Event Recap: Tandem NSI Deal Day (Part 1)

This is a guest post by John Kaufhold. Dr. Kaufhold is a data scientist and managing partner of Deep Learning Analytics, a data science company based in Arlington, VA. He presented an introduction to Deep Learning at the March Data Science DC Meetup. Tandem NSI is a public-private partnership between Arlington Economic Development and Amplifier Ventures. According to the TNSI website, the partnership is intended to foster a vibrant technology ecosystem that combines entrepreneurs, university researchers and students, national security program managers and the supporting business community. I attended the Tandem NSI Deal Day on May 7; this post is a summary of a few discussions relevant to DC2.

The format of Deal Day was a collection of speakers and panel discussions from both successful entrepreneurs and government representatives from the Arlington area, including:

  • Introductions by Arlington County Board Chairperson, Jay Fisette, and Arlington House Representative Jim Moran;
  • Current trends in mergers and acquisitions and business acquisitions for national security product startups;
  • “How to Hack the System,” a discussion with successful national security product entrepreneurs;
  • “Free Money,” in which national security agency program managers told us where they need research done by small business and how you can commercialize what you learn; and
  • “What’s on the Edge,” in which national security program managers told us where they have cutting edge opportunities for entrepreneurs that are on the edge of today’s tech, and will be the basis of tomorrow’s great startups.

There were two DC2-relevant themes from the day that I’ve distilled: the pros and cons of starting a tech business in the DC region, and the specific barriers to entry of which entrepreneurs focusing on obtaining federal contracts should be aware when operating in our region. This post will focus on the first theme; the second will be discussed in Part 2 of the recap, later this week.

Startups in the DC Metropolitan Statistical Area vs. “The Valley”

A lot of discussion focused on starting up a tech company here in the DC MSA (which includes Washington, DC; Calvert, Charles, Frederick, Montgomery and Prince George’s counties in MD; and Arlington, Fairfax, Loudoun, Prince William, and Stafford counties as well as the cities of Alexandria, Fairfax, Falls Church, Manassas and Manassas Park in VA) versus the Valley. Most of the panelists and speakers had experience starting companies in both places, and there were pros and cons to both. Here's a brief summary in no particular order.

DC MSA Startup Pros

  • Youth! According to Jay Fisette, Arlington has the highest percentage of 25-34 year olds in America.
  • Education. Money magazine called Arlington is the most educated city in America.
  • Capital. The concentration of many high-end government research sponsors--the National Science Foundation, Defense Advanced Research Projects Agency, Intelligence Advanced Research Projects Agency, the Office of Naval Research, etc.--can provide early-stage, non-dilutive research investment.
  • Localized impact. Entrepreneurial aims are often US-centric, rather than global.
  • A mission-focused talent pool.
  • A high concentration of American citizens and cleared personnel.
  • Local government support. As an example, initiatives like ConnectArlington provide more secure broadband for Arlington companies.

DC MSA Startup Cons

  • Localized impact. Entrepreneurial aims are often US-centric, rather than global. (Yes, this appears on both lists!)
  • Heavy regulations. Federal Acquisition Regulations (FAR) and Defense Contract Audit Agency accounting requirements can complicate the already difficult task of starting a business.
  • Bureaucracy. It’s DC. It’s a fact.
  • Extremely complex government organization with significant personnel turnover.
  • Less experienced “product managers.”

Silicon Valley Startup Pros

  • Venture capitalists and big corporations are “throwing money at you” in the tech space.
  • Plenty of entrepreneurial breadth.
  • Plenty of talent in productization.
  • Plenty of experience in commercial projects.
  • Very liquid and competitive labor market--which is great for individual employees.
  • Aims are often global, rather than US-centric.
  • Compensation is unconstrained by government regulation.
  • Great local higher education infrastructure: Berkeley, UNSF, National Labs, Stanford...

Silicon Valley Startup Cons

  • Very liquid and competitive labor market--which means building a loyal, talented team can be a struggle.
  • VCs and big corporation investments are unsustainably frothy.
  • Less talent in or exposure to federal contracting.
  • A smaller pool of American citizens and cleared personnel.

Check back later this week to find out what TNSI Deal Day panelists had to say about stumbling blocks to obtaining federal contracts!