakeholders in technology indicate that wealth disparities in networks make it hard for minority entrepreneurs to cross the funding hurdle of the ‘friends and family’ round of startup financing.
Implications: There are opportunities to leverage the diversity of the District’s population and the existing advantages in inclusion of DC’s tech industry to make DC a center for inclusive tech innovation. The main customer in DC, the federal government, has specific preferences for small businesses that are women-owned, minority-owned, and/or veteran-owned. Efforts such as the Inclusive Innovation Incubator (In3) at Howard University to support local businesses and Groundwork (a $10 million investment fund in DC to fund and grow startups launched by minority founders)15 could be scaled to help tech startup CEOs that face disproportionate challenges access capital. There may also be opportunities to help DC-based tech companies introduce local K-12 students to coding and the tech sector.
Creating a Region-Wide Security Technology Network
Trends: While the tech industry may be built on global competition and high-speed telecommunications, firms still find value in clustering near each other in regions such as Silicon Valley, where they can hire from a local pool of skilled workers, exchange information, and build relationships with funders face to face. Tech stakeholders in DC commented that the networks in the DC technology space (e.g., companies, universities, incubators, funders) are disparate.
Implications: Strengthening tech networks in DC could foster innovation. The District could leverage its influence as a convener to facilitate new connections in the tech community and mitigate fragmentation. It could also explore the value of using District-owned space to cluster tech companies to create density and drive tech innovation.16
Resources for DC Entrepreneurs – this document summarizes the key resources available to support DC’s tech and entrepreneurial ecosystem.
- Golden Triangle DC. “Tech Trends Boost Jobs and Businesses in DC’s Golden Triangle.” 5 May 2015. <https://goldentriangledc.com/news/tech-trends-boost-jobs-and-businesses-in-d-c-s-golden-triangle/>.
- Software and IT, internet and information services companies represent collectively nearly 25% of all startups in the region; DC Tech Meetup has grown to over 18,000 members since 2011 and is one of the largest Meetups in the world.
- Proctor, Carolyn. “3 things you should know about Greater DC’s Venture Capital Deals.” Washington Business Journal. 22 April 2016. <http://www.bizjournals.com/washington/blog/techflash/2016/04/3-things-you-should-know-about-greater-d-c-s.html>.
- Werling, Jeffrey, Jeffrey Lemieux, and Troy Wittek. Roadmap for the Washington Region’s Future: Seven Key Economic Clusters. 24 November 2015. <http://2030roadmap.com/wp-content/uploads/2016/02/2030Roadmap_Seven_Key_Economic_Clusters.pdf>.
- U.S. News and World Report, “Best Grad Schools – Rankings – Computer Science”. Ranked in 2014. <http://grad-schools.usnews.rankingsandreviews.com/best-graduate-schools/top-science-schools/computer-science-rankings>
- Ortner, Michael. “How to make DC the next Silicon Valley.” The Washington Post. 16 October 2015. <https://www.washingtonpost.com/opinions/how-to-make-dc-the-next-silicon-valley/2015/10/16/059d34ea-6df8-11e5-9bfe-e59f5e244f92_story.html?utm_term=.8a16ca09ea30>.
- Werling, Lemieux, and Wittek. Roadmap for the Washington Region’s Future: Seven Key Economic Clusters.
- CB Insights. “Venture Capital Demographics – 87% of VC-Backed Founders are White; All-Asian Teams Raise Largest Funding Rounds.” 3 August 2010. <https://www.cbinsights.com/blog/venture-capital-demographics-87-percent-vc-backed-founders-white-asian-teams-raise-largest-funding/>.
- National Venture Capital Association and Deloitte. NVCA-Deloitte Human Capital Survey Report. <http://nvca.org/research/human-capital-survey/>
- Paglia, John K.; and Maretno A. Harjoto. “The effects of private equity and venture capital on sales and employment growth in small and medium-sized businesses”. Journal of Banking & Finance. 2014
- Office of the DC Deputy Mayor for Planning and Economic Development. Pathways to Inclusion: Expanding the District of Columbia’s Tech and Innovation Ecosystem. Accessed 19 Dec 2016. <http://dmped.dc.gov/sites/default/files/dc/sites/dmped/publication/attachments/20160915%20Draft%20DC%20Tech%20Inclusion%20Report%20for%20DMPED-%20FINAL.PDF>.
- Wallace, Nick. “The Best Cities for Women in Tech.” SmartAsset. 14 December 2016. <https://smartasset.com/mortgage/best-cities-for-women-in-tech-2016>.
- Bing, Chris. “Exclusive: New VC Fund Will Bring $10M to Minority Entrepreneurs in DC.” DC Inno. 10 March 2016. <http://dcinno.streetwise.co/2016/03/10/dc-tech-new-10m-vc-fund-to-invest-in-minority-led-startups/>.
- “Is DC Transforming From A Government Town Into A Tech Hub?” WAMU 88.5. 14 November 2014. <http://wamu.org/story/14/11/13/dc_going_from_a_government_town_to_tech_hub?width=605&height=485&inline=tru>.