Founding a startup in Washington, D.C. isn't cheap. Though startup activity in the area is growing, it's still the third most expensive market in the country to found a startup according to a new report from SmartAsset. It will cost you $395,017 annually to run a small company in the D.C. area, a number beat only by San Francisco at $422,455 and San Jose at $439,831.
That's a staggering amount, but it's worth looking at the details before making tracks to Chattanooga, the cheapest city in the report where the yearly cost is only $225,442. The cost is based on a generic five-person business in 1,000 square-feet of office space. That leaves out all those co-working spaces, smaller teams and other considerations. It also encompasses Washington-Arlington-Alexandria, DC-VA-MD-WV Metropolitan Division, so considering the lower rents paid in Virginia and Maryland suburbs, the cost of locating your startup in downtown D.C. could be notably higher, while finding space in Crystal City, Reston or Bethesda could bring costs down. And that overall cost is rising too, up about $6,000 more than the cost in last year's report.
Even in context, it's still a lot of money and could explain the apparently bottomless appetite for new shared workplaces and why working at a startup means taking an average 40 percent pay cut.
The cost also doesn't take into consideration potential benefits. For instance, in the Kauffman Index of Growth Entrepreneurship, the District is cited as the best place in the country for entrepreneurship. That's based on factors like the number of new startups and the extent and speed of their growth. But, if you don't have that money in your pocket, or a check from willing investors, the cost likely turns off potential entrepreneurs looking at D.C., and leaves a space for the area to try to entice them with the kind of tax or in-kind benefits that politicians like D.C. Mayor Muriel Bowser and Virginia Governor Terry McAuliffe make a point to show off.
