Primarily known as the US capital, Washington D.C. is now transforming into a hub for high-tech entrepreneurs and startups. With its competitive workforce, substantial government resources and friendly ecosystem, the Washington-Arlington-Alexandria metropolitan area has shaped itself into one of the most attractive places for investment and entrepreneurship. Last year, the Trump administration announced plans to move some functions out of Washington, which would add to more concentration of economic activity and help speed up the future growth of local startups.
One of the best places to build a startup
Not only did Amazon choose to land its headquarters in Arlington, but more and more new tech companies have also considered the great Washington D.C. metro area as their destination. According to Matt Caywood, who moved his company TransitScreen from Silicon Valley, better access to high-tech talent in D.C. provides massive support for the growth of high-tech companies. The Greater Washington D.C. area is the country’s most educated region, with more than 50% of residents possessing a bachelor’s degree or higher, according to U.S. Census Bureau. Supported by ten world-class colleges and universities in the area, the cities are continuing to offer more high-tech education and nurture tech talent.
The friendly ecosystem formed by the companies, the government, and the educational institutions also helps to make the startup scene a leader in the marketplace. As an increasingly wired city, D.C is home for more than 1,000 tech startups. Besides being a hot spot for innovation, Washington offers unprecedented access to federal regulators and policymakers. Here, entrepreneurs and investors can learn more about regulations in their respective industries and make effective responses. Additionally, startups here also benefit from lower taxes and better transportation.
In the world of Washington-Arlington-Alexandria venture capital, local trends match the national wave of fewer, larger investment deals. Early-stage deals fall, and late-stage deals dominate. It seems that VC investors are now more likely to put their money into late-stage mature companies. The amount of VC funding by startups reached its five-year-highest amount in 2017, adding up to USD 587.85 million. Washington-Arlington-Alexandria metro area companies aren’t the only ones who saw a decline in funding in recent years. National investment total fell by 2.5% in 2019 based on the report by PitchBook. Another potential explanation regarding the decrease in total funding amounts in recent years is that 45 deals that happened in 2018 and 2019 haven’t been disclosed yet, counting for 26% of the deals in these two years. Overall, the analysis shows that venture capital raised by Washington-Arlington-Alexandria-based startups have been steadily rising since 2014.
The Hotbed of Tech Startups
According to data provided by Crunchbase from 2014 through 2019, the Washington-Arlington-Alexandria metro statistical area in total had 517 deals. The majority of VC deals went to companies in the IT sector. Other hot industries include health care, food and beverages, and financial services. The innovation through the combination of technologies became the mainstream of the market. Some of the area' s top tech deals recently included a USD 51 million Series C round from Federated Wireless to expand the availability of advanced shared spectrum services, a USD 45 million Series B round from Pie Insurance to expand its insurance services, and a USD 30 million round by Arcadia to expand its community solar, home energy platform.
Startups on the Rise
EqualOcean has analyzed startups in each metropolitan area according to their background information, past financial performance, innovativeness, and prospects, and laid out a list of the 20 most promising startups in the Washington-Arlington-Alexandria metropolitan area in 2020.
The critical mass of resources in D.C. helps startups, especially in the defense and healthcare sectors, to become leaders in the global marketplace. Socially Determined, a D.C.-based healthcare technology and analytics startup, is one of the most eye-catching in the healthcare sector. The company focuses on the science and measurement of the impact of social determinants of health (SDOH). In January 2020, the company announced that it had closed its Series A investment round, raising a total of USD 11.1 million. With the new funding, they plan to develop further and scale their flagship analytics platform SocialScape® and build out sector-specific sales and marketing programs to support their position in the market as a leading SDOH analytics provider.
Besides government resources and funding resources, proximity to potential partnership or cooperation opportunities with other companies in the metro area is significant. Last year, WireWheel, the leading provider of data privacy management solutions, announced a partnership with another D.C.-based leading data protection platform provider, Virtru, to provide the first end-to-end method of securing personal data shared between companies and consumers. This new solution will help the organization stay productive while reducing risk and remaining in compliance with regulations.
With venture capital funding growing at a faster pace in the financial industry, new fintech startups keep emerging. Pie Insurance, which provides worker’s compensation insurance exclusively to small businesses, made its expansion plan to New Jersey in December 2019. Its coverage is now available in 32 states and the District of Columbia, and the company is expected to offer coverage from coast to coast in 2020.
The hospitality industry is also one of D.C.’s most active sectors, supporting more than 80,000 jobs in D.C. as of May 2017, according to the report by DC.gov. Technology and innovation are playing an increasingly important role in this changing sector. At the end of 2019, WhyHotel, a D.C.-based startup, announced it had raised $20 million in a Series B round of funding. The company partners with property owners and real estate companies to transform apartments into hotels and ensure the property is making money through the time of shifting the apartment in a new build. With its unique understanding of real estate cycles, the company currently offers a handful of properties across Seattle, Houston, and Arlington and Tysons Corner, Virginia. With another $20 million on hand, it plans to expand its footprint into new markets across the US.
Washington D.C. and the metro area offer unique access to various industries, including hospitality, healthcare, cybersecurity, and data. The entrepreneurs have been growing businesses creatively, and it should come as no surprise that high tech companies continue to pop up and grow greater, given the region’s historical wealth of talent and resources. With the arrival of Amazon in 2023, we would expect to see more energy around the Greater Washington D.C. area in the future.