Startup Success Frat House

What About DC’s 1776

People keep asking me, “What do you think about 1776?” They then go on to say that it’s one of the few things DC Tech on which I’ve been relatively quiet. For the uninitiated, 1776 is DCs Silicon Valley makeover artist. A private co-working space that is partially funded by the city.

As DC’s Chief Party Pooper, I’ll answer that question for the public here:

  1. Oh Great… Another Co-working Space – There were already enough non-government funded co-working spaces, CanvasAffinity LabFishbowl LabsUberOffices. Why did the Mayor of DC decide that he should throw away money on an additional space (yes not all of these spaces are in DC) to help fund a competitor to Affinity Lab and Canvas? Couldn’t he have invested in the business people who had already shown a commitment to the model? He could have rewarded those committed entrepreneurs and help them increase their effectiveness instead of creating a government-funded competitor. He could have taken a less risky bet on business people who had already proven a sustainable business model.
  2. Sustainability – Yes it’s a great looking space in an expensive part of town and that’s the problem. This scandal-ridden Mayor is unlikely to make it through another election. Hopefully, by some miraculous moment of sanity, the electorate of DC will elect a business-oriented mayor like New York’s Bloomberg or former DC Mayors, Tony Williams and Adrian Fente. When the current Barry-istic,  Crony-meister,  Mayor, Vincent Gray is gone, 1776 will lose its government hand-out. Rents will have to cover costs and the nascent startup residents will be unable to afford the rent.
  3. Party Till You Puke – At 1776 there’s a party, meetup, education session almost daily. Learning is great, celebrations are great, but sometimes someone needs to get some work done and there’s no place to hide from the party in this cavernous open space where even the walled in conference rooms aren’t walled in from ceiling to floor.  Residents often have to leave the space to get real work done.
  4. More Sizzle Than Steak – It’s a place that’s more about the optics than the execution. It’s like many of the glitter-traction startups that drive my crankatude. It seems to be more about the press, PR and building individual fame than helping startups build sustainable business models. Yes, Princess’s from Jordan can get you press but what a distraction from getting your business done.
  5. Bubble Time – These uber-hypey, startup thingies, like 1776 are the canaries in the coal mine of bubbles.
  6. Exacerbates the Regional Divide – As long as we are a region of divided jurisdictions competing against each other, The District vs Maryland, vs Virginia… we will be a 3rd tier startup region wasting tax dollars and revenue luring each other across arbitrary geographical boundaries instead of focusing that energy on luring out-of-region, talent, companies, cash and resources to the DMV.
  7. DMV Never Had an Office Space Problem – Wasted energy and money on the wrong issue. There is no dearth of office space in this region, or co-working space, mentoring/office hours or meetups or anything provided by 1776. There’s just another space for everything that was already in excess in this region. Our most pressing regional problem is the lack of investment capital and could you imagine if the time and energy was spent to provide, office space, resources, funding and tax incentives to lure out-of-town Venture Capital to DC instead of funding competitors to entrepreneurs and business people who had already made personal commitments and bets to provide co-working space.

Speaking of funding, there is talk of 1776 starting a seed fund. Capital is so difficult to raise today for even the most seasoned and successful seed stage investors; why would any intelligent discerning limited partner with available capital to invest in a seed fund choose an amateur team who have neither raised Venture Capital in the past, invested their own capital in startups, or successfully raised and run a funding vehicle. Who would take the risk on the untested and unproven armatures when there are so many proven, experienced alternatives available?

In 2000 every kid with an MBA and a dream became a Venture Capitalist as there were over 2000 Venture Capital Funds. We all know what happened next. The Darwinian forces of nature have thinned that heard to closer to 600 funds today. As experienced funds, with successful track records like Novak Biddle, struggle to raise capital, who and why would anyone place their bets on a DC government funded coworking space?

With all that said and done, I hope I’m wrong on sustainability issue for several reasons:

  1. There are at times educational programs of value taking place at 1776, although they took place prior and would continue past.
  2. The uber-hype machine that is 1776 has weakened and sucked the air out of some of the other pretenders of Startup credibility.
  3.  Wouldn’t it be great if this Mayor could actually prove he had an idea and vetting process to discern value instead of giving huge tax breaks to cratering businesses like Living Social to ensure that they crater in DC instead of elsewhere?