Editor's note: Harry Alford is a co-founder and partner at humble ventures. Below is his response to the annual DC Startup Census, conducted by Fosterly with a group of other local organizations to get a pulse on the local innovation scene. humble ventures was one of the census' community partners. This post was first published on humble's Medium site and is republished with permission.
In the past few years, the Greater Washington region’s innovation ecosystem has developed immensely. There are now more events and opportunities for entrepreneurs to connect than ever before. To gain a more granular, localized understanding of our region’s innovation ecosystem, Fosterly has released their second annual census report with humble ventures being a proud community partner.
This year, 450 companies participated, which dramatically expanded the data set to more than 70,000 data points across Fosterly’s two annual reports. The written account and visualizations of D.C.’s ecosystem are quite promising. In 2017, we saw huge VC deals, shifts in demographics and a growing need for more early stage support.
Two of the top D.C.-area VC deals included funding from SoftBank’s $100 billion Vision Fund. SoftBank’s Vision Fund led a $164 million Series C round in digital mapping startup Mapbox and invested $500 million more into satellite startup OneWeb. Global recognition from mega-tech funds will only continue to raise D.C.’s profile.
The pool of racially and gender diverse founders is growing. Nearly 30 percent of founders surveyed are female, and almost 40 percent of all founders identified as non-white. Pam Rothenberg, partner at law firm Womble Bond Dickinson, said, "The data from the census uncovers a real opportunity for the D.C. metropolitan region to accelerate growth by investing in traditionally underserved classes of entrepreneurs such as women and minorities."
The report is 97 pages, with many of the pages comprised of direct, written feedback from respondents. Although representing various industries, many are bootstrapping to revenue. They also state the same sentiment — the lack of early stage funding from D.C. investors.
Here's a look at what a few of the founders said anonymously in the report:
"Our biggest problem is resources: we have bootstrapped the hell out of this and while the company’s overall business model isn’t super investor friendly, individual projects could be. But we don’t have the network or experience to recruit investors"
"Building a SaaS platform with a subscription-based revenue model requires significant upfront investment. Bootstrapping leaves little additional capital for the software development that is necessary to keep up with and surpass others addressing similar market needs."
"The greater D.C. area has no visible bootstrapper/indie developer community to speak of. If you’re not into the VC/accelerator game, you’re basically invisible by default. There are plenty of ways to thrive despite this situation, but I still think it’s a hinderance to many local startups."
I’m a big advocate for permission-less entrepreneurship, where startups are maniacally focused on being customer-funded rather than VC-funded. If you organize your business around the pursuit of profit, the believers will come. I’m encouraged to know a majority of D.C.’s founders don’t organize their business around what they think the next crop of investors want to see, but it’s evident that they’d still like more early-stage support building a sound business.
Seventy-three percent of capital raised by D.C. entrepreneurs, an overwhelming majority, comes from outside the D.C. region. However, if D.C. truly wants to be a model for inclusive innovation and offer senior level talent to the likes of Amazon, then there will undoubtedly need to be more exits and local funding to accelerate a virtuous cycle of growth.
