Washington DC might be the political centre of the world’s largest economic and military power but its inhabitants seem to harbour niggling doubts that the city itself is asmuch fun and as interesting as other cities, such as New York.
Whatever the cause of such insecurities, the region is looking to become more innovative as a way to offset an expected slowdown in government, or federal, spending, which accounted for about 27% of jobs in 2008.
In an interview with news provider PEHub, Steve Case, co-founder of internet services company AOL, which was set upin DC, said Washington was "pretty active" in terms of entrepreneurial healthcare, biotech and energy companies – "sectors where there are advantages to being in Washington" – as well as having "very strong" education and government-related fields.
According to DC-based trade body National Venture Capital Association, the DC metroplex region – which includes Virginia, West Virginia, and Maryland- posted $941.4m of venture deals last year, slightly up on the year before but still below pre-credit crunch figures that topped $1 trillion a year after 2003.
While a number of large venture capital and buyout firms are based in the area, such as Carlyle Group and Paladin Capital Group, federal government active in encouraging start-ups, through initiatives such as the In-Q-Tel (IQT) quasi-corporate venturing unit that "identifies, adapts and delivers innovative technology to suppor the missions of the Central Intelligence Agency (CIA) and the broader US intelligence community".
IQT’s current portfolio of 88 start-ups covers the information and communication technologies and physical and biological technologies sectors, while 33 holdings have been exited, mainly to trade peers.
This activity makes IQT one of the most active venture investors since its foundation in late 1999 as an external, non-profit enterprise set up by a group of private citizens led by Norman Augustine at the request of the then-director of the CIA.
As of 2009, In-Q-Tel had delivered more than 240 technologies to the CIA and the broader US intelligence community.
As the Business Executives for National Security organisation said in 2001: "The In-Q-Tel model makes good business sense and … might serve as a notice to other government agencies exploring ways to make use of the private sector’s technology."
Other federal agencies have also been encouraging start-ups to develop technologies they could use as part of an open innovation programme.
At the National Council of Entrepreneurial Tech Transfer (NCET2) conference in the Washington Convention Center last month, a succession of senior military and government figures responsible for investing hundreds of millions of dollars a year in grants or contracts to startups from universities among other entrepreneurial routes said how important it was to support innovation.
Shawn Patterson, programme manager for the Small Business Innovation Research (SBIR) team within the Department of Defense’s (DoD) Special Operations Command, said: "The Navy Seals like start-ups as a number set up companies when they leave the special forces."
The navy’s SBIR programme commits about $350m to $400m a year. John Williams, director of naval research at the DoD, added: "We tell startups our needs and the programme is built to get small business technology into a weapon."
Meanwhile, Case, who invests through his Revolution investment vehicle, told PEHub he had backed local companies, such discount coupon provider LivingSocial – alongside online retailer Amazon – and about 10 others in the wider region.
He added: "Our sense is that the market [in Washington DC] is developing nicely. It is certainly much different than when we started AOL here in 1985. Then it was really a government town. There was nothing but law firms and lobbyists. No one was focused on entrepreneurial companies.
"And compared with [the late 1990s], it is much broader. AOL was sort of the main company here back then. There were not a lot of others. Now if you drive down the access road between Washington and Dulles, there are hundreds of companies."