technology incubator feasibility study · a technology incubator program in the district of...

January 09

Technology Incubator Feasibility Study

Presented by the Emerging Technology Consortium and ANGLE Technology to the Washington, DC Economic Partnership

EMERGING TECHNOLOGY CONSORTIUM

286 M STREET, SW - WASHINGTON, DC 20024

Innovation Empowers

Darold Hamlin

Executive Director

Kenneth Tolson

Chief Operating Officer

Warren Blanchard

Chief Financial Officer

Dr. Chad Womack

Executive Vice-President & Director, Programs and Initiatives

Dr. Daanen Strachan Senior Advisor, Educational and Training Initiatives

Dr. Kenan Jarboe Senior Advisor, Government Affairs & Policy

Mr. Steve Moore President & CEO Washington DC Economic Partnership 1495 F Street, NW Washington, DC 20004 Dear Mr. Moore, The Emerging Technology Consortium (ETC), and its subcontractor, Angle Technology Group are pleased to present to the Washington, DC Economic Partnership the Technology Incubator Study for the District of Columbia. Phase I of the report concludes that Washington DC has all the prerequisites to add technology based economic development to the District’s economic plan. Phase II of the report provides a business implementation plan, with a proposed budget, to establish a technology incubator in the City. The report also provides the foundation for greater economic opportunities with technology based innovation as core of a new creative economy in the District. The report is timely in light of the current economic crisis. The creation of businesses with high paying jobs will be essential to the country’s overall economic recovery. The incoming administration has made stimulating metropolitan areas one of its key objectives of its urban policy. It proposed to provide $200 million in planning and matching grants for regional business, government, and university leaders to collaborate on leveraging a region's existing assets to enhance long-term regional economic growth. The new administration also realizes that municipalities with comprehensive economic development plan can create “Promise Neighborhoods” where all communities can participate in the American dream. The ETC is in accordance with the approach of the new administration, believes that significant and coincident investments in math and science education (or STEM education), human capital and workforce development will yield a many-fold return particularly when aligned with the creation of businesses and encouragement of the entrepreneurial spirit. This is the essence of ETC’s Technology Based Economic Development (TBED) 2.0 strategy. The development innovative technology based economic development plan has the potential to make the District an integral component of the Metropolitan Washington Area and Regional economy. It also aligns the District with the incoming administration’s vision for economic and urban revitalization.

We are pleased to present this report the Washington DC Economic Partnership and look forward to the next steps in developing a TBED 2.0 strategy for the District.

If you have any other questions, do not hesitate to contact me directly by phone at 202-347-5928 or via email at [email protected].

Sincerely,

Darold Hamlin

President and Executive Director

1601 Ballenger Creek Pike Point of Rocks Maryland 21777 Tel: (301) 524-5654 Fax: (240) 465-3088 Email: [email protected]

Web: www.angletechnologyus.com

ANGLE Technology Group

January 30, 2009

Chad Womack, Ph.D. Executive Vice President, Programs and Initiatives Emerging Technology Consortium 286 M Street, S.W. Washington, DC 20024 Dear Dr. Womack: The ANGLE Technology team is pleased to submit to the Emerging Technology Consortium and the Washington, DC Economic Partnership this Final Report on the Feasibility Study for a Technology Incubator in Washington, DC.

We appreciate all the guidance you have provided to the ANGLE Team during the course of this study.

Sincerely,

Lisa S. Smith

Principal US Operations

Acknowledgements This Final Report on the Feasibility Study for a Technology Incubator in Washington, DC reflects the input from District of Columbia and local governments in the Greater Washington region, the private sector, non-profit and academic sectors, community representatives, and the study’s paid consulting team, ANGLE Technology, beginning in the summer of 2008. The project was actively guided by the Emerging Technology Consortium and the Washington, DC Economic Partnership. The study was commissioned by Neil Albert, Deputy Mayor for Planning and Economic Development for the District of Columbia.

Special recognition and appreciation is extended to:

Emerging Technology Consortium

Darold Hamlin, President and CEO

Chad Womack, Ph.D., Executive Vice President, Programs and Initiatives

Kenan Jarboe, Ph.D., Senior Advisor, Government Affairs and Policy

Washington, DC Economic Partnership

Stephen Moore, President and CEO

Andi Joseph, Manager, Research and Communications

ANGLE Technology Team

Lisa S. Smith, ANGLE Technology

Gary Evans, Ph.D., ANGLE Technology

Guillermo Sohnlein, ANGLE Technology

Patricia L. Larrabee, Facility Logix, LLC

Richard Clinch, Ph.D., Jacob France Institute at the University of Baltimore

and Peter Corbett, CEO, iStrategyLabs

Technology Incubator Feasibility Study The Emerging Technology Consortium Washington, DC Economic Partnership

Contents Page

1. Executive Summary ...................................................................... 1

2. Introduction ................................................................................... 8

3. The Economy of the District of Columbia .................................. 10

4. Estimated Market Demand .......................................................... 13

4.1 Overview of Existing Incubators in Greater Washington Area 13 4.2 Business Incubation and Support Programs in Washington, DC 14 4.3 Incubator Programs in the Greater Washington Region 16 4.4 Geographic “Market Area” 26 4.5 Businesses/Industry Sector Focus 39 4.6 Projected Demand for Incubator Space 43 4.7 Competitive Forces That Impact Incubator Success 45 4.8 Incubator Space Configuration 47 4.9 Projected Level of Jobs and Impact to be Created 50

5. Incubator Economic Development Purpose ................................ 61

6. Community and Stakeholder Support ......................................... 63

6.1 Background 63 6.2 Online Survey of “Wired” Technology Community 63 6.3 Incubator Programs and Services 67 6.4 Community Strengths to Support an Incubation Program 67

6.5 Obstacles to the Creation of an Incubation Program 68 6.6 Industry Sector Focus 68 6.7 Indicators of a Successful Program 68

7. Market Feasibility Assessment .................................................... 70

8. Regional Technology Incubator Context and Examples ............. 73

8.1 Montgomery County and the City of Baltimore Examples 73 8.2 Fairfax County Example 74

9. Site Assessment ........................................................................... 75

9.1 District of Columbia Commercial Real Estate Overview 75 9.2 Criteria for Incubator Site 76 9.3 Site Selection Process 78 9.4 Selected Sites 79

10. Business Plan .............................................................................. 82

10.1 Market Opportunity Recap 82 10.2 Vision and Mission 84 10.3 Overview: DC Technology Incubator 844 10.4 Operational Plan 89 10.5 Focus Areas 911 10.6 Criteria and Metrics 92

11. Implementation Plan ................................................................... 94

11.1 Phased Roll-Out 94 11.2 Phase I (Years 1-2) 94 11.3 Phase II (Years 2-5) 96

12. Marketing Plan ............................................................................ 97

12.1 Objectives 97 12.2 General Marketing Activities 97 12.3 Marketing Channels 98

13.4 Organizational Structure 105 13.5 Governance 105 13.6 Advisory Board 109

14. Financial Plan and Pro Forma Budget ....................................... 110

14.1 Costs 110 14.2 Revenues 110 14.3 Pro Forma Operating Budget 111 14.4 Initial Physical Program 111

15. Risks .......................................................................................... 115

16. Summary ................................................................................... 116

APPENDIX I: Stakeholder Interview List

APPENDIX II: DC Entrepreneur Survey Detail

APPENDIX III: Revised Incubator Space List

APPENDIX IV: Revised Preliminary Program Space Configuration

APPENDIX V: Draft Pro Forma Operating Budget

APPENDIX VI: Draft Capital Furnishings Budget

APPENDIX VII: DC Entrepreneur Survey Detail (January 2009)

Technology Incubator Feasibility Study 1 Washington, DC Economic Partnership Final Report January 30, 2009

1. Executive Summary The Washington, DC Economic Partnership (WDCEP) worked with the Emerging Technology Consortium (ETC) to explore the possibilities of developing a technology incubator program or similar research and commercialization space in the District of Columbia, which could become a catalyst for the City’s overall technology-based economic development strategy. WDCEP promotes business opportunities throughout the District of Columbia and contributes to business retention and attraction activities. The ETC promotes technology-based economic development activity in urban environments. The ANGLE Technology team was selected to conduct the Feasibility Study for a Technology Incubator in Washington, DC. This study has been funded by the Deputy Mayor for Economic Development in the District of Columbia.

Phase I of the Feasibility Study analyzed the market demand for an incubator and the potential economic impact it might produce. Phase II of the Feasibility Study developed a Business Plan for implementing the incubator initiative.

Phase I: Market Analysis is comprised of four elements:

♦ Estimated Market Demand

♦ Determination of the Incubator’s Economic Development Purpose

♦ Determination of Community and Stakeholder Support

♦ Assessment of Market Feasibility

Existing business incubation programs in the Washington, DC area focus on several key business sectors/communities important to continued economic growth of the City, such as communications and social media, arts, nonprofits, and small minority business. The ANGLE Project Team has analyzed the critical mass of business and technology resources, as well as the competitive market demand for technology business incubation and new entrepreneurial initiatives in the District of Columbia. We find there is strong demand for the establishment of a business incubation program in Washington, DC with public and private sector support, which focuses on innovative, growth-oriented, early-stage technology businesses.

The establishment of a technology business incubator would meet the specific needs of one of the fastest growing sectors of the Washington, DC economy and help attract new residents to the City. The establishment of a technology business incubation program also would fill a gap in the spectrum of business support offerings in the City and complement the existing business development programs. Longer term, a technology incubation program could assist early-stage companies based on increasing levels of intellectual property generated by Washington’s academic


institutions. Moreover, a technology business incubation program would be a value-add in the Greater Washington Market and offer programmatic and infrastructure resources to help drive regional innovation initiatives, such as the Chesapeake Crescent.

In addition, there is an opportunity for the District of Columbia to become “the heart” of technology business activity in Greater Washington by creating an environment for the development of innovative, growth-oriented companies. In a practical sense, the primary industry sector which would be most likely to benefit from a business incubation program is one of the City’s most dynamic, growth-oriented sectors: information technology (IT). The information technology sector broadly includes computer design and research, and IT services, as well as communications, Web 2.0 and social media companies. A secondary industry focus could be the professional and creative services sector, which includes advertising and marketing, environmental sciences, engineering.

Demand

Incubator initiatives can generally expect to source new knowledge-based companies and entrepreneurs from:

♦ Existing small companies and individual entrepreneurs

♦ Corporate sector

♦ Academic and government research establishments

♦ International/domestic inward investment

These four sources are all dynamic elements in the District of Columbia business environment.

Today there is an estimated 6,000 square feet of office space used by business incubation client companies in the City of Washington. By summer of 2009, that number could double, but it will not be enough to accommodate the space requirements of entrepreneurs and knowledge workers in the information technology and professional services employment sectors that are projected to add 3,000-4,000 jobs each year for the next five years, according to Greater Washington Initiative (GWI) data.

A technology incubator program in the District of Columbia could initially double and subsequently triple incubation space for technology companies to further diversify the industry base in the City. Based on demand, a two-phase incubator development program is envisioned: a 12,000 square foot incubator in Phase I, followed by an additional 12,000 square feet in a Phase II for a total of 24,000 in Phase II. The space could include offices, conference rooms, video conferencing and showroom/demonstration space. Direct economic benefits of a business incubation


program could be realized through an estimated 80 new, high wage jobs for technology company workers in Phase II and an estimated $16 million in added economic activity in the City.

Incubator Economic Purpose

It is important to emphasize that business incubation is a process and that an incubator is much more that a multi-occupancy, managed work space. Incubators play an important role in their communities. A technology incubation initiative in Washington, DC would be a catalyst and a platform for:

♦ Providing a physical focus for entrepreneurship and technology company growth

♦ Creating a common culture and environment for technology entrepreneurship

♦ Facilitating inter company contact, networking and growth

♦ Enabling cost effective delivery of services/resources

In addition to these four roles, the incubation initiative in the District of Columbia should be structured from the outset to be the catalyst for referrals, marketing and the development of program resources for the two existing incubator programs in the City: Affinity Lab and the DC Minority Business Enterprise Center. The technology incubator also can be a platform for activities associated with technology based education and training activities for underserved communities in the City.

Community and Stakeholder Support

A small, but enthusiastic group of stakeholders was identified through the study interview program and an online survey of IT entrepreneurs. As the incubator program grows, becomes known and engages with stakeholders, this group will grow quickly.

Stakeholders noted that there would be challenges to establishing the incubator. Having political and financial support for the technology incubation initiative from the District government at the outset of the project will be critical. As the City does not yet have a comprehensive technology-based economic development strategy which would include this project, and this project would break some new ground, there was a concern that the launch of the incubator might become mired politically.

Some stakeholders also expressed concern about the challenge of identifying early-stage funding and locating appropriate, affordable incubation and graduation space for technology companies in a town known for the high-priced real estate occupied by law firms and other professional service firms. Partnerships with willing developers were suggested. The challenge of marketing to the initial incubator prospects also was highlighted.


Assessment of Market Feasibility

There is an opportunity now in the District of Columbia to establish a technology incubator initiative which will:

♦ build a stronger, more cohesive entrepreneurial environment for technology companies which links, leverages and further develops existing Washington, DC technology entrepreneurship activities which meet the needs of distinct client communities

♦ provide a platform for the development of specific new resources to advance technology development activity in the City, such as the creation of a $1.5 million seed fund for DC-based companies and support for special entrepreneurship, science and technology education and workforce development activity for all communities in the City

♦ provide the platform for establishing a new, professionally managed technology incubator program specifically to drive the attraction, growth and development of growth-oriented technology companies representing Washington, DC’s most dynamic industry sectors and most relevant university-developed intellectual property

The incubator program will increasingly be seen as the focal point, resource and catalyst for technology entrepreneurship in the District of Columbia.

Phase II of the Feasibility Study developed a Business Plan for implementing the incubator initiative.

Phase II: Business and Financial Plan is comprised of four elements:

♦ Site Assessment

♦ Business Plan

♦ Financials

♦ Future Development Options

Site Assessment

As noted in the Phase I report, it is recommended that the incubator be developed in phases and begin in leased commercial space, as discussions with the City government staff indicate that there is no city-owned space currently available which meets the location criteria. The real estate market in the City presents challenges for cost-effective incubator space.

Working with ETC and WDCEP stakeholders, the ANGLE Team reviewed more than 40 sites and further shortened the list of suitable properties as follows:


Near-Term – Phase I (not listed by preference)

1325 G Street NW 225 Virginia Avenue SE – City sublease 3400 International Drive, IntelSat 151 T Street, NE – Innovation Center at McKinley High School

Longer-Term – Phase II (not listed by preference)

641 S Street, NW, The Wonder Bread Building

Mission of the Incubator

The mission statement forms the basis of the business plan and quantifiable performance metrics. The following mission statement is proposed for the DC Technology Incubator:

To provide a common platform for growth-oriented DC technology entrepreneurs to access resources, mentorship, and capital to start and grow their ventures and to graduate from incubation space into commercial space in the District of Columbia.

The Technology Incubator Program

The DC Technology Incubator can support the launch and growth of carefully selected promising entrepreneurs and ventures, while also actively supporting the efforts of other District-based organizations with similar missions. Established as an independent government-funded not-for-profit organization, it can provide a range of valuable programs generally organized into two categories:

1) Entrepreneur and Venture Programs (including Services and Facilities)

2) Incubator and Network Programs (including operations support and promotion)

Focus Areas for the Technology Incubator

The primary focus of the DC Technology Incubator will be on technology entrepreneurs building high-growth ventures. The Incubator will make efforts to support women, minority, disabled, and veteran entrepreneurs via a number of mechanisms, including specialized programs, speakers and mentors, events, and staff recruitment.

The DC Technology Incubator should not initially focus on any specific industries or sectors, developing instead a strong general purpose infrastructure for entrepreneurial ventures with a wide spectrum of innovation-based, high growth business models (e.g., new products/services, new markets, new business processes). However, as


noted in the Phase I Market Analysis, the following industries will likely provide the bulk of the client base, which will be accommodated in a variety of different ways.

♦ Information & Communications Technology (Computer Hardware, GIS, GPS, Internet, IT Services, Mobile, Networking, Satellite, Security, Software, Telecommunications, Web 2.0)

♦ Entertainment & Media (Digital Media, Education, Film, Gaming, Music, Television)

Implementation Plan

For strategic reasons, a phased roll-out approach will be followed over five years to implement the incubator, beginning with an initial launch phase (Year 1-2) then growing through an expansion phase (Year 3-5). A core staff of two is recommended and detailed in the pro forma budgets, with additional staff support/functions detailed in the report narrative, but this support would need to be provided for through organizational sponsorship or in-kind support. As the incubation grows during Phase II, these two core staff members will be further leveraged over the entire program.

Organizational Structure

Operating as a stand-alone non-profit will improve the incubator’s attractiveness to prospective sponsors, since many organizations will not fund an incubator they perceive as publicly supported or as a profit-making corporate entity. A stand-alone organization also, typically, has more maneuverability and flexibility when making financial and purchasing decisions. It is recommended that a non-profit corporation be created to operate the incubator. This non-profit organization could have a staff of two initially and be a program of the WDCEP, with an organizational relationship modeled on the Emerging Technology Centers (ETC)-Baltimore’s relationship with the Baltimore Development Corporation (BDC).

Financial Plan and Pro Forma Budget

Based on the draft space configuration program developed during the Phase I portion of this study and the information gathered during the site selection analysis portion of the Phase II portion of this study, the ANGLE team developed a pro forma five-year operating budget for the proposed incubation facility. These budgets are based on a 12,000 square foot facility which doubles in size to 24,000 square feet as the project matures. The ANGLE team included data related to actual business incubation costs incurred by current incubator operations in Maryland as appropriate, given the anticipated operational model for the proposed incubator.

Income is drawn from office space rents; fee-based use of the assembly and digital showroom areas on a per diem basis; fee-based income for affiliate companies that seek to benefit from the programmatic resources available through the incubator as well as take advantage of conference space and other resources; an annual operating grant from the City; and sponsor-generated revenue.


Gross income in Year One is $459,325 which grows to $677,001 by year five. The aggregate gross income for the five year period is $3,094,862.

Year One of the pro forma operating budget yields a loss of $101,468. The overall Net Operating Income (NOI) during the five-year pro forma operating budget reflects a loss of $24,336.

The total estimated Capital Furnishings Budget is $84,464.

Summary

The District is operating in a potentially significant window of opportunity to energize its base of technology and entrepreneurial talent, expand that base and spur job growth. While there are a number of existing local and regional programs to support high-growth early-stage ventures in the District, the City’s entrepreneur community still needs a “first-stop shop” platform to provide a focal point and to help integrate all of the various offerings.

The Emerging Technology Consortium (ETC), working with the Washington DC Economic Partnership (WDCEP) on a technology business incubation project, can help provide this missing piece of the ecosystem by launching the DC Technology Incubator with public and private sector support. Moreover, this new business incubation initiative can be the catalyst which leads to the development of a comprehensive technology-based economic development strategy for the District of Columbia.


2. Introduction The leadership in the District of Columbia government recognizes the value of continued diversification and growth of the City’s economy. This kind of diversification can be accelerated through the creation of a comprehensive economic development strategy to stimulate technology based economic activity. This type of development is characterized by high-wage, knowledge-based jobs in expanding technology industry sectors. Technology based economic development strategies have many drivers, including investment in science and technology education programs, creation of a climate for entrepreneurship, availability of capital and appropriate physical infrastructure.

This draft Final Report on the Feasibility Study for a Technology Incubator in the District of Columbia is being submitted by the ANGLE Technology team to the Emerging Technology Consortium (ETC), which is working with the Washington, DC Economic Partnership (WDCEP) to explore the possibilities of developing a technology incubator program or similar research and commercialization space in the District of Columbia as part of the City’s overall technology based economic development strategy. The study is funded by the Deputy Mayor for Economic Development in the District of Columbia.

Phase I: Market Analysis details estimated market demand, a definition of the economic development purpose of the incubator, assessment of community and stakeholder support and a market feasibility assessment.

A Project Kick-off Meeting was held with the ANGLE Project Team, along with the ETC and WDCEP teams at the offices of WDCEP on May 12, 2008. The ANGLE team includes Facility Logix, a specialist in facilities planning and development for technology-based companies and the Jacob France Institute at the University of Baltimore, which specializes in economic analysis and impact assessment.

Business incubation is a process and incubation programs can be structured in many different ways, as seen in the three different approaches to business incubation currently operating in the District of Columbia. While there is considerable value in examination of best practice, as has been done at the State level within Maryland, it should be emphasized that business incubation success generally hinges on the design of specific solutions for individual locations. While there is some attraction in seeking to duplicate what has been successful in other locations, it is generally the case that specific local factors play a significant role in the successful development of business incubation programs. And while physical facilities can provide a valuable focus and vehicle for sharing resources, a successful business incubation program is more than a multi-tenant facility.


Phase II: Business and Financial Plan develops the draft Business Plan for the proposed incubator initiative. This includes an implementation plan, marketing plan and staffing plan, as well as a financial plan and pro forma budgets for the first five years of operations. Risks for the incubator initiative are outlined and a number of technology-based economic development considerations for the District of Columbia are discussed.


3. The Economy of the District of Columbia To date, the District of Columbia’s economy has been resilient and has outperformed the national economy, according to the 2008 District of Columbia Chamber of Commerce State of the Business Report. While the City is not projected to experience actual contraction, it is experiencing similar problems compared to the national economy, particularly sub-prime lending, foreclosures and high commodity prices. However, many of these forces are moderated by the structure of the local economy and the continued dominance by less cyclical sectors underpinning its growth. The sectors providing this protection on the downside of the economy include:

♦ The federal government

♦ International institutions and related activities

♦ Associations and membership organizations

♦ Hospitality

♦ Health and education

The importance of these sectors to the local economy’s stability and health when the national economy is underperforming has distinguished the District and the surrounding Washington Region as one of the best places in which to invest and do business nationally.

The District does possess more cyclically-sensitive sectors—the building industry, technology intensive businesses, financial services entertainment and discretionary retail services and dining—but these have not yet achieved the magnitude necessary to drive the City’s economy as fast as the national economy during periods of expansion.

The government and the business leadership in the District of Columbia cannot take the City’s economic growth and development for granted. Whether the City’s economy becomes more expansive depends on whether it:

♦ Diversifies its economic base building on its comparative strengths

♦ Retains and fosters growth within its core industries and develops new ones

♦ Improves its public services and reduces taxes and business costs

♦ Attracts new residents

♦ Trains current residents to help them acquire marketable skills


♦ Ensures the safety and security of all residents and workers in the City

To achieve its inherent economic potential, the District needs to continue to improve its business climate, target under-served markets within the City and in the nearby suburbs and reposition under-utilized assets such as its health, education entertainment, cultural, international and financial services sectors to become more significant generators of jobs and income in the coming decade.

As the national and regional economies recover from the cyclical slowdown, the competition for business investment and for comparative business advantage will become increasingly aggressive. The District of Columbia is in an excellent position with its continuing, relatively strong economic performance to out-position its competition for economic growth.

In the coming decade, the District should move quickly and decisively to reposition its primary assets for growth and to remediate its liability, thereby maximizing its future growth potentials.

Diversifying the City’s Economy

In the District of Columbia, the health and education sectors provide untapped economic opportunities. The City’s universities are its largest non-government employers and have generated significant, but not fully appreciated, economic benefits for the City. If the City is to build a broader economic structure, it must utilize its primary strengths and establish initiatives, such as a broad-based technology business incubator program designed to link its institutions of higher education with the City’s other primary sectors to realize major future economic benefits through strong and productive partnerships.

The same is true for the major health facilities located in the City—university-based teaching hospitals at George Washington, Georgetown, and Howard University, the Washington Hospital Center, National Childrens’ Hospital and the many other medical services and related businesses. The health and education sectors are projected to be among the fastest growing sectors in the coming decade, and the District of Columbia has a comparative advantage in this market and should aggressively support the further development of these services to complement its other core industries. While the City’s health and education sectors are likely to become key core industries similar to the federal, international, hospitality, associations and building sectors that have been the historic sources of new jobs and income, there are other opportunities to diversify the District’s economy. These build on the economy’s strength as cited above.

Some other examples include building an international financial services sector around the existing international financial institutions that already exist in the District—the World Bank, the International Monetary Fund, Inter-American Development Bank; expanding biomedical research activities associated with the


university-based hospitals and other health facilities located in the District that emphasize the testing, evaluation and applications of new technologies in health care treatment; organizing the testing, evaluation and applications of new technologies in health care treatment; and organizing and marketing the City’s already well recognized research organizations by becoming university-based centers independent of government and non-government research institutions and businesses specializing in information, data management and problem solving. These are just several of the clusters of economic activities that are already located and successfully operate in the City that offer the potential for development as core industries whose growth over time could help diversity the economic base and position it for more rapid expansion in the future.

Another area of potentially strong employment growth is in professional services. It is estimated that roughly 67,000 new jobs will be added by 2014 according to the District’s Department of Employment Services (DOES). Of these new jobs, 15,500 will come from professional services. Washington, DC has been a major hub for the legal community; all of the four largest accounting firms have their national research offices located in the City. Additionally, the growth of the political industry with all its lobbyists, advisors and public relations experts has contributed to the growth. This niche market will continue to grow and take advantage of agglomeration.

In short, the strength and vitality of the growth sectors that comprise the Washington, DC economy--health care, education, professional services and international activities—create opportunities for increased new business and entrepreneurial activity.


4. Estimated Market Demand The market demand analysis helps determine the character and strength of demand for business incubation programs and facilities in the City of Washington. This analysis includes research into:

♦ Existing business incubation activities in the region and the District of Columbia

♦ The geographic market area

♦ Regional industry sectors generating or having the potential to generate entrepreneurial activity, and industry sectors in Greater Washington that are creating entrepreneurial activity which could be attracted to a business incubator in the District of Columbia

Successful incubator programs can be important economic development tools, but they cannot operate in isolation. They must be part of their community’s broad based strategic economic development plan, which establishes a vision for the future and outlines a roadmap for the goals and objectives of this vision. An incubator can be a key part of this plan, but it cannot be the entire plan. If the incubator’s role is not fully understood, the investment in an incubator initiative may be fruitless. It also takes several years to realize the impact of business incubation activity within the context of an economic development strategy.

A business incubation program for the District of Columbia should be designed to add value and be complementary and synergistic with the extensive incubator developments in the Washington, DC region, as well as responding to the demand from Washington, D.C.-based institutions and entrepreneurs. The market demand analysis for this project begins with an assessment of these incubators and continues in the following sections with defining the geographic market area, identifying the industry sector focus, estimating demand, evaluating the competitive environment, identifying space configurations to reflect demand requirements, developing lease-up projections and estimating job creation.

4.1 Overview of Existing Incubators in Greater Washington Area

A large number of existing technology incubator programs in the Greater Washington area are located in the suburbs of Maryland and Virginia that ring the City of Washington, DC. Many of these programs are associated with academic institutions. However, while the main campuses for six universities are located in the District of Columbia, there are no formal incubation initiatives currently associated with these universities to connect and develop the technology resources in the City. Best practice technology commercialization of university generated intellectual property leverages the infrastructure proved by business incubation programs.


4.2 Business Incubation and Support Programs in Washington, DC

Currently, there are two established business incubation programs in Washington, D.C: Affinity Lab in Adams Morgan and the DC Minority Business Enterprise Center which is partnered with the Department of Employment Services (DOES) in the District of Columbia government. A third initiative which intensively mentors and provides financing for selected entrepreneurial companies, LaunchBox Digital is discussed in the following sections, along with an example of a community based program that is supporting small business development in the City.

4.2.1 Affinity Lab

Established in 1999 as shared space for new media and web design start up companies in Adams Morgan, Affinity Lab calls itself an “entrepreneurial launch platform”. Affinity Lab provides its members with managed office space and business infrastructure (conference rooms, equipment, etc.), as well as some mentoring and a sense of community. Affinity Lab is managed by a closely held LLC. Affinity currently operates in 2,700 square feet of space and plans to open a second, larger operation east of NoMa in 2009 with approximately 6,000 square feet of space. The program has 27 current members engaged in web design, social media, international and nonprofit organizations. Affinity Lab reports that it has worked with 62 companies through its program over the years and 80 percent or these companies are still in business. Their client base represents a mix of lifestyle and growth–oriented companies.

4.2.2 DC Minority Business Enterprise Center

The Washington, DC Minority Business Enterprise Center (DCMBEC) is a business consulting development agency located in the Nation's Capitol. DCMBEC is committed to increasing economic parity in performance between minority and non-minority companies. DCMBEC works with clients to improve their performance and profitability. The premiere business development agency of its kind in the Washington region, DCMBEC is committed to its core philosophy of economic parity in performance between minority and non-minority small to medium-sized enterprises (SME’s).

DCMBEC Mission:

Enhance the economic performance and growth of minority business enterprises (MBE’s) in the National Capital Region through assistance: • Providing access to capital • Providing access to markets • Increasing organizational efficiencies


All of the DCMBEC companies are for-profit entities located in the National Capital Region with at least 51 percent minority owned. Half of the DCMBEC companies are technology companies, typically with $500,000 in annual revenues. While they are in the program, they can lease one of the six small offices co-located at the DCMBE. The total area for this office space is approximately 1,200 square feet. DCMEC counselors work closely with the six resident companies. The DCMBEC counselors also assist an additional 30-50 companies a year who are utilizing the services of the Business Resource Center at DOES. This counseling/mentoring activity could likely be extended to companies in other business incubation programs in Washington, DC. There is a waiting list of companies which would like to participate in the resident program. Companies are typically in the program from six months to two years.

DCMBEC is funded by the U.S. Department of Commerce, Minority Business Development Agency’s (MBDA) to provide management and technical assistance to MBE’s throughout the “National Capital Region”. DCMBEC is operated by the National Community Reinvestment Coalition (NCRC) and is partnered with the District of Columbia DOES.

The Minority Business Development Agency (MBDA) is part of the U.S. Department of Commerce and is the only federal agency created specifically to foster the establishment and growth of minority-owned businesses in America. MBDA is dedicated to becoming an entrepreneurially focused and innovative organization, committed to empowering minority business enterprises for the purpose of wealth creation. MBDA’s mission is to achieve entrepreneurial parity for MBEs by actively promoting their ability to grow and compete in the global economy. MBDA is addressing challenges faced by MBEs by developing programs that provide the “keys to entrepreneurial success”. These programs include access to financing, access to the marketplace, access to education and access to technology.

4.2.3 LaunchBox Digital

While it is not a formal business incubation program offering the shared facilities associated with a technology incubator program, LaunchBox Digital provides a number of incubation-type benefits to its clients through a short-term, intensive program. LaunchBox is a DC-based investment company focused on seed and early stage digital media opportunities. They organize an annual 12-week summer accelerator program that can best be described as an “incubator boot camp for entrepreneurs.” Limited to no more than 10 ventures/entrepreneurs, program benefits include:

♦ $30,000 seed funding

♦ Personal mentorship from the co-founders

♦ Events with high-profile guest speakers


♦ Access to a national advisor network

♦ Operational support (e.g., incorporation, accounting, legal, etc.)

♦ Program-ending “Demo Days” – opportunities to pitch investors on both Coasts

The inaugural 2008 program yielded nine companies, and the first Demo Days attracted 45-60 investors each in Reston, VA, and San Francisco, CA. While it is still too early to determine whether the 2008 program will yield fully-funded ventures, the founders have decided to repeat the program in 2009.

LaunchBox Digital has a small office in DC, but it does not house its program participants or portfolio “graduate” companies.

4.2.4 Community and Faith-based Programs

Disadvantaged communities in the District of Columbia also need to have access to incubation and support activities. The Mathews Memorial Baptist Church in Southeast Washington is an example of one church which is already working with small businesses to help them get established. This is an extension of the church’s community work to provide affordable, multi-family housing units. The Church plans to build a community center which will include offices for the Community Development Corporation, a medical doctor’s office, restaurant and coffee shop. There also will be a limited amount of office space for small business.

While currently there is no formal business incubation program or network of mentors for these companies, they will have access to small offices, as well as ongoing, informal business mentoring by the community development staff which will be housed there. As the business incubation program in the District is defined and developed, it will be critical to provide access to business incubation programs and services to all communities in the City of Washington,

4.3 Incubator Programs in the Greater Washington Region

The Greater Washington Region is home to a network of business incubation programs addressing a range of business and technology niches. More than 20 incubation programs are currently in operation either in the state of Maryland or in Northern Virginia. Nearly half of these programs are within an hour’s drive from the center of Washington, DC.


4.3.1 Maryland Incubator Programs

The State of Maryland, working through the Technology Development Corporation (TEDCO) has made a significant financial and political commitment to the development of technology business incubation programs. Business incubation has been incorporated into strategic plans at the state, county and municipal levels in Maryland.

The Maryland Business Incubation Association (MBIA) currently includes 22 incubation program members, with new programs in East Baltimore, the City of Bowie, Germantown, Johns Hopkins Montgomery County Campus and White Oak under development.

Montgomery County alone accounts for four existing programs and three programs under development. That county invests $500,000 annually in its business incubation network.


The following tables summarize information about the location, services and activities of Maryland’s incubators, based on interviews with incubator managers.

Code Incubator Name City Setting Location

CEC Chesapeake Entrepreneur Center

Chestertown, MD Rural Business Park

CIC Chesapeake Innovation Center

Annapolis, MD Suburban Business park

ETC1 Emerging Technology Center @ Canton

Canton, MD Urban Co-located with business, shops and restaurants

ETC2 Emerging Technology Center @ Johns Hopkins Eastern

Baltimore, MD Urban Residential area and HUB Zone

FITCI Frederick Innovative Technology Center

Frederick, MD College campus

Close to Ft. Dietrich / proximity to Rt. 270

GITC Garrett Information Technology Center

McHenry, MD College campus

Near resort

HEAT Higher Education and Applied Technology Center

Aberdeen, MD Suburban Business park / near Aberdeen Proving Grounds

MTDC Maryland Technology Development Center

Rockville, MD Suburban Business park /proximity to Rt. 270 tech area

NeoTech NeoTech Howard County, MD Suburban Business park

SSIC* Silver Spring Innovation Center

Silver Spring, MD Urban High density commercial/shopping

TAC* Technology Assistance Center

Lanham, MD Suburban Business park

TAP* Technology Advancement Program

College Park, MD University campus

Academic setting

TIC Technical Innovation Center

Hagerstown, MD College campus

Academic setting

UMBC Techcenter @ UMBC Baltimore, MD University campus

Research park

WBIC Wheaton Business Center

Wheaton, MD Suburban Shopping mall

(*) denotes the incubators geographically closest to Washington, DC.


Services provided by Maryland incubators

Incubator Admin. Resources (1)

Direct Business Assistance Mentoring / Coaching Most

Valued Service (2)

Type Provider Type Provider

CEC Phone auto attendant, kitchen, Internet DSL (no phone service)

Legal, accounting, marketing

SCORE, Service Providers

Fast Track®, other entrepreneurial training

Staff Training (major Function)

CIC Receptionist, office furniture, LCD projector

Loan negotiation, sales plan, IP review, assist with business plan

Staff Presentation coaching, business plan and strategy

Staff Assistance and Mentoring

ETC1 Receptionist, , LCD projector, kitchen, scanner

Business plan, legal, PR/marketing, finance, access to investors

Staff, IP Law Clinic, service providers

Business planning and strategy, presentation coaching

Staff, external mentors, volunteer EiR

Mentoring

ETC2 Shared server room, LCD projector, kitchen, scanner

Business plan, legal, PR/marketing, finance, access to investors

Staff, IP Law Clinic, service providers

Business planning and strategy, presentation coaching

Staff, external mentors, volunteer EiR

Mentoring

FITCI Bookkeeping, clerical, scanner

Accounting, legal, specialty biotech services, animal facility

Service providers

Sales, marketing, business process consulting, (now launching program)

Staff and volunteer mentors

Mentoring




Valued Service (2)


GITC Kitchen/lounge, overhead projector, LCD projector and screen, conference phone, server room

None – provides referrals

Service Providers

General business advice

County EDA, SBDC – college provides interns and seminars through Continuing Education

Assistance in finding highly trained employees

HEAT Receptionist, cafeteria, computers, projector, web based video conferencing

Accounting, financial reporting

Staff General scientific and business advice

APG science and business professionals, local service providers

Financial assistance

MTDC Receptionist, computer, shredder; autoclave, D/I water, centrifuge, oven, dark room equip., glassware washer, -80 freezer

No N/A General Business support, information and referrals

County EDA, and Duc Duong

Educational programs and referrals (networking)

Neotech Several LCD projectors, laminator, shredder

Legal, accounting, marketing, etc.

Local service providers

Neotech does needs assessment, then refers

Staff Mentoring and accounting (many clients are getting ready for govt. audits)

SSIC* Computer, shredder

No N/A General business support, information and referrals



TAC* Receptionist, voice mail, 2 training rooms, Board room

Legal, accounting, general business services

Service Providers

General business advice

Board members and service providers

Administrative




Valued Service (2)


TAP* Mailing services, Fedex/UPS delivery/pick-up, copier, fax, LCD projectors, laptop, teleconference equipment; freezers, centrifuges, D/I water system, cold room, common lab

recruiting C level executives, financial modeling, raising capital and refers to service providers for legal and accounting

Staff strategic and business planning, introduction to service providers, potential employees, funding sources

Staff Mentoring

TIC General clerical, bookkeeping, multi-media presentation equipment, library, trade show pop-up display, limited hosting

Strategic marketing, business plan structuring, distribution channels, financial planning for growth

Staff (preliminary, Service providers (next step)`

HR, crisis management, business planning

Staff Administrative and mentoring (half/half)

UMBC Receptionist (M&G), bookkeeping, shredder, printer; chemical fume hoods, 3 centrifuges, warewasher, autoclave 2 -80 freezers with UPS, 2 refrigerators, common lab

Legal, market research studies, financial planning, Web site design

IP Law Clinic, staff, EiR

Presentation coaching, business and market planning

EiR, external mentors

Mentoring




Valued Service (2)


WBIC Shredder, computer

No N/A General business support, information and referrals



(*) denotes the incubators closest to Washington, DC.

(1) Includes conference room, Internet, phone system, copier, fax, postage meter or mail services,

unless otherwise stated. (2) Question asked: Which is most valued: administrative, mentoring, training/education services?

Note: No incubators charge fees for mentoring or administering the mentoring program. All but one incubator provides direct business assistance by staff to client companies. TIC assesses $50/hr if the incubator director does work, such as marketing plans, for the companies. There is no extra charge for mentoring. Many service providers throughout the State will offer reduced rates to incubator companies.


Maryland incubator activity matrix

Facility Client Mix Industry Focus

Prospect or Waiting List

Inquiries per Month

Rejection Rate

Reasons for

Rejection (1)

Specialty Space Requests

CEC Mixed Use None No 2 (b) Light industrial and manufacturing

CIC High Tech Home land Security

Prospect 20 75% (b) No

ETC 1 Tech None Prospect 6-10 35% (a) (b) Wet lab ETC 2 Tech None Prospect Blended with

ETC1 35% (a) (b) Wet lab

FITCI Tech/ Biotech

Biotech Waiting 2-6 (a) Manu., chemical; SCIF

GITC Tech based None Prospect 1 All (2) (a) (b) 1 asked for Wet Lab HEAT IT/Biotech Defense

related No 2 Most (a) (b)

MTDC Biotech/IT None Prospect 5-10 30% (a) (b) No Neotech

Tech IT Prospect 12 30% (a) (b) Various

SSIC* Tech IT Prospect 2-3 30% (a) (b) No TAC* Tech IT Prospect 2-4 50%-75% (b) Small scale light

electronic assembly TIC Tech based IT Prospect 2-3 75% (b) Wet lab TAP* Tech None Prospect 20 95% (b) Specialty loading

dock (1 request) UMBC Tech/

Biotech Areas of UMBC strength

Waiting 10 Not available

(a) (b) SCIF, manufacturing.

WBIC* Prof. Ser. None Prospect 3-5 30% (b) No

(*) denotes the incubators closest to Washington, DC.

(1) (a) cannot meet space needs, (b) does not meet profile

a. Most frequently cited reasons for (a) were that incubator did not have the needed space size available, followed by a general lack of space at the incubator. Several managers noted that they would redesign the facility to allow for smaller offices and labs. Poor location and price was also cited for ETC2. Most frequently requested specialty space is wet lab. Most other requests for specialty space are infrequent.


b. Most frequently reasons for (b) were lack of a sound business plan or type of business of applicant. Some incubators will work with a client whose business model makes sense to get the business plan in order before admission.

The incubation programs in Maryland in closest proximity to Washington, DC are: Silver Spring Innovation Center (SSIC), the Technology Advancement Program (TAP) at the University of Maryland-College Park and the Technology Advancement Center (TAC) in Largo, MD. All three of these programs are accessible by METRO from Washington, DC.

4.3.2 Northern Virginia Incubator Programs

The Commonwealth of Virginia has taken a less structured approach to business incubation as an economic development tool and has been less active than the State of Maryland in incubator development and support. Consequently, there are fewer incubators in Virginia. Mixed-use incubators, incubators that work with a variety of industries are the predominant type of program in Virginia.

This is in contrast with Maryland’s program of technology incubators. In Northern Virginia, within an hour’s drive of Washington, DC, there are two incubation programs and one international business center. The following tables summarize information about the location, services and activities of Northern Virginia’s incubators based on interviews with incubator managers.

Northern Virginia incubator locations and codes

Code Incubator Name City Setting Location

FIC Fairfax Innovation Center

Fairfax, VA Suburban Academic setting

INC INC.spire Reston, VA Suburban Office building

KBC Korean Business Development Center

Vienna, VA Suburban Office building


Services provided by Northern Virginia incubators



Valued Service (2)


FIC Receptionist, Phone answering, T1, kitchen, mail, parking

Business consultation

Staff Monthly Roundtables

Mason Venture Mentors

Venture Mentors

INC Furnished offices, meeting rooms, Internet In-house and virtual

Business consultation

Consultant Bank

One-on-one Incubator Advisory Council

Mentoring, press releases, TV, Chamber publications

KBC Office space Business consultation

Staff Business partner match-making

Staff Introductions

Northern Virginia incubator activity matrix

Facility Client Mix

Industry Focus

Prospt or

Waiting List

Inquiries per Month

Rejection Rate

Reasons for

Rejection (2)

Specialty Space

Requests

FIC Tech International Prospect 4-6 30% (a) (b) No

INC Tech IT, games, digital content, mobile com

Prospect 2-4 30% (a) (b) No

KBC Korean SMEs

Manufact. & distribution

Prospect 2-4 20% (a) No

(2) (a) cannot meet space needs, (b) does not meet profile a. Most frequently cited reasons for (a) were that incubator did not have the needed space

size available, followed by a general lack of space at the incubator. None of these incubators includes wert lab space. Most other requests for specialty space are infrequent.


b. Most frequently reasons for (b) were lack of a sound business plan or type of business of applicant. Some incubators will work with a client whose business model makes sense to get the business plan in order before admission.

Fairfax County and Arlington County each operated incubation programs in recent years. The Mason Enterprise Center of George Mason University operates entrepreneurship programs and offers a small amount of incubation space at its campus in Prince William County. The Town of Leesburg in Loudoun County currently is conducting an incubator feasibility study.

While the number of established business incubation programs in the suburbs of Greater Washington provide many best practice examples for a Washington, DC-based business incubation program, these programs also represent serious competition for a District of Columbia initiative. The Washington, DC incubator program will offer the ultimate urban location, but its program offerings and pricing must truly add value, be differentiated and be competitive for the market that has already been defined to a large extend by the existing programs.

4.4 Geographic “Market Area”

The geographic market served by a technology incubator in Washington, DC would first and foremost be communities, entrepreneurs and corporations, as well as academic and research institutions located in all parts of the City of Washington. The secondary market would be those communities, entrepreneurs, corporations, and academic/research institutions within a 60-minute drive or less from the center of the City. Given the number of existing incubation programs in the Maryland and Virginia suburbs, incubation clients would utilize an incubator program in the urban environment of Washington, DC if the incubator clients were located in relatively close proximity to the incubator or the incubator programs offered a special service or feature not readily available in other incubator projects.

Aspects of the market are that are relevant to business incubation demand are discussed in the following sections.

4.4.1 Employment projections in Washington, DC

Washington, DC is the home of the federal government; its economy and employment are unique in many respects. The table below provides a profile of District employment in 2004 with projections to 2014 listed in order of the number of jobs.


District of Columbia Employment Projections

Industry 2004 2014 2004 Share %

Growth Rate%

Federal Government 192,653 195,965 26.1 0.17

Professional, Scientific and Technical Services 97,325 112,816 13.2 1.49

Self Employed 67,939 66,525 9.2 -0.21

Other Services 62,898 70,680 8.5 1.17

Health Care and Social Assistance 52,029 57,017 7.0 0.92

Educational Services 50,240 57,760 6.8 1.40

Accommodation and Food Services 45,208 52,663 6.1 1.54

Administrative Support & Waste Mgmt. Services 44,430 52931 6.0 1.77

Information 23,330 24328 3.2 0.42

Finance and Insurance 19,365 20,976 2.6 0.80

Retail Trade 17,563 19,372 2.4 0.99

State and Local Government 16,744 20,291 2.3 1.94

Construction 12,327 13,673 1.7 1.04

Transportation, Warehousing, Utilities 11,507 11,864 1.6 0.31

Real Estate and Rental Leasing 11,053 12,830 1.5 1.50

Arts, Entertainment & Recreation 5,724 7,120 0.8 2.21

Wholesale Trade 4,511 4,803 0.6 0.63

Manufacturing 2,393 2,263 0.3 -0.56

Management of Companies and Enterprises 1,401 1,548 0.2 1.00

Natural Resources 29 26 0.0 -1.09

Total 738,669 805,541 100.0 0.87

Source: DC Employment Projections by Industry and Occupation 2004-2014, December 2007

Federal government employment is at the top of the list with 26 percent of the jobs. The adjoining states of Virginia and Maryland have only four to five percent of their employment in federal jobs, reflecting the commuting patterns in the region. Federal employment in the District is expected to remain fairly stable over the period.


Next on the list is Professional, Scientific and Technical Services with over 13 percent of the jobs in 2004 and significant projected growth. Within this group, legal services leads with over 5,000 new jobs forecasted for 2014 followed by other office-based jobs accounting and business services, architecture, engineering, computer design services, management consulting, scientific research and advertising services.

Within Educational Services, higher education jobs have expanded from 27,500 in 1997 to 31,000 in 2000. They are expected to continue to grow at above average rates reaching 35,000 by 2014. Primary and secondary education jobs can expect modest growth, but education will continue to be an important part of the District economy.

The important role of higher education was highlighted in the 2008 Business Report of the DC Chamber of Commerce. The report points out that the universities are the largest non-government employers and have generated significant economic benefits. It recommends linking the institutions of higher education with the other primary sectors of the economy through the establishment of a broad-based technology business incubator program as part of its diversification strategy.

This report also identifies the major health facilities located in the District as important sources of economic growth—university-based teaching hospitals at George Washington, Georgetown, and Howard University, the Washington Hospital Center, Children’s National Medical Center and the many other medical services and related businesses.

4.4.2 Technology Generators

Academic, federal and non-profit research resources can be critical elements in support of technology industry growth in a region and in generating demand for an incubator. Many technology centers in the nation have grown up around one or more research centers.

A world-class collection of scientific and technical resources is located in close proximity to Washington, DC. These resources include the National Institutes of Health (NIH), the Department of Defense, the Food and Drug Administration, federal laboratories, Johns Hopkins University, hospitals, such as the U.S. Veterans Administration (VA) Hospital, the Washington Hospital Center and the Children’s National Medical Center, plus the teaching hospitals associated with George Washington University, Georgetown University and Howard University. The base of information technology, communications and life science companies in Washington, DC is another potential resource of new technology and entrepreneurs.


4.4.3 Relevant Research Centers and Institutes

Three of Washington’s six universities are home to significant research activities in information technology, as well as life sciences.

Georgetown University

The research strengths of Georgetown University that are relevant for incubator markets are primarily in the life sciences, computing, information technology and imaging as indicated by their research centers and institutes shown in the table below.

Georgetown University Research Centers and Institutes

Life Sciences Physical Sciences and IT

Lombardi Comprehensive Cancer Center Advanced Research Computing

Bioinformatics and Computational Biosciences

Advanced Vehicle Development Program

Center for Neural Injury and Recovery Institute for Information Assurance

Center for Drug Development Science Molecular Modeling Center

Drug Discovery Program Imaging Science and Information Systems

Georgetown Transplant Institute Institute for Cognitive and Computational Sciences

Institute for Molecular and Human Genetics Center for Functional and Molecular Imaging

Institute for Reproductive Health

International Collaboration in Infectious Disease Research

National Biomedical Research Foundation


George Washington University

The research strengths of George Washington University that are relevant for incubator markets are in the life sciences, physical sciences, computing, information technology, media, engineering, communications and the management sciences as indicated by their research centers and institutes shown in the following table:

George Washington University Research Centers and Institutes

Life Sciences Physical Sciences and IT Management

Biostatistics Center Center for Nuclear Studies Center for Entrepreneurial Excellence

W.M. Keck Institute for Proteomics Technology and Applications

Center for the Study of Combustion and the Environment

Global and Entrepreneurial Finance Research Institute

Institute for Biomedical Engineering

Center for Innovative Media Creative and Innovative Economy Center

Center for Biomimetics and Bioinspired Engineering

Institute for Materials Science Dean Dinwoodey Center for Intellectual Property Studies

Center for Digestive Diseases Center for Intelligent Systems Research Institute for Integrating Statistics in Decision Sciences

Center for Injury Prevention and Control

GW Aviation Institute Institute for Reliability and Risk Analysis

GW Cancer Institute GW Transportation Research Institute

GW HIV/AIDS Institute Institute for Computer Graphics

GW Institute for Biomedical Sciences

Institute for High Speed Telecommunications

Institute of Translational R&D Institute for Magnetics Research

Lipid Research Clinic Institute for MEMS and VLSI Tech

Ronald Regan Institute of Emergency Medicine

GWU Institute for Massively Parallel Applications & Computing Technology


In addition to its main campus in Foggy Bottom, George Washington University has two satellite campuses: the Mount Vernon Campus in NW Washington, DC and the Virginia Campus – a Research & Technology Campus located in Ashburn, VA in Northern Virginia. This campus has been designed to be a robust center for innovative research, graduate education, and advanced partnerships. As the University's research and technology campus, it is creating centers of excellence in transportation safety and security, public health and homeland security, professional and executive education, and information technology and telecommunications. Located at the University Center in Ashburn, the campus is strategically positioned in the Northern Virginia technology corridor near Dulles International Airport.

The GW Virginia Campus currently offers innovative executive programs for experienced professionals seeking advanced degrees without career interruption. Graduate education is provided in key focus areas of education and business leadership, information technology and telecommunications, engineering and transportation safety, and in the health sciences.

Howard University

The research strengths of Howard University that are relevant for incubator markets are in the life sciences, energy systems, media, and management services as indicated by their research centers and institutes shown in the following table.

Howard University Research Centers and Institutes

Life Sciences Physical Sciences and IT Management

Howard University Cancer Center

Center for Energy Systems and Controls

DC Small Business Development Center

Center for Drug Abuse Research

Institute for Multimedia Applications

Institute for Entrepreneurship, Leadership and Innovation

Center for Sickle Cell Disease

General Clinical Research Center

Catholic University of America

The research strengths of Catholic University that are relevant for incubator markets are in physical rehabilitation, computational science and cognition as indicated by their research centers:


♦ Center for Applied Biomechanics and Rehabilitation Research

♦ Institute for Astrophysics and Computational Science

♦ Cognitive Science Lab

American University

The research strengths of American University are largely in policy development, law, international relations and the social sciences as shown by their numerous research centers in these fields. However, the research results from their project in global intellectual property could very well be of interest to incubator clients.

University of the District of Columbia

The principal research strength of the University of the District of Columbia is their Water Resources Research Institute that could possibly be a source of incubator tenants in this field. In addition, the University has also received grant funding for several urban agriculture projects through the US Department of Agriculture.

4.4.4 Existing R& D activities

The following table lists the ranking and amount of research and development expenditures for the universities in the District of Columbia for FY 2006 (latest data available). These rankings are based on 640 institutions reporting.

Although Howard is ranked 183rd in R&D funding, Howard is the second highest ranked Historically Black College and University (HBCU) in the data after Jackson State University in MS. Jackson State was ranked 178th.

Research and Development Expenditures University Rank/640 R&D Expenditure

FY2006 $million Georgetown 117 118.6

George Washington 122 114.0

Howard 183 36.5

Catholic 238 17.7

American 393 2.4

Total 289.2

Source: National Science Foundation


The National Science Foundation also provides more detailed information for the 200 highest ranked universities. Washington universities are shown in the following table.

R&D Expenditures by Field, $million University Environ-

mental Sciences

Life Sciences

Computer Sciences

Physical Sciences

Engine- ering

Social Sciences

Georgetown 0 105.0 0.2 3.3 0 10.1

George Washington 0.1 44.9 41.3 4.1 9.9 13.7

Howard 0 25.3 0.2 2.8 4.8 3.4

Total 0.1 175.2 41.7 10.2 14.7 27.2

Source: National Science Foundation

The total R&D expenditures in the District of almost $290 million are substantial with over 60 percent concentrated in the life sciences. This distribution would suggest a modest the need for wet lab space for start-up and early stage companies with roots in the universities.

4.4.5 Washington, D.C. university technology transfer activities

The Association of University Technology Managers publishes the results of annual surveys of their members describing their performance in technology transfer. In their latest survey (FY2006), they received 161 responses including Georgetown and Catholic University, which were the only Washington, DC institutions reporting data, as shown in the following table.

Technology Transfer Performance

University Licenses, Options Executed

Active Licenses

2006 Start-ups

2006 Invention Disclosures

2004-2006 Invention Disclosures

2006 US Patents Issued

2006 New Patent Applications

2004-2006 Gross Income $000

2006 License Income $000

Georgetown 31 148 2 45 119 5 23 9,632 8,478

Catholic 1 4 1 4 9 1 1 1,619 539

Total 32 152 3 49 128 6 24 11,251 9,017

Source: Association of University Technology Managers

University technology managers encourage their researchers to disclose potential inventions so they can be considered for patent applications. When patents have been applied for and awarded, they can be optioned and licensed to private companies for their commercialization. They can be licensed to either start-up or established


companies, and license terms provide for royalties to be returned to the university. Most universities share this revenue among the inventor, the academic department and the technology transfer office. The table indicates that Georgetown has been very successful in moving invention disclosures to license income. Although there were only two start-ups in 2006, it is typical of the relationship with R&D expenditures of many US universities.

4.4.6 Additional resources for business incubation and entrepreneurship

4.4.6.1 Washington D.C. Economic Partnership activities

The Washington D.C. Economic Partnership (WDCEP) is a public/private partnership with the mission of facilitating economic development by contributing to business retention and attraction the District of Columbia. The WDCEP is a primary contact for doing business in Washington, DC. The WDCEP provides several platforms for the distribution of economic development data, by offering programs such as the BusinessPremier speaker series, and publications such as Doing Business in Washington, DC and Neighborhood Retail Opportunities. WDCEP is also active in the development of a creative economy in the District. In September 2007, WDCEP joined with the DC Commission on the Arts and Humanities and the DC Office of Planning to organize a Summit on the Creative Economy. The results of the Summit included the development of a one-year assessment of the District’s creative assets as a first step in developing the Creative Action Agenda for strengthening the creative economy, expanding employment and business development, and improving neighborhoods.

4.4.6.2 Washington D.C. Chamber of Commerce activities for entrepreneurs

The DC Chamber of Commerce in partnership with the DC Department of Housing and Community Development and Verizon provides services to entrepreneurs through the Business Resource Center. The Center offers access to educational resources, counseling and a secure, high-speed wireless Internet connection.

The Center also offers counseling services on the fundamentals of business planning, market research and analysis, financial record keeping, financing, legal structures, business licensing, proposal writing, and certifications. The program also introduces entrepreneurs and small business owners to banks and venture capitalists. The BRC hosts various forums throughout the year on funding as well as a seminar series on such topics as banking, finance, law, marketing and information technology.


4.4.6.3 Small Business Administration (SBA) lending history and pattern

The District of Columbia office of the US Small Business Administration manages 1,700 8(a) minority enterprises, over 4,600 loans totalling $700 million, a Small Business Development Center and four micro-loan programs.

4.4.6.4 Service Corps of Retired Executives (SCORE) activity

SCORE, "Counselors to America's Small Business," is a national non-profit association and resource partner of the U.S. Small Business Administration dedicated to entrepreneur education and the formation and growth of small businesses nationwide. SCORE has over 10,500 volunteer members in 389 chapters across the United States.

The Washington, D.C. Chapter of SCORE has about fifty members, both retired and working, who have significant experience in the ownership, operation and management of both small and large businesses in many fields. Members offer free counseling in the District of Columbia, Montgomery and Prince Georges Counties in Maryland, and Northern Virginia. SCORE offers individual counseling, low cost workshops, and team visits to business locations.

4.4.6.5 Small Business Innovation Research (SBIR) Grant Activity

The Small Business Innovation Research Program requires eleven federal departments and agencies to reserve a portion of their R&D funds for award to small business. These agencies designate R&D topics and accept proposals for conducting R&D projects through a competitive process. Following submission of proposals, agencies make SBIR awards based on small business qualification, degree of innovation, technical merit, and future market potential. Small businesses that receive awards then begin a three-phase program.

Phase I is the startup phase. Awards of up to $100,000 for approximately 6 months support exploration of the technical merit or feasibility of an idea or technology.

Phase II awards of up to $750,000, for as many as 2 years, expand Phase I results. During this time, the R&D work is performed and the developer evaluates commercialization potential. Only Phase I award winners are considered for Phase II.

Phase III is the period during which Phase II innovation moves from the laboratory into the marketplace. No SBIR funds support this phase. The small business must find funding in the private sector or other non-SBIR federal agency funding.

Small businesses in the District are active participants in this program with 173 SBIR awards from 2000-2006 (latest available) averaging 25 per year with 25 percent awarded by National Institutes of Health.


4.4.6.6 DC Small Business Development Center Activity

The Washington, DC Small Business Development Center (DC SBDC) at Howard University is the Lead Center for the SBDC Network and is focused on the economic improvement of the Washington, DC small business community. The business improvement comes from free management counseling and low-cost, small business management entrepreneurial training seminars. The DC SBDC is a partnership of the US Small Business Administration and Howard University. This partnership brings a host of small business resources to the SBDC clients within DC.

SBDC records show that approximately 325 entrepreneurs received assistance through the SBDC over the last 12 months. The majority of these clients—one third-- represented services businesses, including scientific and technical, retail and construction. Some of these SBDC clients could be prospects for the incubator program.

4.4.6.7 National Foundation for Teaching Entrepreneurship (NFTE)

Since 1987, the mission of the National Foundation for Teaching Entrepreneurship is to provide entrepreneurship education to young people from low income communities. NFTE has offices in major metropolitan areas; with chapters for NFTE in Washington, DC, Baltimore and 19 other communities around the United States.

4.4.6.8 Availability of Capital

While Silicon Valley and New England remain the country's leading regions for venture capital investment, they are not the fastest growing, according to The MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association (NVCA) in March 2008. Based on data by Thomson Financial, in the last ten years, smaller pockets in non-traditional venture capital regions have enjoyed impressive growth in the number of companies funded each year. Included in this ranking are areas such as New Mexico and Pittsburgh, which have not had a strong venture capital presence in the past but have recently shown notable signs of growth.

Additionally, the ranking included larger metropolitan areas such as Seattle, Los Angeles, and the Washington DC metro area, which have been quietly growing their venture base over the last ten years. None of these up-and-coming areas were included in the top five regions for total venture capital investing in 2007, but that may only be a matter of time, according to the NVCA.


Washington D.C. Metroplex at a Glance: 2007 Venture Investment

2007 1997 % of ChangeNo. of Total No. of Total No. of TotalComp. Investment Comp. Investment Comp. Investment

(Millions) (Millions)

New Mexico 21 128.26 3 27.03 650% 375%

Pittsburgh/Tristate 44 198.17 12 32.32 267% 513%

Seattle 132 1253.41 65 403.2 103% 211%

Los Angeles 124 1146.04 73 459.41 72% 155%

Washington DC/ 180 1292.16 105 558.24 71% 130%Metroplex

Source: Pricewaterhouse MoneyTree Report

Venture capital growth is extremely organic. Once a critical mass of companies is funded in a certain region, a new ecosystem will develop. It becomes very magnetic in the sense that start-ups breed innovative thinkers and entrepreneurs who, in turn, attract venture capitalists. For regions that do not have a large, indigenous venture investor base, it is important to give outside VCs a reason to visit. These unexpected regions are making venture capitalists stand up and take notice.

The analysis focused on the ten-year growth rates for regions across the country and ranked the fastest growing areas based on number of companies funded. In “Washington D.C. Metroplex at a Glance: 2007 Venture Investment”, the Washington DC Metroplex region has many attributes that help foster a strong venture capital ecosystem, including a strong population of technologists and entrepreneurs, a group of indigenous venture capital firms, and clusters of innovations in areas such as Suburban Maryland and Northern Virginia.

Much of the D.C. region's entrepreneurial culture is uniquely rooted in components of government-based activity. First, the entrepreneurs bred by federal laboratories and agencies create opportunities for VCs who understand the nuances of building companies around talent and innovations spun out of a government lab. Second, VCs are increasingly drawn to local companies' ability to sell sophisticated technologies that address some of the government's and industries' toughest challenges. With D.C.-area venture-backed companies like Blackboard and AOL spawning new


companies and, in some cases, new clusters, the region is likely to remain attractive for many years.

Top industries: Software, Life Sciences, Telecom

Top investors: Novak Biddle Venture Partners, Columbia Capital, Grotech,

New Enterprise Associates, Valhalla

Stage of Investment: 37 percent of the companies were Seed/Early stage

Largest Investments: Bravo Health, BillMeLater, Gridpoint

4.4.6.9 Company Characteristics and Investment Attraction

Any discussion about the availability of capital for early stage company growth requires an understanding of the company characteristics that will attract investment. Venture capitalists and angel investors categorize prospective investment companies in three ways, and they invest in only one of these categories. The categories are: Lifestyle, Cash Flow, and High Growth. When companies are just starting out it is sometimes not clear which category they will fall into. This is why investors spend a lot of time studying market size data and asking questions about customer scenarios.

Lifestyle companies provide a nice job and great compensation for the owner and top people. They might have a solid history of profitability, and a solid product or service. But, without significant changes these companies will never grow 5X or 10X from where they are now. VCs and Angels will not invest in this type of company. These companies should look for Friends and Family money, asset based loans from banks, or vendor financing.

Cash Flow companies are very profitable and throw off consistent cash flow. They grow at a reasonable (10% to 20%) rate and the cash flow covers all growth needs. After years of steady growth these companies might decide they need capital to staff up new sales offices in an attempt to double their revenues over a couple years.

VCs and Angels are not likely to be interested in this situation even though there is little risk. Little risk equals little reward. They are looking for 3X to 5X returns over a few years with an occasional 10X winner. From an investor point of view, a minority percentage ownership in a privately held company, where insiders control the Board of Directors, is not attractive. The company can decide to keep all the cash flow or pay it out to executives. The investors are unlikely to see any of it, or enough to make the investment interesting.


Cash Flow companies should look for bank financing, asset based lending, or convertible secured loans from angel investors. Some angels will do secured loans with an optional conversion to equity feature.

High Growth companies have the opportunity to grow 50% to 100% per year for several years. They have products in fast growing markets where innovation and/or disruption happens. It is a high risk, high reward environment. Innovation often leads to entirely new markets or usage scenarios where value is added to an existing process. Disruption usually means that a new technology is applied to an existing problem or process where incumbent products will be replaced. Either way it is a high growth opportunity.

Investors need to understand the total addressable market and guess at what percentage of that your company can win. They will spend a lot of time understanding the competitors and possible acquirers of the company. From the beginning investors are looking for multiple exit strategies.

VCs and Angels are really only interested in investing in high growth companies. They both want growth and big payoffs. The only difference between Angels and VCs is the size of their investment. They both evaluate investments in the same way and want the same types of exits. However, Angels are willing to make seed stage investments of $250,000 to $1 million, sometimes even up to $2 million, while most VCs will not consider anything less than $3 million to $5 million.

Both Angels and VCs want significant ownership and Board of Directors representation. Angels tend to get more involved in day to day activities during the seed stage and get you ready for future VC investment. VCs tend to get involved later in filling out the rest of the management team, helping you arrange partnerships, and paving the way for acquisitions.

Incubation programs can add real value to the development of all three of these types of companies. However, the economic role of the incubation program should drive the type of company represented among the incubator program clients. For example, while there are legitimate community development reasons to select life style and cash flow types of companies for incubation programs, the greatest economic impact is generated by high growth, investment grade companies, which will generate a significant number of high wage jobs for the community.

4.5 Businesses/Industry Sector Focus

Greater Washington is a leading talent capital in the U.S., with the greatest concentration of knowledge workers—1.1 million-- among metro areas with more than one million residents, according to the Greater Washington Initiative’s (GWI) recent study, “Human Capital, Greater Washington’s Knowledge Workers”. A knowledge worker is defined as one whose daily job tasks require the use, analysis


and development of ideas and information. The concentration of knowledge workers drives the region’s economy and gives the region a significant advantage in industry sectors that are expected to grow in coming years.

Greater Washington’s Knowledge Workers Projected Growth US

Professional Category 2005 2014* 2005-14 AverageProfessional Services 432,660 496,480 14.80% 13.20%Information Technology 219,950 281,540 28.00% 24.30%Healthcare 211,060 248,540 17.90% 20.50%Education & Research 178,400 185,380 3.90% 2.20%Media, Arts & Design 72,450 81,820 12.90% 11.60%

Source: Bureau of Labor Statistics, 2004-2005. GWI analysis, 2007

According to the GWI Human Capital Study, Greater Washington leads the benchmark regions in its concentration and growth potential for knowledge workers in IT, education and research and professional services. This region’s knowledge workforce grew nearly 20% between 1999 and 2005 and is expected to grow 16.1% by 2014, reaching 1.3 million workers. The GWI study describes the region as “the epicenter for professional services” with professional services being the largest category of knowledge workers and with projected growth well ahead of the national average. The study also notes that after a 43% increase in the number of IT professional between 1999 and 2005, this part of the region’s workforce will grow more slowly at a rate of 28% by 2014, but still ahead to the national average.

Given the size and growth projections for professional service and information technology companies in Greater Washington, the growth and impact of these industry sectors could be further accelerated an focused through business incubation programs and facilities in the District of Columbia.

The GWI Study notes that Greater Washington attracts a wide range of professional services workers, many of whom are self–employed and who take on freelance work. They are a critical force behind the successful consulting sector in Greater Washington. The flexibility and access to resources and community that a business incubation program typically provides are of great interest to this group. Greater Washington’s knowledge workforce also includes more that 20,000 employees in information technology, more than 17,000 are self employed. Access to business incubation services also typically appeals to this group. This interest was validated in a general way through the DC Entrepreneur survey conducted by ANGLE Technology for this feasibility study. (See Appendix II.)

The region has comparative advantage in computer programming and design workers, as well as a concentration of IT services workers. According to the Bureau of labor statistics (2004) the fastest growing computer design and research occupations in Greater Washington 1999-2005 were:


Computer software engineers, applications (18,850) Computer software engineers, systems software (17,270) Computer and information systems managers (1,030)

The fastest growing IT service occupations were:

Computer support specialists (9,120) Network and computer systems administrators (7,870) Network systems and data communications analysts (7,850)

Looking forward to 2014 in the programming and IT Services sectors, more than 40,000 new workers will be needed in each of these areas to meet expected growth. The GWI study notes that the region produces over 4,000 computer science and IT graduates annually, but with estimates of 9,700 computer science and IT openings annually, this is less than half of the projected need. Given this dynamic, Greater Washington will continue to be a magnet for computer design and research workers, as well as IT service specialists. Incubators can provide “landing pads” for these types of professionals and small companies.

In ANGLE’s experience, incubator clients are much more likely to grow and graduate if they represent industries in growth markets in the region where the incubator is located. Not surprisingly, the Greater Washington growth markets are mirrored within the District. The potential growth industries and supporting businesses within the District that would benefit from the presence of a technology incubator are shown in the table below listed in the order of their expected employment growth 2004-14.

High Employment Growth Industries

Industry EmploymentGrowth

Growth Rate %

Colleges, Universities and Professional Schools 4620 1.42

Management, Scientific, Technical Consulting Services 2080 1.57

Nursing and Residential Care Facilities 2058 2.47

Scientific Research and Development Services 1740 1.13

Ambulatory Health Care Services 1116 1.05

Other Professional, Scientific & Technical Services 862 4.10

Computer Systems Design and Related Services 739 0.47

Securities, Financial Investments, Related Activities 415 1.32

Hospitals 340 0.14


Total 13,970

Source: DC Employment Projections by Industry and Occupation 2004-2014, December 2007

Incubator tenants can be expected to be drawn to these high growth sectors both from the general community and from relevant university research programs. Employment growth in college, universities and professional schools will include researchers in technical fields who will have the opportunity to spin off new companies that need an incubator home. Growth in management, scientific and technical consulting services as well as other professional, scientific and technical services can supply the management and technical support services needed by start-up and early stage companies. Some of these service providers might also be interested in starting up and growing their own businesses in an incubator with potential clients in close proximity.

The growth in nursing and residential care facilities, ambulatory health care services and hospitals will create markets for new products and services that can be developed and provided by potential incubator companies. Growth in employment in computer systems design and related services is likely to include start-up information system companies that develop products and services that support the other growth industries.

The expansion of employment in securities and other financial investments and related activities is likely to include investors and consultants who can support the financing and growth of start-up and early stage incubator tenants. They also could be drawn to the incubator themselves to find a ready market for their services.

The growth in the medical and health related sectors offers opportunities for start-up and early stage companies based on the work of the impressive life science research centers and institutes of the universities in the District described in Section 2.4.1. These universities also have in-depth research strengths in computer and information systems relevant to the growth of the computer systems design and related services sector in the District.

Early stage companies that address local markets can also expand their offerings in similar regional, national and international markets as they grow. Spin-offs from university research can also be expected to participate in markets outside the district and would be well-positioned to address expanding markets in media, energy, materials development, telecommunications, environmental protection and imaging.


4.6 Projected Demand for Incubator Space

Identifying appropriately located and priced physical space is a critical factor in the success of an incubation program. Incubator programs stimulate economic impact and they are frequently located in emerging market areas of communities.

4.6.1 Outlook for the Office Market

The Washington, DC office market is expected to see increasing vacancy rates as new construction and redevelopments come online, according to CB Richard Ellis. However, as prices increase and vacancy becomes tighter in the Central Business District (CBD) and East End, newer, less expensive alternatives in NOMA and the Capitol Riverfront will become another option for price sensitive tenants searching for an urban alternative.

As Washington, DC continues to develop new office product at a brisk pace, uncertainty remains on how this product will be absorbed. Current development is located in two distinct geographic areas: the core markets of the CBD and East End, and the emerging markets of NOMA and Capitol Riverfront. The core continues to see robust demand, while the emerging markets face oversupply.

Typically, the bulk of Washington, DC’s demand occurs in the core markets. In the previous quarter (2008Q2) alone, they contributed 85% of the 358,991 square feet absorbed. Additionally in the core markets, tenants have expressed significant interest in Class A space. Since the beginning of 2007, absorption in Class A space was 1.7 million square feet – significantly higher than the 1 million square feet absorbed.

The following table provides market information for various sections of the City.

Market Rentable

Area SF

Vacancy Rate %

YTD Net Absorption

SF

Under Construction

SF

Average Asking Lease Rate*

Capitol Riverfront 2,774,343 6.90 57,525 1,530,119 48.00

Capitol Hill 4,499,736 4.33 1,924 551,800 59.30

CBD 37,389,582 6.12 (129,025) 2,244,693 51.93

East End 40,857,536 6.55 506,216 1,043,035 51.89

Georgetown 2,753,893 10.57 54,105 44.79

NOMA 6,555,427 5.20 63,884 2,145,986 45.40


Southwest 9,959,288 9068 46,467 3,324,577 54.88

Uptown 7,106,554 5.02 (30,405) 37.33

West End 3,545,970 8.98 (80,377) 46.18

Wash, DC 115,442,329 6.60 490,314 10,840,210 50.84

*$, SF/Yr.

The development pipeline for the CBD and East End is driven by necessary redevelopments in response to the tenant demand for Class A space. This has led to a reduction in lower rent product and has had limited impact on vacancy rates. Because of this redevelopment, Class B buildings have fallen from 33.3% of the core inventory at the beginning of 2007 to 32.4% at the end of second quarter 2008. Overall vacancy rates have ranged between 6.0% and 7.5% over the same time period. At the end of the second quarter, the CBD and East End had a vacancy rate of 6.3%.

While demand and vacancies have remained stable in the core markets, the emerging markets, the developing areas within the city, are “untested.”

However, these new business districts are the “future” of DC and are attractive locations for initiatives such as business incubation programs, as the core submarkets are projected to be built out in approximately five years. In order for the emerging markets to compete for tenants pushed out of the core, they must be vibrant urban centers. Developers have to include retail, parks, transportation infrastructure and other amenities in these new areas. As part of creating these new business districts, NOMA and Capitol Riverfront account for 35% of the 10.4 million square feet of office space under construction in the District. As a result of minimal demolition cost, landlords will be able to offer the new space at lower rents than the CBD and East End. In the near term, the core is expected to remain in demand, while future projections show tenant migration to the emerging markets as rents become more attractive, space availability in the CBD and East End diminishes, and the infrastructure improvements are completed.

4.6.2 Office-Using Employment

Office-Using Employment in the District of Columbia is 502,000 and office employment continues to be a strong indicator of demand and growth in the market. However, this demand is at a slower pace than previous years. Since January 2008, approximately 2,900 office-using jobs have been added in DC, contributing to the positive absorption year-to-date. Employment is expected to decline by 0.10% in accordance with the uncertain economy throughout the remainder of 2008 and continue that trend by another 0.18% into 2009. However, the five-year average projects more positive numbers, with a 0.27% increase from now until the end of 2013.


4.6.3 Larger Transactions

Larger transactions (those greater than $100 million) are closing in downtown Washington. While this activity is not directly relevant to the demand for potential incubation space, it is a measure of the vitality of the overall market. To-date closed office sales greater than $20 million aggregate to just over $1.4 billion, with an average transaction size exceeding $100 million. Two other large transactions, One Westin Center and Techworld, with likely closings in 2008 should average $250 million in value. If not for the removal of Terrell Place and The Watergate from the market during the second quarter, the trend of larger transactions closing would have continued in even greater strength.

4.7 Competitive Forces That Impact Incubator Success

A technology incubation program in the District of Columbia would operate in a dynamic environment which includes established, successful technology incubation programs supported by state governments, industry, academic and federal research institutions. It is a region which is home to leading, growth oriented technology industries, with a growing cadre of serial entrepreneurs, and the availability of angel and venture capital financing.

A number of competitive forces will impact the success of the incubation program in the District of Columbia.

4.7.1 Technology cluster

The District of Columbia can focus on the two business sectors with greatest regional growth projected through 2014—Information Technology and Professional Services. Virtually all of the existing incubators in Maryland and Virginia have targeted these types of companies. However, the growth and concentration in these sectors in the City, together with the power of a location in the District of Columbia and the City’s ability to develop a new, industry-driven technology incubation program could provide the competitive advantage required for success.

4.7.2 Geographic area served

Located in the geographic “heart” of Greater Washington, the District of Columbia can position itself to be the focal point for new technology company growth by serving initially all the communities in the City of Washington. With the right value proposition, it also will be able to attract client companies from the suburbs of Greater Washington, nationally, as well as internationally to the new urbanism and opportunity of Washington, DC. It owns the “Washington, DC brand” and can further develop this brand with a technology business focus.


4.7.3 Type and price of services offered

The technology incubation program in the District of Columbia must offer business incubation and networking services that are the most innovative and highest value in Greater Washington to compete effectively with established incubation programs in the region. Pricing for services must be fair and always be perceived as adding value. As the historical “hub” for meetings and high-profile networking activities, there may be opportunities to engage with large number of affiliate or non-resident companies that wish to be associated with technology business development in the City of Washington.

4.7.4 Unique incubator staff skills or incubator program components

The incubator staff must have a combination of entrepreneurial and technology industry experience that garners respect from client companies, stakeholders and potential investors. The incubator program components should be sharply focused on the needs of the incubator clients in the area that are most valued: intensive mentoring, networking and business development, assistance with financing and access to special facilities for meetings and demonstrations. A small seed fund for companies operating in the District of Columbia should be established, as the State of Maryland has done, so the District can remain competitive regionally.

4.7.5 Strength of the stakeholder base

The initial stakeholder base identified for the incubator program of industry and potential service providers is enthusiastic, but relatively small currently. This base will grow and develop as the program grows, becomes visible and engages with stakeholders in their areas of expertise. The stakeholder base should be viewed in its broadest sense to include existing incubation programs in the City, venture-backed initiatives such as LaunchBox and underserved communities in all parts of the City. The support of all these stakeholders will be required for the success of the technology business incubator program.

4.7.6 Number of ventures served annually

The business incubation initiative in the District of Columbia should be designed as a platform for all existing and new incubation and entrepreneurship activity to provide a focal point for information and to leverage City-wide resources, as well as programmatic resources for technology company development in the City of Washington. The number of ventures served through this platform should include the existing programs, as well as all the clients served through the new incubation program. It is important that as the City moves forward with increased support for technology company development that the number of ventures served is representative of a range of actual activities. It is also important, particularly in the


initial stages of the development of the incubator program, that the full range of activity in the District is seen regionally.

4.8 Incubator Space Configuration

Incubator space configuration and size will be driven by:

♦ projected demand for incubation services and facilities

♦ the limited amount of incubation space in the City of Washington currently associated with a program

♦ the initial industry focus, which research indicates could be information technology and professional services firms,

Given the projected demand and relatively high price of leased commercial real estate in the District of Columbia and the need for flexibility in operations, a modestly sized space for 14 to 16 resident clients companies is recommended for the first phase of the incubator development. This size space could be approximately 12,000 square feet, which would more than double the total amount of incubation space available within the City currently. The incubation program can be grown from this platform. Based on the lease up projections in Section 4.8.4, the size of the incubator is expected to double to 24,000 square feet by the end of the second year of occupancy.

4.8.1 Phased Development

The incubator project growth and development is envisioned in two phases:

♦ Phase I Initiation (12,000 square feet)

♦ Phase II: Expansion (an additional 12,000 square feet)

In Phase II, the incubator would have a total of 24,000 square feet. Upon reviewing the demand data and the DC Entrepreneurs’ Survey responses, the predominant space type required is typical office space with provisions for conferencing and vide-teleconferencing space, given the anticipated users. These first two phases for the incubator program do not include special facilities, such as wet labs, as the number of new companies and Washington, DC university spin-outs is currently too low to justify the infrastructure investment.


4.8.2 Incubator Space Plan

The following table outlines the proposed uses of incubator space.

Space Function Size (SF)

Number Extended SF Total

Finishes Comments

Assembly Area 250 1 250 VCT, coated ceiling tile

Empty room with power overhead

Individual Offices 120 9 1,080 Standard finishes

Double Offices 240 5 1,200 Standard finishes

Office Suites 750 2 1,500 Standard finishes

Conference Room 200 2 400 Standard finishes

Video/Conference 400 1 400 Standard finishes Doubles as standard meting space

Digital Showroom 400 1 400 Standard finishes High end lighting and utilities

Lobby/Waiting area

320 1 320 Standard finishes Will not be occupied

Break room 200 1 200 Standard finishes, sink Appliances, coffee service

Mail/Copy/Fax Room

120 1 120 Standard finishes Color copier

Communications 80 1 80 Standard finishes Incoming service

Restrooms 192 2 384 Near lobby, conference area

Janitor’s closet 48 1 48 At either end of the main corridor

Receiving area 80 1 80 Warehouse finishes

Future Expansion 12,000 1 12,000 Appropriate finishes

Subtotal 6,462

Core factor gross up (30%)


One distinction for the incubator space proposed is to include a “Digital Showroom” which is space that could be utilized by tenants and other outside companies (affiliates) to display their product/service/software lines in a showroom environment. This could be particularly attractive to the large contingent of self-employed knowledge workers in the City, and generate a revenue stream for the incubator operation. This room can double as meeting space if needed but would offer high-end lighting and electrical/data connections consistent with the needs of today’s and tomorrow’s media/digital content needs.

4.8.3 Other facility considerations

The space that is selected for the incubation program must be competitive not only in its programs and pricing, but also in its amenities. The space needs to:

♦ convey a technology and commercial image in a secure facility

♦ be easily accessible to retail and dining opportunities

♦ provide adequate parking

♦ be accessible to METRO

These considerations will be discussed in more detail in Phase II of the study.

4.8.4 Space Lease-up Projections

Our demand analysis of regional and state business and technology development activity, plus regional commercial real estate activity will influence the incubator space lease-up projections for five years of operations.

The incubation program envisioned includes resident companies, as well as affiliate or virtual companies who pay a fee to participate in the incubator program, but who do not reside in the incubator facility. An affiliate program can be used to develop prospects who could ultimately be admitted to the program, companies that need mentoring or other services and prefer to pay for their specific needs of facility use, or graduates of the program who want to remain in contact the program and its resources.

Based on the proposed facility configuration of 16 offices total (individual, double and suites total), the following lease lease-up dynamic is projected:


Phase I (16 offices) Resident Affiliate

At Opening 4 2

After 6 months 8 4

After 12 months 12 5


Phase II (32 offices) Resident Affiliate




Given the growth-oriented companies that are likely to be part of the incubator program, by 12 months there should be some graduations from the incubation program.

4.9 Projected Level of Jobs and Impact to be Created

Business incubation programs generate jobs and associated economic impact for their host communities. ANGLE Technology retained Richard Clinch, Ph.D. Director of Economic Research at the Jacob France Institute of the Merrick School of Business at the University of Baltimore (JFI) to analyze the economic and fiscal impact of the development of a business incubator on the Washington D.C. economy. The economic impact analysis that follows was prepared using the IMPLAN input-output model for the Washington, D.C. economy. IMPLAN is one of the most widely used models in economic impact assessment.

4.9.1 Economic Impact of the Proposed Incubator

ANGLE Technology provided data on the planned size and target market of the proposed incubator. The IMPLAN model can use either the revenues/spending or the jobs associated with a project as the basis for estimating the economic impacts of an event or activity. Because the revenues of the companies likely to locate in the proposed incubator are obviously unknown, this analysis is based on estimated incubator company employment. This was estimated based on standard relationships


of jobs per square foot (sq. ft.) of a building. For the targeted IT-related sector of the proposed incubator, it is assumed that one job will be created based on every 300 sq. ft. This is lower than the widely accepted standard of one job created for every 250 sq. ft. used for office buildings in order to adjust for the greater amount of common and shared space and facilities in most incubators.

Based on this calculation, the proposed 24,000 sq. ft. incubator will create an estimated 80 jobs inside the facility. These were entered into the IMPLAN model in the various sectors that comprise the IT sector in Washington, D.C., based on the share of employment in each sector.

In Phase II of this study, the business plan for the incubation program with sources and uses of funds will be outlined.

Model inputs are shown in the following table.

Economic Impact Analysis - Modelling Inputs

Estimated

Target Sq. ft. Estimated

Item Sq. Ft. Market Per Job Jobs

Phase I 12,000 IT 300 40

Phase II 12,000 IT 300 40

Total 24,000 80

The results of this economic impact assessment are presented in the following table. The companies locating in the incubator in each phase (Phase I and Phase II) are estimated to have revenues of $6.1 million and create 40 jobs with an estimated $3.4 million in salaries and wages respectively – for a combined Phase I and Phase II total of $12.3 million in company revenues and 80 jobs earning $6.8 million in salaries and wages. The average earnings per job for the companies locating in the proposed incubator are estimated at $84,896 per year.


The companies locating in the proposed incubator in Phase I and Phase II combined will increase economic activity in Washington D.C. by a total of $16.1 million, create 107 jobs earning $8.3 million in salaries and wages and increase City tax revenues by an estimated $610,218.

Economic Impacts of Operations

(Jobs and 2008$)

Phase I and II

Item Phase I Phase II Combined

Direct Impact ($s) $6,132,056 $6,132,056 $12,264,112

Direct Impact (# of Jobs) 40 40 80

Estimated Direct Employee Compensation ($) $3,395,854 $3,395,854 $6,791,708

Average Direct Employee Compensation per Job ($s) $84,896 $84,896 $84,896

Economic Output ($s) $8,059,477 $8,059,477 $16,118,955

Employment (# of Jobs) 53 53 107

Employee Compensation ($s) $4,145,764 $4,145,764 $8,291,527

Average Employee Compensation per Job ($s) $77,645 $77,645 $77,645

Fiscal Impact ($s) $305,109 $305,109 $610,218

Source: IMPLAN


The economic output impacts of the companies locating in the proposed incubator are presented by sector in the following table, the employment impacts by sector in the next table and the employment compensation impacts are presented in the third table. As presented in these tables, the impacts are concentrated in the professional scientific and technical services, information, administrative, health and social services, and government sectors.

Economic Impact By Sector

Direct Impact

Indirect Impact

Induced Impact

Total Impact

Total $12,264,112 $1,764,404 $2,090,438 $16,118,955

Natural Resources $0 $2 $76 $79

Mining $0 $0 $0 $0

Utilities $0 $15,647 $46,057 $61,705

Construction $0 $3,181 $2,385 $5,566

Manufacturing $0 $32,811 $33,358 $66,169

Wholesale Trade $0 $63,285 $81,304 $144,590

Transportation & Warehousing $0 $43,486 $21,627 $65,113

Retail trade $0 $10,622 $146,690 $157,312

Information $2,430,354 $244,851 $85,967 $2,761,172

Finance & Insurance $0 $129,273 $239,156 $368,428

Real Estate $0 $194,940 $121,468 $316,409

Professional Scientific & Technical Services $9,833,758 $359,244 $92,029 $10,285,031


Management of Companies $0 $39,075 $15,961 $55,036

Administrative & Waste Services $0 $460,140 $40,935 $501,074

Educational Services $0 $25,242 $67,734 $92,975

Health & Social Services $0 $81 $430,581 $430,661

Arts, Entertainment & Recreation $0 $13,944 $23,443 $37,387

Accommodation & Food Services $0 $87,685 $155,711 $243,396

Other Services $0 $18,024 $90,405 $108,430

Government $0 $22,872 $395,550 $418,422

Source: IMPLAN


Employment Impact By Sector

Item Direct Impact

Indirect Impact

Induced Impact

Total Impact

Total 80 13 14 107

Natural Resources 0 0 0 0

Mining 0 0 0 0

Utilities 0 0 0 0

Construction 0 0 0 0

Manufacturing 0 0 0 0

Wholesale Trade 0 0 0 1

Transportation & Warehousing 0 0 0 1

Retail trade 0 0 2 2

Information 5 1 0 5

Finance & Insurance 0 0 1 1

Real Estate 0 1 0 1

Professional Scientific & Technical Services 75 2 0 77

Management of Companies 0 0 0 0

Administrative & Waste Services 0 6 1 7

Educational Services 0 0 1 1

Health & Social Services 0 0 4 4

Arts, Entertainment & Recreation 0 0 0 1

Accommodation & Food Services 0 1 2 3


Other Services 0 0 1 1

Government 0 0 1 1

Source: IMPLAN


Employee Compensation By Sector

Item Direct Impact

Indirect Impact

Induced Impact

Total Impact

Total $6,791,708 $761,431 $738,387 $8,291,527

Natural Resources $0 $0 $0 $0

Mining $0 $0 $0 $0

Utilities $0 $3,464 $10,172 $13,636

Construction $0 $1,300 $938 $2,238

Manufacturing $0 $6,801 $3,035 $9,837

Wholesale Trade $0 $23,506 $30,199 $53,705

Transportation & Warehousing $0 $27,524 $10,540 $38,065

Retail trade $0 $4,229 $58,424 $62,653

Information $712,796 $68,803 $19,011 $800,610

Finance & Insurance $0 $51,898 $89,306 $141,203

Real Estate $0 $22,303 $13,509 $35,812

Professional Scientific & Technical Services $6,078,912 $172,045 $42,466 $6,293,423

Management of Companies $0 $22,000 $8,986 $30,986

Administrative & Waste Services $0 $277,663 $21,054 $298,718

Educational Services $0 $15,521 $42,080 $57,602

Health & Social Services $0 $30 $229,784 $229,813

Arts, Entertainment & Recreation $0 $6,756 $10,305 $17,061


Accommodation & Food Services $0 $32,706 $59,584 $92,290

Other Services $0 $11,565 $46,115 $57,680

Government $0 $13,317 $42,879 $56,196

Source: IMPLAN

4.9.2 Economic Impact of Incubator Graduates

It is impossible to predict the economic impact of incubator graduates on the Washington, D.C. economy before the proposed facility is constructed. Most companies remain in an incubator for 3-5 years before they graduate and begin operations outside of the facility. Some companies go on to create large numbers of jobs, others fail to graduate or go out of business in a few years. The economic impact multipliers for the major sectors targeted by the proposed incubator are presented in the following table. These multipliers provide information on the economic impacts associated with incubator companies after they graduate and operate in the City. For example, as presented in this table, a software publishing company with $1 million in annual revenues will generate $1.34 million in economic activity in the City and create 4 jobs earning a total of $430,000 in salaries and wages.


Economic Impact Multipliers of Incubator-Related Sectors

Employment Employee

Output Multiplier Compensation

Sector Multiplier (Jobs per $1 mil.) Multiplier

Software publishers 1.34 4.20 0.43

Custom computer programming services 1.33 12.18 0.88

Computer systems design services 1.31 11.51 0.84

Other computer related services 1.25 5.73 0.39

IMPLAN

4.9.3 Methodology

This report describes the overall economic impact of the companies locating and operating in and graduating from the proposed incubator on the Washington, D.C. economy. It is quite difficult to assess the economic impacts of business incubation. It is nearly impossible to determine whether or not the companies locating in an incubator were created because of the incubator or the actual impact of the entrepreneurial assistance received on the success or growth of the companies served. However, because the Washington D.C. metropolitan area, especially the surrounding Maryland suburbs, are well served by business incubators, and the City of Washington lacks a technology-related incubator; it is quite reasonable to assume that the development of the proposed incubator will create an opportunity for the City to capture and benefit from the strong level of entrepreneurial activity occurring in the City and region. While it is impossible to predict a priori how the proposed incubator will impact the level and rate of new company formation; it is clear that the creation of the incubator will allow the City to participate in and benefit from the strong level of entrepreneurial activity and its related economic impacts occurring in the metropolitan area. It is impossible to predict how the proposed incubator will create net, new and incremental economic activity in the City. Thus, this analysis instead analyzed the economic impact of the companies operating in the proposed incubator


and describes, using industry multipliers, the potential impacts of incubator graduates. As a result, this report analyzes the contribution of the incubator companies on the City economy.

This report uses an economic model1 to estimate the economic activity generated by and economic impact of the companies locating in the proposed incubator. This analysis focuses on three measures of economic impact: economic output (a figure similar to business volume); employment; and employee compensation. Four measures of the economic activity and impact of the incubator are included in this report:

Direct effects, which represent the change in economic activity being analyzed – in this case the revenues of companies locating in the proposed incubator;

Indirect effects, which represent the changes in inter-industry purchases, for example the purchase of goods or services to support company operations, in response to the change in demand from the directly affected industries;

Induced effects, which represent the changes in spending from households as income and population increase due to changes in production; and

Total effects, which are the combined total of direct, indirect and induced effects.

An input-output analysis examines the relationships among businesses, and among businesses and final consumers. Input-output analysis is based on the use of multipliers, which describe the response of an economy to a change in demand or production. Multipliers measure the effects on an economy from a source of economic activity, in this case the activities of IT companies related to the proposed incubator. The economic activity generated in a region is greater than the simple total of spending associated with the event or activity being studied. This is because as this money is earned it is, in turn, spent, earned and re-spent by other businesses and workers in the regional economy through several successive cycles. However, the spending in each successive cycle is less than in the preceding cycle because a certain portion of spending “leaks” out of the economy in each round of spending. Leakages occur though purchases of goods or services from outside of the region. The multipliers used capture the effects of these multiple rounds of spending.

1 The Jacob France Center used the IMPLAN input-output model. All impact figures are in year 2008 dollars.


5. Incubator Economic Development Purpose The National Business Incubation Association (NBIA) defines business incubators as initiatives that nurture the development of entrepreneurial companies, helping them survive and grow during the start-up period, when they are most vulnerable. These programs provide their client companies with business support services and resources tailored to young firms. The most common goals of business incubation programs are:

♦ creating jobs in a community

♦ enhancing a community’s entrepreneurial climate

♦ retaining businesses in a community

♦ transferring technology from universities and major corporations

♦ building or accelerating growth in a local industry

♦ diversifying local economies

There are an estimated 1,100 business incubators in North America today, up from 12 in 1980, according to NBIA. The majority of North American business incubators—approximately 86%—are non-profit organizations focused on economic development. About 16 % are for-profit entities that are established to generate returns on shareholder investments. NBIA data indicates that 47% are “mixed use”, or assisting early-stage companies in a range of industry and technology sectors.

From a regional perspective, publicly supported incubators are typically established for one of two economic development purposes. They are either designed to be economic catalysts or economic accelerators. The incubator established as an economic catalyst can initiate or bring together policies, programs, resources, etc. from the public and private sectors to establish the basic framework for nurturing and growing innovative companies in one or more business areas. Communities, such as Washington, DC benefit from this type of economic catalyst, as well as regions with a small or fragmented innovative company base, which have, or have the ability to establish the key ingredients to support the continued formation and growth of these ventures.

An incubator established to serve as an economic accelerator can accelerate the growth—and improve success—of business ventures in an area where the existing framework of policies, programs, resources, etc. may not be maximizing the opportunities for new ventures in one or more business clusters. Almost all regions with an established base of entrepreneurial ventures can benefit from an incubator that is properly positioned to fill a gap in the market and provide client businesses and stakeholders with a viable incubation program.


City leaders would like to broaden the existing business base by attracting technology-based employers, as well as nurturing the development of small, entrepreneurial businesses that would grow and generate new economic impact in the City. The City of Washington also is seeking ways to burnish its image as a community that is a good place to start a business located in a growing region with accessibility to the Maryland and Virginia suburbs, plus Baltimore and Annapolis. A concentration of business and technology incubator activity already exists in and around the City of Washington, DC.

In summary, the role of a business incubation program in the District of Columbia would be:

♦ to catalyze the further growth of information technology and professional service firms in the City, and to increase the economic impact of these enterprises on the business base of the City

♦ to meet the development needs of a broad group of small and entrepreneurial enterprises which could be built around the expertise and technology developed by the City’s universities

♦ to help attract new, growth oriented entrepreneurial businesses to the City of Washington, who will establish roots in the community and generate high wage jobs over time

♦ to provide a platform for additional science and technology education and workforce/human capital development for all communities in the City

Successful incubator programs can be important economic development tools, but they cannot operate in isolation. They must be part of their region’s broad based strategic plan, which establishes a vision for the future and outlines a roadmap for the goals and objectives of this vision. An incubator can be a key part of this plan, but it cannot be the entire plan. If the incubator’s role is not fully understood, the investment in an incubator initiative may by fruitless.


6. Community and Stakeholder Support A key step in the feasibility process is to assess the level of community and stakeholder support for the incubator and its expected impact on the overall success of the project. The ANGLE Team conducted a series of interviews with a group of stakeholders identified by the ETC and WDCEP that reflect the diversity of interests associated with this project to understand the true level of community support. The list of our interviewees appears as Appendix I. ANGLE also identified what appears to be a growing community of technology-savvy entrepreneurs working and living in the Washington, DC region and conducted a brief, opportunistic survey of this group to learn more about potential incubator program stakeholders.

6.1 Background

Gathering stakeholder information is particularly important for this project, given the concentration of existing business incubation activity within the City. These exploratory activities related to testing the concept of a technology incubator in the District of Columbia, defining the market and determining the types of programs services to be offered, also help to stimulate the market and begin the community education process. Through the interview process, potential stakeholders begin to consider ideas about the full range of entrepreneurship and technology incubation activity.

In a sense, there are two sets of customers for the incubator: the incubator company and the community. The relationship of the individual incubator company to an incubator is clear and direct. The relationship with the community is more complex. The community can provide start-up resources, ongoing volunteer support and a source of entrepreneurs, in hopes of gaining new companies and new jobs that will expand the tax base and other benefits, such neighborhood revitalization. The community can also withhold their support, and without community support, it is difficult for an incubation program to be successful. General observations from the stakeholder interviews are provided below.

6.2 Online Surveys of “Wired” Technology Community

As part of this Feasibility Study, ANGLE also conducted two online surveys of local DC area entrepreneurs to solicit their feedback on what a potential incubator might offer them. The members of this community have established social and profession networking events and electronic communications vehicles.


6.2.1 Survey

The first survey was designed by ANGLE and managed using the Survey Monkey on-line survey platform. It was designed in four major sections:

♦ Entrepreneur Demographics. To gain insight into the types of people who are interested in launching new ventures in DC.

♦ Venture Demographics. To gain insight into the types and stages of businesses being started in DC.

♦ Entrepreneur Needs. To gain insight into the types of programs and services that DC entrepreneurs think they need.

♦ General Feedback. To provide respondents with an opportunity to provide open-ended feedback, recommendations, comments, and suggestions.

A second four-question survey was conducted in January 2009 and this reinforced the findings form the initial survey and provided additional insight into the types of early stage companies operating in the District. This survey requested information on the type of company/product under development and most urgent company development needs besides money.

A detailed summary of the survey responses appears as Appendix II and Appendix VII.

6.2.2 Respondent Pool

ANGLE worked closely with Peter Corbett of iStrategyLabs to circulate both surveys. Mr. Corbett publishes a regular e-newsletter with a distribution list of approximately 1,200 entrepreneurs in the DC region. An initial survey-focused email was sent to ~100 individuals on July 29th. An e-newsletter was send to the distribution list of 1,200 on August 12th.

In January 2009, Mr. Corbett send the short survey to 4,000 individuals in his database.

6.2.3 Data Biases

Due to budget and time restrictions, the announcements for these surveys were included as one item of several in a regular e-newsletter publication. It is likely that many potential respondents either never opened the e-newsletter or never saw the survey announcement among all of the other content in the e-newsletter. This could have negatively affected the response rate. Moreover, the individuals who did see the announcement (and therefore responded) were likely regular active readers of the e-newsletter, which caters to a certain demographic that is reflected in the survey responses. To minimize the risk and impact of these biases, future surveys should send out email announcements specifically focused on the survey.


6.2.4 Response Rate

Thirty-one (31) respondents completed at least a portion of the first survey, which yields a response rate of ~2.5%. This certainly falls within the industry standard response rate for email-based surveys. However, 15 of those responses came from the initial July 29th email (a 15% response rate), while the remainder came from the subsequent August 12th e-newsletter distribution (a 1.4% response rate).

Twenty-four respondents completed the four-question survey in January 2009. Eleven of these responses (45%) were from entrepreneurs identified as living in Washington, DC.

6.2.5 Highlights from the First Survey

Demographics – Entrepreneurs

As expected due to the general demographic of the e-newsletter announcing the first survey, the respondents were overwhelmingly young, highly educated, first-time entrepreneurs:

81% under the age of 40

97% completed at least a Bachelor’s degree

86% never started a company before

Demographics – Ventures

Also likely reflective of the demographics of the underlying respondent pool, the respondents’ ventures tended to be early-stage, boot-strapped, internet-based businesses focused on serving consumer markets from home-based operations:

40% pre-product stage

74% financed via founders’ investments and revenues

79% internet-based

68% consumer-focused

54% home-based

Entrepreneur Needs

The respondents felt that they could most benefit from:

♦ Events: educational (81%) and networking (62%)


♦ Connections: angel investors (58%) and personal mentors (58%)

♦ Office space: leased (58%) and shared (53%)

♦ Professional services: accounting (72%), legal (52%)

6.2.6 Highlights from the Second Survey

The second, four-question survey data reinforced the findings from the first survey that mentoring, access to space for offices or space for demonstrations were key requirements from this group of 11 DC-based entrepreneurs.

The second survey also provided information on the type of applications or products being developed by these companies. The survey responses indicated that there were companies engaged in:

Political data analysis Medical/healthcare appointment scheduling software Social media consulting Applications for mobile devices Open source database solutions iPhone applications

6.2.7 Conclusions

6.2.7.1 Bias Influence

Due to time and budget constraints, the survey information was distributed both times to a core group of between 1,200 and 4,000 recipients of a local e-newsletter that caters primarily to young consumer-focused internet-based entrepreneurs. Therefore, the survey respondents reflected the same demographic, which may lead to a particular bias on their responses.

6.2.7.2 Support Needed

For these types of entrepreneurs (young, first-time) and ventures (early-stage, consumer-focused, internet-based), the best support they can receive is in core entrepreneurial and new venture creation processes, including:

♦ Entrepreneurial: mentorship, education, peer group, networking

♦ New Venture Creation: funding, advisory services (accounting, legal, etc.)

Additionally, they would benefit from a marketing/promotional/branding effort that would position the DC area as a hub for creative and innovative entrepreneurship.


Finally, they need a central physical facility that would act as a hub for all of these services and activities, as well as the entrepreneurs and the new ventures.

6.3 Incubator Programs and Services

Stakeholders and survey respondents made a broad range of recommendations for technology incubator programs and facilities, with private sector interviewees expressing equal support for incubation services and facilities.

6.3.1 Technical Assistance

Stakeholders noted that technical assistance would be of great value in areas such as entrepreneurship and management, business plans, government contracting, marketing, networking and access to finance. Interest in seeing more engagement with Washington’s universities in technology company formation and development was mentioned frequently.

6.3.2 Incubator Facilities

The high cost of office space in the City, and the relatively small amounts of space available under a flexible lease basis made a business incubation program with managed space particularly appealing. The two existing incubation programs, Affinity Lab and the DC Minority Business Enterprise were not well known to the stakeholders interviewed. LaunchBox Digital was slightly better known because of recent press coverage. The idea of a seed fund for early-stage companies, which could be established by the District of Columbia Government, was mentioned numerous times. Stakeholders noted that the City understood small business development and had created a range of services for small business, but that the City did not understand or provide appropriate programs for technology business development. The establishment of a business incubation program was viewed as the first step for the City in the creation of a comprehensive approach to developing more entrepreneurship and new technology companies in the District of Columbia. Several stakeholders suggested the creation of an entrepreneurship institute which would involve some of Greater Washington’s best known and most successful entrepreneurs.

6.4 Community Strengths to Support an Incubation Program

Every stakeholder interviewed has a positive and enthusiastic about the establishment of technology incubation imitative in the District of Columbia. Many stakeholders commented that the time was right for a project of this type and could fill a void for technology-based entrepreneurs who have for years opted to establish their operations in the incubation programs in suburban Maryland and Virginia because their options were limited in Washington DC. We also heard that the Government of the District


of Columbia provides no program for early stage, growth-oriented companies seeking facilities, as well as the mentoring provided through programs such as LaunchBox. Virtually all of the online survey entrepreneur respondents expressed interest in a program that would increase their networking, mentoring, facility, funding and investment options. There was a definite sense that a technology business incubation program would attract new “knowledge workers” and members of the “creative class” to the city to further diversify and strengthen its “new urbanism” appeal. It was also important to stakeholders that the incubator program be structured and promoted as a complement to existing programs in the City, so that natural synergies within programs could be exploited and the image of a spectrum of entrepreneurship activities is projected. A business incubation program was seen by some stakeholders as a focal point/facility/resource for new science, technology engineering and mathematics (STEM) education and technology workforce training for communities in the city who have participated in technology-based business activity previously.

6.5 Obstacles to the Creation of an Incubation Program

Stakeholders noted that having long-term political and financial support for the technology incubation initiative from the District government at the outset of the project will be critical. As the City does not yet have a comprehensive technology-based economic development strategy which would include this project, and this project would break some new ground, there was a concern that the launch of the incubator might become mired politically. Some stakeholders also expressed concern about the challenge of identifying early-stage funding and locating appropriate, affordable incubation and graduation space for technology companies in a town known for the high-priced real estate occupied by law firms and other professional service firms. Partnerships with willing developers were suggested. The challenge of marketing to the initial incubator prospects also was highlighted.

6.6 Industry Sector Focus

The stakeholders recommended opening the incubator program to a mix of companies broadly defined as being engaged in the information, communications, Internet 2.0 and social media companies initially. This approach mirrors the job growth sectors for the City. As the program grows, it may evolve to include life science companies that are spin-outs from Washington’s universities, federal labs and NIH.

6.7 Indicators of a Successful Program

When asked to describe the indicators of a successful incubation program, most private and public sector stakeholders pointed to a more visible entrepreneurial environment for technology activity, technology-based job growth and the attraction of additional investment in the companies. Retaining businesses in the City following graduation from the incubation program was seen as important considerations, but


stakeholders acknowledged that this could be difficult given the number of location choices outside the City for these companies. Another critical indicator of a successful program was strong linkages among the incubator program, client companies and Washington’s universities. This will be a challenge in the proposed Phase I of the program, given the current low rate --three to four companies annually-- from Washington, DC universities. However, the presence of an established, professionally managed incubation program may stimulate more spin-offs.


7. Market Feasibility Assessment The ANGLE Project Team has analyzed the critical mass of business and technology resources and the market demand for new entrepreneurial initiatives in the District of Columbia. We find there is demand for the establishment of a technology business incubation program.

Incubator Economic Purpose

It is important to emphasize that business incubation is a process and that an incubator is much more that a multi-occupancy, managed work space. Incubators play an important role in their communities. A technology incubation initiative in Washington, DC would be a catalyst and a platform for:

♦ Providing a physical focus for entrepreneurship and company growth

♦ Creating a common culture and environment for technology entrepreneurship

♦ Facilitating inter company contact, networking and growth

♦ Enabling cost effective delivery of services/resources

In addition to these four roles, the incubation initiative in the District of Columbia should be structured from the outset to be the catalyst for referrals, marketing and the development of program resources for the two existing programs in the City, Affinity Lab and the DC Minority Business Enterprise Center. The technology incubator also can be a platform for activities associated with technology based education and training activities in the City.

Technology Focus

Two existing incubation programs in the City of Washington address the needs of two distinct client groups: early-stage, communication, social media and nonprofit organizations at Affinity Lab and more mature minority firms in federal contracting, technology and professional services at the DC Minority Business Enterprise Center. In a virtual way, a third program, LaunchBox Digital selects a few growth oriented companies for intensive mentoring and financing. The proposed new technology incubation program would be designed to support the business growth requirements of businesses working in technology areas broadly defined as information technology, Internet 2.0, and new media.

Demand

Today there is an estimated 6,000 square feet of office space used by technology incubation client companies in the Washington, DC. By summer of 2009, that number could double, but it will not be enough to accommodate the space


requirements of entrepreneurs in employment sectors that are projected to add 3,000-4,000 jobs each year for the next five years, according to GWI data.

Incubator initiatives can generally expect to source new knowledge-based companies from four sources:

♦ Existing small companies and individual entrepreneurs

♦ Corporate sector

♦ Academic and government research establishments

♦ International/domestic inward investment

A new technology incubator initiative would draw its clients from all four of these sources. In fact, analysis indicates that there is pent up demand for this type of an initiative.

Incubator Initiative for the District of Columbia

There is an opportunity now in the District of Columbia to establish a technology incubator initiative which will:

♦ build a stronger, more cohesive entrepreneurial environment for technology companies which links, leverages and further develops existing Washington, DC technology entrepreneurship activities which meet the needs of distinct client communities

♦ provide a platform for the development of specific new resources to advance technology development activity in the City, such as the creation of a $1.5 million seed fund for DC-based companies and support for special entrepreneurship, science and technology education and workforce development activity for all communities in the City

♦ provide the platform for establishing a new, professionally managed technology incubator program specifically to drive the attraction, growth and development of growth-oriented technology companies representing Washington, DC’s most dynamic industry sectors and most relevant university-developed intellectual property

This Washington, DC Technology Incubator Initiative would develop in leased office space in at least two Phases:

Phase I: Initiation

The incubator can be initiated in 12,000 square feet of leased Class B office space in a location, preferable in a location with the flexibility for the program to double in size in approximately 24 months. During this period the basic incubator program elements of business support, mentoring, and a facility can be established to serve the City’s technology entrepreneurs. Technology-based education and training activities in the City can utilize the incubator program’s platform.


Phase II: Expansion

Within two years, the demand for the incubator program and facility will require the incubator to double in size to 24,000 square feet of leased space. The program will increasingly be seen as the focal point, resource and catalyst for technology entrepreneurship in the District of Columbia.

The incubator program will increasingly be seen as the focal point, resource and catalyst for technology entrepreneurship in the District of Columbia.


8. Regional Technology Incubator Context and Examples As detailed in the Phase I: Market Analysis of this study, the regional context for any technology business incubation initiative undertaken by the District of Columbia provides numerous examples of successful programs, as well as insights into many issues involved with launching and operating business incubation programs as economic development tools. Three programs--two in Maryland and one in Virginia—are useful examples.

8.1 Montgomery County and the City of Baltimore Examples

To provide a first-hand look at the state of regional technology incubation activities, the ANGLE team arranged a day-long tour for ETC and WDCEP in October 2008 which included visits to Montgomery County’s Silver Spring Innovation Center (SSIC) and the City of Baltimore’s Emerging Technology Centers (ETC-Baltimore). A meeting also was arranged with Robert Brennan, President and CEO of the Maryland Economic Development Corporation (MEDCO), a capital funding instrument for incubator development in Maryland. In addition to providing exposure to technology incubator best practice, these two programs on the tour also illustrated two different approaches to facility development and organizational models for incubator development.

The SSIC is a three-year old program operating in a new, purpose-built building, which Montgomery County constructed with a developer partner as part of the revitalization of Silver Spring. The County provides incubator management through the Montgomery County Incubator Network program, which manages incubators in Rockville, Gaithersburg, Wheaton, and now Montgomery College in Germantown. MEDCO has worked with Montgomery County on the financing and administration of several County incubators.

The ETC-Baltimore in an 11-year old program in the Canton neighborhood operating in a historic industrial building which was renovated for the ETC-Baltimore by the Baltimore Development Corporation (BDC). The ETC-Baltimore is a program of the BDC and the incubator was purposefully located in an emerging neighborhood in Baltimore, which has now become economically vibrant. The ETC-Baltimore also operates an incubator in another building renovated by the BDC, ETC@Johns Hopkins Eastern, near the Hopkins Homewood campus. ETC-Baltimore is structured as a separate 501 (c) (3) nonprofit with its own board of directors, but it is also a program which is largely funded by the BDC with many close connections administratively. For example, ETC-Baltimore employees are considered BDC employees for the purposes of general payroll administration and benefits.


8.2 Fairfax County Example

The Fairfax County Economic Development Authority (FCEDA) formally launched a technology business incubation program called the BioAccelerator in January 2003 to spur the development of early-stage biotechnology, biomedical and bioinformatics companies in the County and provide a focal point and catalyst for the growth of the life science industry in Northern Virginia. FCEDA hired ANGLE Technology on a multi-year contract to manage the BioAcelerator as an FCEDA initiative. The BioAccelerator program was designed to attract early-stage U.S.-based companies, as well as to attract more mature international companies seeking a base of U.S. operations.

The FCEDA is one of the few county-level economic development organizations in the U.S. with its own international offices and these offices worked actively to recruit companies to the BioAccelerator program. FCEDA was pleased with the impact of the BioAccelerator companies in terms of jobs and revenue generated, as well as international publicity generated. But FCEDA priorities shifted and at the conclusion of the professional management contract in 2006, FCEDA opted not to continue the contract or the program and to shift the financial resources associated with the BioAccelerator to other economic development priorities, such as the expansion of its international network of offices. FCEDA helped BioAccelerator companies move into commercial space in the County.

The BioAccelerator maintained a broad scope of company activity during its existence, which included bio-defense, biometric, and homeland security companies and entrepreneurs. This broad scope was aimed at addressing some of the major trends in the region, federal budget allocations, and some overlapping technologies with the biomedical space. For example, Homeland Defense and Bio-defense continue to see increased emphasis and offer continuing opportunities for entrepreneurs and early-stage businesses in Fairfax County.

After the first three full years of BioAccelerator operation:

♦ Eight thriving companies were involved with the BioAccelerator program in Springfield, VA, three of which were international (from the UK, Germany and Korea)

♦ Four companies had graduated

♦ BioAccelerator companies had generated more than 100 jobs

♦ Several companies had attracted angel investment

♦ BioAccelerator companies have generated an estimated $29 million in revenues

FCEDA continues to publicize the successes of the former BioAccelerator companies.


9. Site Assessment As noted in the Phase I report, it is recommended that the incubator be developed in phases and begin in leased commercial space in the District of Columbia, as discussions with the City government staff indicate that there is no city owned space currently available which meets the location criteria (See Section 9.2 below).

In addition, the option of leasing vacant retail space in South East DC near the baseball stadium was discussed with the DC Office of Planning. While it could be possible to negotiate a favorable lease rate and term, retail space typically does not work well for business incubation. It is not a business focused environment and retail space is more expensive than commercial office space. The real estate market in the City presents real challenges for cost-effective incubator pace.

9.1 District of Columbia Commercial Real Estate Overview

The Washington DC commercial office real estate market consists of 136.01 million square feet of space divided as follows among established sub-markets:

Downtown 89.99 million

Capitol Hill Area 28.69 million

Georgetown/Uptown 15.68 million

Northeast/Southeast 1.65 million

The table below provides a summary of the DC commercial office real estate market based on the CoStar Office Market Watch published in the November 10, 2008 Washington Post reflecting end of third quarter 2008 statistics.

Submarket Market Size

Space Available

Vacancy Rate

Asking Rent

Under Construction

(millions sq. feet)

(millions sq. feet)

(percent) (per sq. feet)

(square feet)

Downtown 89.99 6.65 7.4% $49.10 2,806,119

Capitol Hill Area 28.69 3.93 13.7% $46.73 4,950,194

Georgetown/Uptown 15.68 0.85 5.4% $38.71 0

Northeast/Southeast 1.65 0.13 7.7% $32.63 48,000


The submarkets are defined as follows:

♦ Downtown: East End, Central Business District, West End

♦ Capitol Hill Area: Capitol Hill, Southwest

♦ Georgetown/Uptown: self-explanatory

♦ Northeast/Southeast: self-explanatory

The space available includes direct and sublet; rent is average asking rent; vacancy rate includes sublet for existing properties; space includes all classes (A, B, and C); construction includes projects currently under construction and/or renovation. It does not include pipeline development.

In contrast to the broader Washington area commercial real estate market which saw increases in vacancy rates over the prior year period, the vacancy rate for the District area was 8.5 percent for the third quarter of 2008, nearly the same as the 8.6% vacancy figure for the third quarter of 2007. The Washington Post (November 10, 2008) estimates that 2 to 4 million square feet of space may be required in the District to accommodate the new of new regulatory industries especially those associated with the Treasury Department and the incoming Administration.

9.2 Criteria for Incubator Site

Based on the program selected during the first phase of this study, the ANGLE team developed site selection criteria to guide the team’s search and evaluation of available locations prioritized as follows:

♦ 10,000-12,000 rentable square feet of standard commercial office space.

♦ Expansion capabilities to address phase II requirement of additional 12,000 square feet of rentable standard commercial office space.

♦ Metro accessible.

♦ Contiguous space available on a single floor to facilitate synergistic benefits of business incubation and to maximize operational efficiency.

♦ Neighboring tenant profile in industries consistent with proposed areas of emphasis for the proposed incubation program.

♦ WI-FI and fiber connectivity.

♦ Access to paid parking.

♦ Value lease rates reflective of Class B office to achieve operational sustainability.


♦ Shorter lease term of 2-5 years to maintain maximum flexibility for future expansion and modification of the program.

♦ Secure neighborhood to accommodate round-the-clock access for entrepreneurs.

♦ Nearby amenities such as coffee shops, deli’s, and banks.

♦ Prefer to locate in an emerging neighborhood where the business incubation program can grow with the community.

♦ Evaluate sites from multiple sub-markets throughout the District including Northwest, Northeast, and Southeast.

The ANGLE Team and the Emerging Technology Consortium have discussed technology commercialization opportunities in the nanotech and biotechnology industries, including devoting a portion of the proposed new facility to address these programmatic needs by providing wet lab space. The ANGLE Team does not feel a focus on these industries is appropriate at this initial stage for the following reasons:

♦ Percentage of research by DC area universities in biotechnology and nanotechnology in comparison to their peers in neighboring Maryland institutions such as Johns Hopkins University, the University of Maryland at College Park and George Mason University in Virginia does not warrant a focus on these industry sectors;

♦ Federal labs are already significantly established outside the District;

♦ Locating a biodefense laboratory in the District places a strategic defense resource adjacent to the most significant bio-defense related targets in the Nation;

♦ The Federal Government has already funded a substantial investment in expanding the bio-defense research laboratory related assets at Fort Detrick;

♦ Absent a significant City subsidy, the cost of doing business in the District would drive pricing of laboratory space well beyond the reach of the majority of market users; and

♦ The District workforce for biotechnology jobs is not as strong as that found just outside the region.

The ANGLE Team feels that it will be important that an incubator program be developed that is positioned for success right out of the gate, much like the highly successful Frederick Innovative Technology Center Incubator (FITCI), which has already graduated 8 companies after just three short years of operation. As such, the ANGLE Team recommends that a phased strategic approach to the development of its incubation program be adopted, starting with the short-term lease of existing, class B office space, followed by the evaluation of newly developed or renovated space for the location of the Phase II incubation program.


9.3 Site Selection Process

Working with Washington DC Economic Partnership (WDCEP) staff, the ANGLE Team identified several existing class B office space opportunities primarily in the Northwest neighborhood. This initial search of the CoStar database yielded 52 potential locations including the Intel Sat building located at 641 S Street SW and the Technology Building located near the Verizon Center at 800 K Street NW. The ANGLE Team also ran a search for available existing properties meeting our search criteria in the Northeast sub-market which resulted in the identification of only two properties both of which are Class C space. The Northeast sub-market is characterized by industrial properties and renovation projects as seen in the relatively small amount of space in comparison to the Northwest sub-market as noted by CoStar and reflected in the District of Columbia Commercial Real Estate Overview presented earlier.

The ANGLE Team requested new development sites for evaluation as these may represent good opportunities for consideration under the Phase II incubator program. This search revealed five separate new development projects that include commercial office space. One of the sites is in Southeast; one is in Northwest; and three are in Northeast.

The ANGLE Team requested city-owned sites for consideration under either Phase I or Phase II of the incubation program. WDCEP identified one site, 225 Virginia Ave. SE which is currently leased by the DC government, but not occupied. McKinley High School was identified by several project stakeholders as a potential location for the proposed facility.

Working with the above-identified sites, the ANGLE Team culled the overall list of sites based on the following:

♦ Availability of contiguous floor space to meet program

♦ Metro access

♦ Rental rate

♦ Available lease term

The ANGLE Team separated the culled list as follows:

♦ Properties appropriate for Phase I

♦ Properties appropriate for Phase II

Please refer to the Culled Site List found at Appendix III.


9.4 Selected Sites

Working with ETC team stakeholders, the ANGLE Team further shortened the list of suitable properties as follows:

Near-Term 1325 G Street NW 225 Virginia Avenue SE (City sublease) 3400 International Drive-Intelsat 151 T Street, NE-Innovation Center at McKinley High School

Long-Term 641 S Street NW, The Wonder Bread Building

9.4.1 Near Term Sites

The 1325 G Street NW property offers several attractive features including 12,194 leasable square feet on one floor; lower end rental rate of $30 plus electric; access to Metro Center; and available paid parking. This property would enable ETC to initiate operations immediately upon lease execution if desired.

The 225 Virginia Avenue SE property offers several attractive features including substantial contiguous leasable square feet; very low lease rate of $15.44 per square foot (psf) on a triple net basis. Based on a conversation with Jim Layton of Grubb & Ellis’ downtown DC office, the cost of operating a class B commercial office building in the District can range from $12 to $20 psf. For comparative purposes, this would translate into an overall lease rate of between $27 and $35 psf once the cost associated with operating the building is added to the base rental rate. This property is large at 421,000 square feet. The property will be developed as the north anchor of the Waterfront/Navy Yard development area and shows strong potential for future community growth; however, that growth may not occur until several years from now. In the interim, it may be challenging from both an economic and marketing perspective to bring the space up to an operable, sustainable condition to serve as a base of success for the proposed incubator project. Several proposals have been received by the City to further develop this facility, but no decision on the development plan appears to have been made.

The Intel Sat property represents attractive features including immediate proximity to the University of the District of Columbia (UDC) and the Van Ness Metro station. The asking full service lease rate is $32 psf which is very competitive for Class B commercial office space in this market. Phase I of the proposed incubator project would require separation over two floors at this property as the maximum available


space on one floor is just over 8,000 square feet. Bruce Pascal, the listing broker for the property stated that three year lease terms are available with a mutual right to terminate after two years. Intel Sat carries this provision to maximize its flexibility in regard to its future need for the space as owner of the property. The ANGLE Team views this space as less favorable than the 1325 G Street NW property due to the short lease term and the inability to locate the entire 12,000 square foot requirement on one contiguous floor. Managing incubators in non-contiguous space is an operational challenge and offers a less effective environment for entrepreneurial companies, because it is harder to foster a sense of community over multiple floors.

According to Chad Womack, President & Executive Director, Philadelphia Biotechnology and Life Sciences Institute, when McKinley High School was renovated a few years ago, the A-wing was intentionally designed to house commercial lab/office space with the idea of co-locating tech-oriented businesses, particularly life science related businesses, on the campus. The A-wing has 3 floors of approximately 66,000 sq ft of space available for fit-out for a variety of uses including offices, classrooms and research and commercial laboratories.

Chad has been working with the Carnegie Institute for Science, NIH, J Craig Venture Institute and other science education stakeholders to establish a science, technology, engineering and math (or STEM) education center within the A-wing that would link math and science education with human capital/workforce development around a theme of genomics. Industry validated certificate training in various bio/life sciences oriented jobs skills could be offered. This location could also house collaborative, university led basic and translational genomic research with Howard University, American University, George Washington and Georgetown University investigators. An integrated and articulated bio/lifescience career academy and STEM educational programs with McKinley High School could be offered to provide science teacher professional development and student academy programs in the summer.

In addition, the DC Public School System was recently approached by DC Cable TV to lease a significant portion of the space that would occupy at least one floor. The remaining space available in the A-wing could provide enough space for a small incubator for tech-based companies and would range from 15-20,000 sq ft. This property may represent an excellent long-term choice for the Phase II location of the incubator project as significant renovation and fit-out must occur prior to being ready for occupancy.


9.4.2 Long-Term Sites

The 641 S Street NW-Wonder Bread property is very appealing as a long-term location for the proposed incubator project. Less than a block from the Shaw Metro station, the site offers free surface parking and totals 12,000 square feet of space. This property is slated to undergo significant renovation, the timing of which is undetermined. The building is appealing from a visual perspective and represents a product that should be highly marketable to technology entrepreneurs. A potential drawback may be the size of the property if it does not allow for additional density to expand.


10. Business Plan

10.1 Market Opportunity Recap

This section recaps existing entrepreneurial support programs in the District and the region, as well as underlying factors driving the need for a DC Technology Incubator, as well as its role in the overall DC economy.

10.1.1 Existing Initiatives – DC

The DC Technology Incubator will operate within a local ecosystem that already has several entrepreneurship-related initiatives in operation. These are complementary programs that will help support the overall DC entrepreneurial experience. Since there is a strong need for a central “first-stop shop” platform, a core element of the Incubator’s value proposition will be to actively support and promote these existing initiatives.

10.1.1.1 Incubators

♦ Affinity Labs

♦ DC Minority Business Enterprise Center

♦ LaunchBox Digital

♦ Community and faith-based programs

10.1.1.2 Entrepreneur Resources

♦ Service Corps of Retired Executives (SCORE)

♦ U.S. Small Business Administration (SBA)

♦ U.S. Small Business Innovation Research (SBIR)

♦ Washington DC Chamber of Commerce

♦ Washington DC Small Business Development Center

10.1.1.3 Other Programs

♦ National Foundation for Teaching Entrepreneurship

♦ The Indus Entrepreneurs-DC Chapter (TiE-DC)


10.1.2 Existing Initiatives – Region

The DC Technology Incubator will also operate within a regional ecosystem that already has several entrepreneurship-related initiatives in operation. Again, a core element of the Incubator’s value proposition will be to actively support and promote these existing initiatives.

10.1.2.1 Incubators

♦ Maryland incubators

♦ Virginia incubators

10.1.2.2 University-affiliated programs

♦ George Mason University’s Business Alliance (Grubstake Breakfast and Entrepreneur Boot Camp)

♦ MIT Enterprise Forum

♦ The George Washington University’s University Start-up/Spin-Out Program

♦ Dingman Center at the University of Maryland

10.1.2.3 Organizational programs

♦ Northern Virginia Technology Council’s Entrepreneur Committee

♦ Technology Council of Maryland

♦ The Entrepreneurship Center @NVTC

♦ Virginia’s Center for Innovative Technology

10.1.2.4 Other events and programs

♦ Amplifier Networks

♦ Capital Call – Cooley, E&Y

♦ Ernst & Young’s Entrepreneur of the Year Awards

♦ Mid-Atlantic Venture Association’s ALPHAConnect, CEOConnect, and Capital Connection

♦ MindShare

♦ Morrison & Foerster’s Entrepreneur Dinner Series


♦ Netpreneur

♦ PwC’s MoneyTree event series

♦ TeqCorner

10.2 Vision and Mission

Every major project benefits from having clear and consistent principles that guide every aspect of its development. This section articulates the Vision and Mission for the DC Technology Incubator.

10.2.1 Vision

The vision statement is intended to be an over-arching statement of purpose that encapsulates the intended outcome of the DC Technology Incubator.

The following vision statement is proposed for the DC Technology Incubator:

To foster and promote an entrepreneurial culture that leads to District-based, growth-oriented technology ventures which play a significant role in the long-term vitality of and diversity in DC’s overall economy.

10.2.2 Mission

The mission statement is intended to be a specific set of objectives that, if achieved, will drive toward successfully achieving the ultimate purpose articulated in the vision statement. The mission statement forms the basis of the business plan and quantifiable performance metrics.

The following mission statement is proposed for the DC Technology Incubator:

To provide a common platform for growth-oriented DC technology entrepreneurs to access resources, mentorship, and capital to start and grow their ventures and to graduate from incubation space into commercial space in the District of Columbia.

The proposed mechanism by which this mission can be realized is discussed in subsequent sections of this Business Plan.

10.3 Overview: DC Technology Incubator

To accomplish the mission set forth above, a DC Technology Incubator should be created. This section describes the various elements of the offering.


The Washington, DC Technology incubator program provides a process for the identification and development of new technology companies, which graduate from the incubator into commercial office space in the District of Columbia can be drawn from a variety of sources. The figure below illustrates this process.

Figure 10-1. DC Technology Incubator Process

The DC Technology Incubator also can support the launch and growth of carefully selected promising entrepreneurs and ventures, while also actively supporting the efforts of other local organizations with similar missions related to entrepreneurship. Established as an independent publicly and privately funded not-for-profit organization, it will provide a range of valuable programs generally organized into two categories: (1) Entrepreneur and Venture Programs (including Services and Facilities); and (2) Incubator and Network Programs (including operational Support and Promotion). These programs will be designed to be offered to companies who are resident in the incubator as well as for companies who are affiliate, or non-


resident in the incubator program. The following sections describe the two categories of programs in more detail.

Figure 10-2. DC Technology Incubator Program

10.3.1 Entrepreneurs & Ventures

Entrepreneurial ventures require a variety of support programs, some of which help the individual entrepreneurs and some of which help the ventures themselves. The DC Technology Incubator will provide—on its own and through partnerships with strategic third-party firms—a range of services and facilities to properly support a business throughout the early stages of its life cycle.

10.3.1.1 Services

The following services are examples of services which can be provided by the Incubator staff, outsourced vendors, and a network of strategic partners.


For entrepreneurs:

♦ JumpStart. This 12-week “mini-incubator” program is modeled after a successful series developed by LaunchBox Digital in DC. Entrepreneurs with or without a business idea are given a modest amount of funding and hands-on mentoring from serial entrepreneurs. The program helps them mold their new venture so that they are ultimately prepared—either with a business plan, prototype, or full product—to approach prospective investors.

♦ Mentoring. The Incubator staff will match entrepreneurs with at least one mentor, who will help guide the entrepreneur through their careers. Mentors assist with personal and professional issues that an entrepreneur must face, and as such they add value to the entrepreneur across multiple ventures and over many years.

♦ Events Series. The Incubator staff will organize a series of events for the client entrepreneurs, including Peer Networking (entrepreneur-to-entrepreneur), Social Networking (entrepreneur-to-community), and Speaker Series (educational and professional development).

For ventures:

♦ Advisory & Consulting. The primary responsibility of the Incubator staff will be to advise client ventures on various aspects of their operations. These business consulting services may include market research, financial modeling, and business plan development.

♦ Professional Services. Beyond the core services provided by the Incubator staff, a strategically selected network of services firms will engage with client ventures to assist with legal, accounting, communications, marketing, and other professional services. These may be provided at a discounted rate or pro bono, depending on the agreement between the partner and the Incubator.

♦ Team Building. The Incubator staff will help client ventures build out their teams, including management and staff, Boards of Directors, and Advisory Boards. Several tactics may be employed, such as the use of online resources, recruiting and search firms, and venture fairs organized by the Incubator.

♦ Fundraising. The Incubator staff will help client ventures with their fundraising process, including fundraising strategies, pitch development, due diligence documents, and term negotiations. Several tactics may be employed, such as the use of investment bankers/brokers, and venture fairs organized by the Incubator.

10.3.1.2 Facilities

Creating a physical “cluster” of innovative entrepreneurs and ventures creates synergies to foster a self-sustaining and growing entrepreneurial ecosystem. However, the initial facilities requirements for the DC Technology Incubator are relatively modest (See Appendix II) but can scale as appropriate:


♦ Leased commercial Class B space

♦ 12,000 square feet in Phase I - doubling to 24,000 square feet in Phase II

♦ Office space, as well as cubicles in customizable layouts

♦ Common, conference, meeting rooms and digital showroom

♦ Staff offices

10.3.2 Incubators & Networks

For many of the other local incubators and networks that currently serve the entrepreneur community, the DC Technology Incubator can act as a focal point, both supporting their operations and also promoting their offerings.

10.3.2.1 Operational Support

The DC Technology Incubator will have an experienced team, a far-reaching network, a comprehensive offering of services, a robust partner program, and a managed facilities offering. With such assets at its disposal, it will be in a unique position to provide adequate support to other local incubators and entrepreneur networks.

♦ Hosting events

♦ Financial and in-kind sponsorships

♦ Office space

♦ Staff support and augmentation

♦ Extended network and introductions

♦ Advice and consultations

10.3.2.2 Promotion

The DC Technology Incubator will become a “first-stop shop” for the local entrepreneur community, actively promoting the offerings of all other local incubators and entrepreneur networks. This will provide a valuable service to the entrepreneur community, while also helping to promote DC as a hub of entrepreneurial activity.


10.4 Operational Plan

The section explains the manner in which the Incubator will manage the entire life cycle of its clients, as well as its entrepreneur and industry focuses, and its criteria and success metrics.

10.4.1 Life Cycle Management

The DC Technology Incubator will operate a model that addresses the entire life cycle of an entrepreneur or venture client, as depicted in Figure 4-2, below. At a high level, the various activities in the Marketing Plan will fill a pipeline of prospective clients, which will then be assessed and evaluated. Upon acceptance into the Incubator program, new clients will be classified according to their specific needs and provided a variety of services and facilities. After progressing through the program, clients will graduate from the incubator as fully operational self-sustaining ventures. Upon graduation from the incubator these companies typically would seek commercial space to house their growing operations.


Figure 10-2. Life Cycle Management

The following apply above:

♦ Entrepreneur. These are qualified entrepreneurs, who may or may not have a business idea, but who demonstrate the capacity to successfully launch new ventures.

♦ Pre-Seed Ventures. These are extremely young ventures that may or may not have formed legal entities, and that are focusing on honing their business plan and developing early prototypes of their product.

♦ Seed Ventures. These are ventures that are in the early stages of developing their product, generating sales, and building a team.

♦ Growth Ventures. These are ventures that are ready for growth by expanding their sales and marketing, product development, and operations.

10.4.2 Sourcing Prospects

One of the primary objectives for the Marketing Plan is to develop a growing pipeline of client demand for the DC Technology Incubator. This will result in direct recruitment of entrepreneurs and ventures, as well as unsolicited inbound applications.

10.4.3 Client Selection

Regardless of how a prospective new client is initially sourced, their application will be evaluated against set selection criteria and a decision will be made on whether to accept the applicant into the DC Technology Incubator. Once accepted, the staff will conduct an assessment to identify the new client’s specific needs in order to properly coordinate the services programs, funding, and facilities that will best assist the client in successfully establishing and growing their venture. These needs will be different depending on the venture’s particular stage of development.

10.4.4 Service Delivery

Once a new client is accepted into the DC Technology Incubator and their needs identified, the Executive Director and Client Services Coordinator will work closely with them for the duration of their tenure in the Incubator. The Executive Director will provide direct consulting, mentoring, and advisory services. The Client Services Coordinator will primarily assist the client in accessing the Incubator’s entire range of support. These may include proprietary and third-party services and events, funding programs, facilities, and promotional activities.


10.4.5 Progression and Graduation

The DC Technology Incubator will provide valuable support programs for entrepreneurs and ventures at all stages of early development. No matter at which stage new clients initially enter the Incubator, the Incubator Business Manager will ensure that they benefit from the Incubator’s many programs in such a manner as to promote the growth of the entrepreneur and their venture. During this programmatic and timely progression, the client will receive support to minimize their venture’s operational risk of failure. While no time limit will be set, the objective will be to promote a timely progression through the various offerings until a venture is prepared to graduate as a self-sustaining business. The length of time that a company participates in the incubation program depends on many factors, particularly the company’s assistance requirements. However the company’s general timeframe for graduation should be discussed as part of the admission process and that time frame should be reinforced through the milestones set for the company while in the incubator. Experience indicates that companies typically will be part of the incubator program for approximately 24 months. Company progress is monitored through scheduled progress meetings on a semi-annual basis. Life science companies frequently require a longer incubation period, but they are not the target for the proposed DC Technology Incubator.

10.5 Focus Areas

The primary focus of the DC Technology Incubator will be on technology entrepreneurs building high-growth ventures. The Incubator will make efforts to support women, minority, disabled, and veteran entrepreneurs via a number of mechanisms, including specialized programs, speakers and mentors, events, and staff recruitment.

The DC Technology Incubator will initially not focus on any specific industries or sectors, developing instead a strong general purpose infrastructure for entrepreneurial ventures with a wide spectrum of innovation-based, high growth business models (e.g., new products/services, new markets, new business processes). However, the following industries will likely provide the bulk of the client base, which will be accommodated in a variety of different ways.

♦ Information & Communications Technology (Computer Hardware, GIS, GPS, Internet, IT Services, Mobile, Networking, Satellite, Security, Software, Telecommunications, Web 2.0)

♦ Entertainment & Media (Digital Media, Education, Film, Gaming, Music, Television)


10.6 Criteria and Metrics

In order to measure the Incubator’s success in supporting the stated mission, several criteria will be established for selecting new clients and for graduating existing clients from the programs, both described below. This section ends with an overview of potential success metrics.

10.6.1 Selection Criteria

The following selection criteria, which may be modified over time, will be used to determine whether an applicant is accepted into the DC Technology Incubator:

♦ Qualified entrepreneur with or without a business idea

♦ Seed or early-stage venture with high-growth potential

♦ Innovation-based business model

♦ Business idea with legal freedom to operate

♦ Business idea with financial viability

♦ Committed founder(s) developing a growth oriented company

♦ Preference given to ventures stating an intention to stay in DC after graduation

10.6.2 Graduation Criteria

The underlying objective of the Incubator’s programs is to produce as many viable high-growth ventures as possible while simultaneously minimizing the operational risk of failure for its clients. Therefore, a balance must be struck between pushing the clients through a progression of programs toward ultimate graduation and nurturing the clients to make sure they are always ready for their next step in the growth process. Toward that end, the Incubator will not set or adhere to strict graduation criteria, but will instead adopt flexible standards to allow smooth graduation. Also, the staff will develop a transition program that properly prepares clients for leaving the Incubator while they are still receiving benefits. For some time after clients graduate from the Incubator, they will receive support from the Incubator as part of its alumni assistance programs that the staff will develop for this purpose.

10.6.3 Suggested Performance Metrics

While there are many different metrics that can be used to gauge the performance of the Incubator, the following is a preliminary list of initial suggested outputs over the first five (5) years of operation:


♦ 50 - 75 new companies based in DC

♦ 300 - 500 new jobs created in DC

♦ $50M - $75M outside investment capital secured

Additional metrics should be developed in conjunction with the stakeholder for the incubator. These additional metrics could relate the types of businesses participating in the program (minority, woman-owned, service disabled, etc.), as well as direct outputs from the program, such as new research funding attracted to the City, company revenues and taxes generated, etc.


11. Implementation Plan This section details the 5-year plan for launching and growing the DC Technology Incubator. For strategic reasons, a phased roll-out approach will be followed, starting with an initial launch phase and then growing through an expansion phase. The general approach and each of the two phases are described in the sections below.

11.1 Phased Roll-Out

In order to ensure an efficient and effective implementation that minimizes operational risk, the DC Technology Incubator will be implemented in a manner that develops an initial foundation and then scales to meet market demand. The following sections detail a 5-year Implementation Plan across two distinct Phases.

It should be noted that the Marketing Plan detailed in this Plan will stimulate market demand for the offerings provided by the DC Technology Incubator. Based on the success of these efforts, the Plan may be modified and decisions can be made on how to best roll out Phase II. These may include changing the specific offerings, the magnitude or scope of the offerings, the financing mechanisms, and the timing of the implementation. Regardless of how the subsequent phases are ultimately implemented, the underlying foundation laid out in Phase I should provide a scalable platform to build upon. The proposed costs of the Marketing Plan are very conservative in the draft Pro Forma budget because the expectation is that a number of marketing partnerships and alliances with stakeholder groups will be required to provide the actual marketing resources required.

11.2 Phase I (Years 1-2)

The primary objective for this initial phase of the Implementation Plan is to lay the foundation for the DC Technology Incubator. Toward that end, the first 24 months of operation will be critical to its long-term success and must proceed as effectively and efficiently as possible. The timeline below depicts the various milestones:


Year 1 Year 2 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

General

Complete draft business plan Approve plan Approve funding Create legal entity Recruit team Hone Business Plan Recruit Board of Directors and Advisory Board

Launch Incubator

Marketing

Hone Marketing Plan Develop messaging Develop materials Implement marketing program Create partner program Recruit initial partners Implement partner program Develop event schedule Implement event program Recruit initial clients

Services

Hone Services Offering Develop service provider program Recruit initial service providers Hone selection criteria and process Screen and evaluate initial clients Service initial clients Graduate initial clients

Facilities

Identify and lease initial office space Prepare initial space Operate initial space Identify and lease Phase II space

Support & Promotion

Identify DC/regional partners Establish contact Negotiate partnerships/MOUs (where applicable)

Host partner events Promote partner offerings

Figure 11-1. Phase I: Implementation Timeline


11.3 Phase II (Years 2-5)

Assuming the Phase I operations and marketing initiatives achieve their objectives of setting up a robust infrastructure, the next step will be to build upon that foundation and grow the operations, as follows:

♦ Grow client population

♦ Expand team, services, and facilities, as needed

♦ Extend regional and national outreach, promoting success stories where possible


12. Marketing Plan Perhaps the most important element of this Business Plan is the Marketing Plan, which will actively promote the DC Technology Incubator and position it as the foundation for a growing entrepreneurial culture within DC’s technology community. This section discusses the objectives of the Marketing Plan, as well as general marketing activities and specific initiatives.

12.1 Objectives

This Marketing Plan is designed to accomplish two major objectives:

♦ Client Pipeline. To develop a growing pipeline of client demand for the DC Technology Incubator.

♦ Regional Awareness. To broadcast regionally a consistent brand and message for the DC Technology Incubator and for DC as a hub of entrepreneurial activity.

12.2 General Marketing Activities

The Marketing team will employ a wide array of mechanisms to achieve the objectives listed above. These activities will take place across a range of platforms, from local to regional and national, and may include some or all of the following:

♦ Branding and Messaging

♦ Communications

♦ Marketing

♦ Advertising

♦ Sponsorships

♦ Public Relations

♦ Media Relations

♦ Community Relations

♦ Government Relations

♦ Investor Relations


12.3 Marketing Channels

In order to maximize the efficiency and effectiveness of the outreach efforts, several strategic relationships will be formed in DC, in the DC region, and nationally. These are intended to promote the brand and message to a wide audience, including entrepreneurs, investors, business executives, and students.

♦ District of Columbia

– Washington DC Economic Partnership

– All DC universities

– Greater Washington Initiative

– Washington DC Chamber of Commerce

– Other business and technology groups

♦ Regional

– Amplifier Networks

– Chambers of Commerce

– MD and VA universities

– Mid-Atlantic Venture Association

– Technology councils

♦ National

– Angel Capital Association

– Angel Investor Association

– Conrad Foundation

– Entrepreneur Organization

– Kauffman Foundation

– National Association of Seed and Venture Funds

– National Foundation for Teaching Entrepreneurship


– National Venture Capital Association

12.4 Washington, DC Marketing Channels

The following activities are designed to promote entrepreneurship generally and the DC Technology Incubator specifically as a means of building a pipeline of prospective entrepreneur and venture clients.

12.4.1 Open Houses

The DC Technology Incubator will host at its facilities periodic “Open House” events, which will be designed to educate and inform the general public about the Incubator and its activities. The primary target audience will be prospective clients, namely DC-based entrepreneurs or seed-stage ventures. However, the events will also serve to foster relationships with partners, advisors, media, and current/former clients. They can be informal settings with programs highlighting the Incubator’s objectives and successes.

12.4.2 Social Networking Events

The DC Technology Incubator will sponsor, either at its facilities or elsewhere, periodic social networking events specifically designed to connect client entrepreneurs with each other and with other non-client entrepreneurs, prospective entrepreneurs, and future (student) entrepreneurs. These will be informal events with no set program, primarily created to allow entrepreneurs an opportunity to get to know each other and share their entrepreneurial experiences. These may take place at restaurants, hotels, sporting events, or anywhere that would attract otherwise extremely busy entrepreneurs.

12.5 Regional Marketing Channels

In order to promote DC as a hub of entrepreneurial activity, it must also be positioned as a leader in the regional entrepreneur community. The following activities are designed specifically to support DC’s entrepreneurship efforts while also providing a platform for regional cooperation and collaboration.

12.5.1 Global Entrepreneurship Week

As the name implies, Global Entrepreneurship Week (www.unleashingideas.org) is a worldwide initiative to promote entrepreneurship in young people. Organized for each November, it is an effort to coordinate local, regional, and global initiatives promoting entrepreneurship. The DC Technology Incubator will use this opportunity to plan several of its own activities while also promoting DC’s entrepreneurial activity internationally.


12.5.2 Partner Events and Programs

As stated in Section 4.1.1 and 4.1.2, there are a number of existing entrepreneurship programs in the region. The Incubator will partner with these organizations and support their efforts as a means of simultaneously promoting its own leadership within the entrepreneur community.

12.6 Success Metrics

Measuring the performance of any Marketing Plan is always difficult, in part because some of the results may not be easily identified as being directly attributed to particular marketing activities and in part because many of the results may be intangible or otherwise unquantifiable. However, there are several success metrics that can potentially be designed to track the performance of this Marketing Plan in accomplishing the stated objectives.

Objective Possible Success Metrics

Client Pipeline Number of new entrepreneur applicants

Number of new venture applicants

Number of minority applicants

Number of women applicants

Number of young applicants

Application acceptance rate

Graduation rate

Regional Awareness

Mentions in major media stories focused on entrepreneurship and/or DC

Profiles in major industry, entrepreneur, business, and national media outlets

Awards won by Incubator, staff, or client entrepreneurs and ventures

Invitations to participate in regional and national events

Number of participants in Incubator-organized events and programs

Number of unsolicited inbound inquiries for clients and partnerships

Number of partner incubators and networks supported by the Incubator

Number of partner events and programs supported by the Incubator

Figure 12-1. Marketing Plan Success Metrics


13. Staffing Plan In order to support a phased roll-out for the DC Technology Incubator, the Staffing Plan is designed to secure the initial operations of the Incubator while also providing a solid foundation for future growth. This section describes the Incubator operations, the staffing plan, and the positions (both internal and external) needed to execute the Implementation Plan.

13.1 Incubator Operations

The initial team must be able to effectively execute on the following model:

Figure 13-1. Operational Model

13.2 Staffing Plan

The following Staffing Plan has been designed to maximize the effectiveness of the team while controlling overhead expenses through the phased roll-out.


Figure 13-2. Complete Staffing Plan

13.3 Roles and Responsibilities

The Executive Team for the incubator--the Executive Director and the Business Manager--will play a critical role in the overall implementation of this Plan. They will certainly be responsible for the early operation of the DC Technology Incubator, but perhaps more importantly they will be responsible for creating much of the initial infrastructure and essentially launching the entire initiative. They must be both operational managers and also entrepreneurial professionals. They must have enough seniority and experience to manage a growing operation while also possessing a willingness to “roll up their sleeves” to execute on tactical objectives. As a small team, they can form the core of a larger team that may grow as the operations scale through the phased roll-out.


13.3.1 Executive Director

Reporting directly to the Board of Directors, the Executive Director will act as the senior operations manager or “Chief Executive Officer” of the organization and will be ultimately accountable for its performance.

Responsibilities include:

♦ Communicating with the Board of Directors and providing regular reports

♦ Honing and implementing the strategic plan

♦ Recruiting and managing the incubator team and contract services

♦ Maintaining financial and performance accountability

♦ Managing the incubator’s sponsorship program

♦ Fostering relationships with strategic partners

♦ Providing some advisory and mentoring services directly to client companies

♦ Fostering relationships with strategic partners, such as third-party service providers

♦ Managing the service delivery components of the transition into Phases II

♦ Managing the Incubator’s transition into Phase II

13.3.2 Business Manager

The Business Manager will oversee the mentoring program for client companies, as well as the launch and management of the service provider network. The Business manager needs to have extensive industry contacts and practical, entrepreneurial experience.


♦ Taking the lead on providing advisory and mentoring services to client companies

♦ Honing and implementing the Client Services plan

♦ Honing and implementing the Screening and Evaluation Process

♦ Leading the screening and evaluation process activities

♦ Maintaining financial and performance accountability for service operations


13.3.3 Client Services Coordinator

The Client Services Coordinator will manage the incubator facility and oversee daily operations and administration of the DC Technology Incubator, including special events for client companies, graduates, and partners. In the pro forma operating budget for the incubator, this position is shown as a part time position in the first year of operation, changing to a full time position beginning in Year 2.


♦ Incubator facility management

♦ Incubator program administration, including monthly accounting and billing

♦ Management of reception services and general client support

♦ Leading the screening and evaluation process activities

♦ Management of special events at the incubator

♦ Administrative support for the transition to Phase II

13.3.4 Finance and Operations Manager

The position of Finance and Operations Manager is not included in the pro forma budget in Appendix V, but as the program matures, it could afford this position. In the long term, this position would perform at least two critical roles, namely that of the primary financial manager for the DC Technology Incubator and that of the head of facilities operations. In the short term, the Executive Director would be responsible for the overall financial operations of the incubator, with the Client Services Coordinator overseeing facilities operations.

Responsibilities for this position include:

♦ Coordinating and overseeing the finances of the DC Technology Incubator, including regular financial reporting to the Board of Directors

♦ Fostering relationships with strategic partners, such as banks, institutional investors, investor groups and networks, corporate venture groups, and industry analysts

♦ Managing the physical facilities and infrastructure for the DC Technology Incubator, including leasing, fit-out, tenancy, and ICT services. Under a full service lease, little is required here.

♦ Ensuring that all aspects of the Incubator facilities are operating as required, including telecommunications, internal computer systems and networks, etc.


♦ Fostering relationships with strategic partners, such as landlords and developers

♦ Managing the finance and operations components of the transition into Phase II

13.3.5 Marketing Manager

The position of Marketing Manager also is not specifically included in the pro forma budget. This function oversees the communications and public outreach for the DC Technology Incubator, including marketing, advertising, sponsorships, events, and public, media, community, government, and investor relations. Initially, this function would be handled by the Business Manager. In-kind support from a host organization of corporate sponsor also could provide this service. As the program matures, this could become a separate position within the incubator team, or the function could be contracted out to another organization.


♦ Honing and implementing the Marketing plan

♦ Maintaining financial and performance accountability for marketing operations

♦ Overseeing the production of all branding, messaging, and communications efforts

♦ Growing a pipeline of prospective clients

♦ Fostering relationships with strategic partners, such as marketing services providers and media outlets

♦ Managing the marketing components of the transition into Phase II

13.4 Organizational Structure

The appropriate legal structure for the incubator must be decided early. The incubator can be (a) a stand-alone non-profit entity, (b) affiliated with another non-profit entity, such as the Washington, DC Economic Partnership or a university, or (c) a for-profit corporation. There are benefits to all alternatives.

Whether the sponsors decide to establish the incubator as a stand alone, not-for-profit corporation or to embed it within a sponsor organization, there is no substitute for competent legal counsel. It is important to make certain that the legal issues are managed correctly and comply with IRS regulations required to retain the appropriate tax status.


13.4.1 Operating as a Nonprofit

The National Business Incubation Association (NBIA) has reported in its most recent industry survey (“2006 State of the Business Incubation Industry”) that roughly 94% of all incubation programs are structured as not-for-profit organizations. NBIA also reports that 39% of incubators are technology oriented.

Tax status can be an integral part of a nonprofit incubator’s identity and there are numerous models for addressing tax status. The Internal Revenue Code (IRC) describes three types of nonprofit tax status that may apply to business incubators: 501(c) (3), 501 (c) (4) and 501 (c) (6). Many incubation programs, like the Emerging Technology Centers in Baltimore, apply for 501 (c) (3) status to gain an edge in fundraising, as they can receive tax-deductible charitable contributions.

Under the rules and regulations effective October 2004, to qualify for 501 (c) (3) designations an organization must be organized and operated exclusively for one or more of the following purposes: charitable, religious, educational, scientific and literary. However, the members of the national incubation community have noted that it is getting increasingly difficult for an incubator to qualify for 501 (c) (3) status. In order to qualify for 501(c)(3) status, the Washington, DC incubator will need to emphasize the educational component of the program and show outreach and services to moderate income and diverse populations.

If incorporated as a non-profit, the incubator director would develop an annual budget, to be approved a Board of Directors. The incubator manager would report to the Board of Directors.


Nonprofit tax status comparisons are useful.

501(c)(3) 501 (c)(4) 501(c)(6)

Organizational

Requirements

Must be organized exclusively for one or more charitable purposes as defined in Chapter 501(c) (3) of the IRS-IRC.

Must be organized to further (in some way) the common good and general welfare of a community.

Must be organized to improve business conditions of one or more lines of business.

Assets Must be dedicated permanently to a charitable purpose.

No requirements to dedicate assets.

No requirements to dedicate assets.

Charitable

Donation

Contributors can receive a charitable contribution deduction from the IRS.

Not tax deductible. Not tax deductible.

Source: National Business Incubation Association, 2004

Figure 13-3: Nonprofit tax status comparison

13.4.2 Operating as an Embedded Entity

A variation on the separate not-for-profit corporation is the embedded organization, which may or may not be a separate legal entity, but operates within the context of larger organization. It is not uncommon for an incubator to be part of a parent organization—frequently one of the founding sponsors, such as a university, a government entity, or a quasi-public economic development agency. Most often, the parent is a not-for-profit. Many incubators in Maryland, including the Technology Assistance Center in Lanham, operate through the local economic development agency, while others, like the Technology Advancement Program, are programs of a university.

In some cases, embedded incubators work from a separate budget and are expected to account for both income and expenditures in order to meet budget. In other cases, the embedded incubator is treated as a cost center with an allocation from the parent. The


incubator’s budget will be proposed by the incubator manager and incorporated into the larger agency budget, to be approved by the governing jurisdiction. The incubator manager will report to an official within the agency and work with a Board of Advisors. Often the parent organization will assume some administrative responsibilities and their related costs, such as those for employee payroll and benefits, accounting, legal assistance and insurance. Typically, embedded incubators, such as the ETC-Baltimore have their own boards of directors or advisors.

The relationships between the embedded incubator and its parent organization (or between the stand alone incubator and its dominant sponsor) can range from weak to strong and from positive to negative. The incubator and its companies may benefit from the infrastructure and resources of the parent organization or sponsor. However, on the negative side, the capacity of the incubator to act as an independent business and to be entrepreneurial can be compromised by the bureaucracy of the parent or sponsor.

Affiliating an incubator with a university is one possibility. However university affiliations have their drawbacks in the added layers of bureaucracy and competition with funding for other parts of the university and the possibility of changing funding levels as university priorities and administrative personnel change. Nonprofit university affiliated incubators enjoy the same tax exemptions as a stand alone nonprofit incubator; some things can be more difficult in a university setting. Fundraising is one example. At many universities, only the development department can solicit funds. University incubators can often receive grants and contract, but not private donations, unless they come through the university’s private foundation.

Incubators affiliated with government entities also share the tax status of their sponsoring organizations. They are often exempt from state and local taxes. Being associated with a government or government-affiliated incubator can be beneficial for raising funds, because some types of state and federal funding can only flow to government agencies for disbursement. Having a close relationship with the government entity can ensure the process is expedited.

13.4.3 Operating as a For-profit Corporation

Some incubation programs are established as for-profit limited liability corporations. This tends to happen if the incubator is part of a for-profit corporation that manages a business or research park. However, this type of structure can have serious tax implications when the project becomes profitable and must bear the tax burden.

13.4.4 Proposed Operating Structure

Operating as a stand-alone non-profit will improve the incubator’s attractiveness to prospective sponsors, since many organizations will not fund an incubator they perceive as publicly supported or as a profit-making corporate entity. A stand-along


organization also, typically, has more maneuverability and flexibility when making financial and purchasing decisions. We recommend that the City create a non-profit corporation to operate the incubator. This non-profit organization can be a program of the WDCEP, with a relationship modeled on the ETC-Baltimore relationship with the BDC.

13.5 Governance

The DC Technology Incubator will be governed by a Board of Directors whose membership not only provides appropriate oversight by also represents some of the various communities it serves. Meeting regularly as a body, it will make high-level strategic decisions, as well as evaluating performance and deliverables. The founding Board should consist of the following individuals:

♦ Independent Chairperson (a noted and successful DC technology entrepreneur)

♦ Outside Director (from the DC investment community)

♦ Representative of the Deputy Mayor for Economic Development for the District of Columbia

♦ Representative from the Washington DC Economic Development Partnership

♦ Representative from the Emerging Technology Consortium

13.6 Advisory Board

The DC Technology Incubator will benefit from an Advisory Board for the input of subject-matter expertise in various aspects of its operations. Although it will not have legal responsibility and it will likely not meet as a collective body very often, the Advisory Board will play an important role in the ultimate success of the Incubator.

The individual Advisors should represent a diversity of communities and subject areas that may be relevant, both strategically and tactically. In order to be effective, the total number of members should be limited to 12-15, at the discretion of the Executive Director. Individuals may include representatives from any of the organizations, programs, and communities identified in Section 4.4.6.


14. Financial Plan and Pro Forma Budget A detailed financial model has been developed for the proposed DC Technology Incubator, based on the Business Plan as outlined in sections 10, 11, 12 and 13 of this report. This financial plan covers a five-year period comprising the initial two-year start-up phase for the project (Phase I) and the following three-year operation of the project (Phase II) period.

The model is based on an analysis of the anticipated costs associated with establishing and operating the proposed Incubator facility, providing the necessary core management team to operate the incubation program effectively, and to utilize the appropriate external resources where possible to deliver services to the client companies.

14.1 Costs

The model includes estimates of all anticipated costs for the Incubator, which fall broadly into three categories:

♦ Staff – representing the core staff complement of two professional positions for the Incubator and one administrative position, as described in Section 13 of this Plan. Additional staff could be added to the program at any time with their costs underwritten by sponsors or provided as in-kind contributions.

♦ Facilities – representing the costs associate with renting and equipping an appropriate amount of office space as described in section 14 of this Plan.

♦ Programs – representing the costs associated with the delivery of the incubator’s business support services that do not relate to the physical facilities as described in Section 10 of this Plan.

The financial model uses the Occupancy Model to profile the variable cost elements of the program – i.e. those cost elements that are dependent on the number of clients that are being serviced. The fixed cost elements, which relate primarily to the core staff team and facilities costs, can be identified separately from the variable costs. The costs can be reduced through creative public and private sector partnering.

14.2 Revenues

The financial model also includes estimates of potential revenues for the program. Given the nature of the program and the initial size, it is not envisaged that project will be a net revenue generator through monthly fees collected from client companies. Obviously, it is desirable for the companies to pay for the services they receive from the Incubator. When they leave the program they will be operating in a fully commercial environment and experience has shown that it is important for incubator


companies to build appropriate costs into their own operational model. Operating in a completely cost-free environment does not prepare them well for the realities of doing business once they leave the Incubator.

It is also anticipated that conference rooms and networking spaces in the incubator will be leased to generate revenue and that a corporate sponsorship program associated with the incubator will contribute to the program revenues.

14.3 Pro Forma Operating Budget

Based on the draft space configuration program developed during the Phase I portion of this study and the information gathered during the site selection analysis portion of the Phase II portion of this study, the ANGLE team developed a pro forma five year operating budget for the proposed incubation facility. The ANGLE team included data related to actual business incubation costs incurred by current incubator operations in Maryland as appropriate, given the anticipated operational model for the proposed incubator.

Income is drawn from office space rents; fee-based use of the assembly and digital showroom areas on a per diem basis; fee-based income for affiliate companies that seek to benefit from the programmatic resources available through the incubator as well as take advantage of conference space and other resources; an annual operating grant from the City; and sponsor-generated revenue.

14.4 Initial Physical Program

The ANGLE team revised the initial program developed during the Phase I portion of this study to increase the rentable square footage of office space from 3,780 square feet to 4,380 square feet of a total square footage of 12,000. This revision enables the incubator to increase rental income and improves the operating pro forma budget. The ANGLE team captured additional square leasable square footage by:

♦ Reducing the size of the lobby/reception area

♦ Reducing the size of the conference rooms

♦ Reducing the size of the break room

♦ Removing restrooms from the program as they are provided in the building core

♦ Removing the janitor closet as this is unnecessary in a full-service lease scenario

Please refer to Appendix IV for the Revised Preliminary Program Configuration. The pro forma operating budget was modeled based on this Revised Preliminary Program.


14.4.1 Income Assumptions

Income assumptions are as follows:

♦ Rental rate for office space at $45 per square foot, full service. Rates include a 25% gross-up factor. Tenants stay for three years with 10% annual rent escalations upon entry. Base rental rate escalates at 4.5% annually.

♦ Lease-up is assumed at 60% during year one, followed by 90% annually for years 2-5. This reflects a standard 10% vacancy rate once stabilized which is typical of business incubation programs in Maryland and is a typical factor used in standard commercial leasing pro formas.

♦ Assembly area (250 square feet) can be rented on a fee-basis at a per diem rate of $400. We assume 50 “use days’ in year one, followed by 100 “use days” annually in years 2-5.

♦ Digital showroom area (400 square feet) can be rented on a fee-basis at a per diem rate of $750. We assume 50 “use days” in year one, followed by 100 “use days” annually in years 2-5. The Digital showroom space also could be leased as additional conference space.

♦ Affiliate programs have been very successful at numerous business incubators throughout Maryland. From the Emerging Technology Center program in Baltimore, to Montgomery County’s incubator network, the Howard County Neotech program, and the Frederick Innovative Technology Center (FITCI) program, the average affiliate rate is $200 per month. Our pro forma operating budget reflects 10 affiliates for year one, followed by 20 affiliates annually for years 2-5.

♦ From inception, similar incubation programs have enjoyed public financial support by way of operational grants. For example, Montgomery County’s programs began with annual operating support of $200,000, which has grown to annual operating support of $500,000 as the program has expanded over the years to include additional incubators. We have included an annual operating grant of $200,000 from the District of Columbia for each of the five years.

♦ Several business incubation programs such as those at FITCI have successfully implemented sponsorship programs to help underwrite programmatic resources offered by the incubator. We have included sponsorship revenue of $36,000 from the broad business and philanthropic community during year one, which increases at 20% annually during years 2-5.

Gross income in year one is $871,425 which grows to $1,462,107 by year five. The aggregate gross income for the five year period is $5,902,385.

14.4.2 Expense Assumptions

Expense assumptions are as follows:


♦ Full service rental rate of $30 per square foot which reflects anticipated rate based on comparable lease rates and expected final negotiated price. Rental rate escalates at 4.5% annually for years 2-5.

♦ Full service rental rate does not include any tenant improvement dollars based on conversations with listing agents for a variety of the properties analyzed.

♦ The allowance for bad debts or uncollected rents is established at 10% of total rental and fee-based income. The ANGLE team carries this expense as a result of actual operational experience with a variety of business incubation programs.

♦ The Executive Director receives an annual salary of $250,000 with a 33% overhead burden rate. This position receives annual salary increases of 4% in years 2-5.

♦ The Business Manager receives a salary of $80,000 with a 33% overhead burden rate. This position receives annual salary increases of 4% in years 2-5.

♦ The Client Services Coordinator receives an annual salary of $45,000, but in year 1 this position is 50% of a full time equivalent (FTE) with a 33% overhead burden rate. This position becomes a full-time position in years 2-5 and receives annual salary increases of 4% in the years 2-5.

♦ While the Marketing Manager and the Finance and Operations manager positions are needed for the smooth functioning of the incubator operation, those positions are not budgeted in the pro formas. The costs for these two functions would need to be covered through additional sponsorship or in-kind services provided by stakeholders.

♦ Property and General Liability Insurance was determined based on International Real Estate Management (IREM) 2007 data for the DC Metropolitan area. We escalated the 2007 data at 3% to arrive at year one base rate for this operating budget.

♦ Office supplies for the incubator management team are set at an allowance of $5,000 and escalated annually at 3%.

♦ Phone and Internet service is set at an allowance of $3,000 and escalated annually at 3%. Tenants are responsible for procuring their own phone and Internet service.

♦ Web-hosting services for the incubator program are set at an allowance of $5,000 in year 1 and this cost declines by 50% in year 2, once the incubator is established.

♦ Postage is set at an allowance of $500 and escalated annually at 3%.

♦ Dues & subscriptions are set at an allowance of $1,500 annually and escalated annually at 3%.

♦ Catering is set at an allowance of $5,000 and escalated annually at 3%.

♦ Advertising and marketing is set at an allowance of $5,000 in year 1, doubling to $10,000 in year 2 and then escalated annually at 3%. This level remains high as


continual marketing is required to address the short tenancy (3 years) and to build demand for the future success of phase II of the proposed incubator program.

♦ Accounting fees are set at an allowance of $10,000 and escalated annually at 3%. Comparable accounting fees incurred by Montgomery County’s Maryland Technology Development Center (MTDC) facility are set at $12,000.

♦ Legal fees are set at an allowance of $5,000 and escalated annually at 3%.

Year one of the pro forma operating budget yields a Net Operating Reserve of $11,598. The overall Net Operating Reserve during the five-year pro forma operating budget is $373, 995.

Please refer to Appendix V for the Draft Pro Forma Operating Budget.

14.4.2.1 Capital and Furniture, Fixtures and Equipment Budget

While the space for Phase I will be leased in “As Is” condition, the new incubation program will need to secure funding to improve the rooms dedicated to Assembly and Digital Showroom functions and will need to secure furniture to outfit a total of 30 offices as shown in the program. Twelve are single person offices; six are dual person offices; and two are triple person offices. Each office receives a desk, a desk chair, and a 2-drawer lateral file cabinet.

The Capital Furnishings budget includes a reception desk, copier, fax machine, and shredder as well as tables and chairs for two medium conference rooms and the video-teleconference room. This budget also includes appliances and a table with chairs for the break room area.

We include a value of $19,000 to provide video-teleconferencing equipment based on an estimate received from VenAmerica, a telecommunications vendor.

We include an allowance of $2,000 for a standard phone system for the front desk, conference room, and program offices.

We include an allowance of $10,000 to modify the electrical and lighting system in the assembly and digital showroom areas.

All values are derived from standard mid-grade furnishings from Staples and other related vendors where indicated.

The total estimated Capital Furnishings Budget is $84,464.

Please refer to Appendix VI for the Draft Capital Furnishing Budget.


15. Risks Despite all best efforts and strategic planning, every initiative faces a number of risks that jeopardize its success. These risks could include:

♦ Operational Risks. There are a number of risks associated with the implementation of this Plan and the operation of the DC Technology Incubator.

♦ Market Risks. There are a number of risks that are external to the DC Technology Incubator but that could nonetheless negatively impact its success.

♦ Financial Risks. There are a number of risks related to the finances of the DC Technology Incubator that could negatively impact its success.

The table below highlights examples of various risks, along with potential mitigation measures. However, unforeseen risks could materialize at any time, so the team and Board of Directors must be vigilant and respond appropriately to ensure ultimate success.

Risk Factors Mitigation Measures

Inability to maintain focus on supporting and promoting other regional initiatives

Include performance and success metrics that reflect this specific mission

Provide regular reporting to Board of Directors

Inability to establish strategic relationships with key regional partners

Conduct aggressive outreach effort

Maintain operational transparency

Remain neutral and supportive of all efforts

Provide operational, financial, and marketing support

Project funding may not be approved (either in full or in part)

Develop a mix of alternative funding sources

Ensure appropriate reporting and transparency

Operational costs may exceed projections and/or revenues may not materialize as expected

Implement tight financial controls and manage finances closely

Provide regular financial reporting and auditing to Governing Board

Conduct periodic reviews of operations, performance, and financial costs

Figure 15-1. Risks and Mitigation


16. Summary The District is operating in a potentially significant window of opportunity to energize its base of technology and entrepreneurial talent, expand that base and spur job growth. While there are a number of existing local and regional programs to support high-growth early-stage ventures in the District, the City’s entrepreneur community still needs a “first-stop shop” platform to provide a focal point and to help integrate all of the various offerings.

The Emerging Technology Consortium (ETC), working with the Washington DC Economic Partnership (WDCEP) on a technology business incubation project, can help provide this missing piece of the ecosystem by launching the DC Technology Incubator with public and private sector support. Moreover, this new business incubation initiative can be the catalyst which leads to the development of a comprehensive technology-based economic development strategy for the District of Columbia.

APPENDIX I:

Stakeholder Interview List

Appendix I: Stakeholder Interviews More than 30 interviews were conducted as part of the study research with representatives of the business, government, and academic communities in the Greater Washington, DC region.

Government Erik Moses, Former Director, DC Department Local & Small Business Development Harriett Tregonig, Director, DC Office of Planning Geraldine Gardner, Assoc. Director, Neighborhood Planning, DC Office of Planning Sakina Khan, Economic Development Specialist, DC Office of Planning Education Ralph Albano, Assoc. Provost for Research/ Director Tech Transfer, Catholic University Carolyn Stewart, Director of Technology Transfer, Georgetown University Carol Sigleman, Associate VP for Academic Studies and Graduate Affairs, GWU David Lerch, Director, Technology Transfer, GWU Andy Dubler, Director, Planning, Georgetown University Medical Center Corporate Doug Beekman, Principal, Advantage Capital Partners (CAPCO) Michael Petrucelli, VP Government Affairs, Gridpoint Wendell L. Jenkins, President, Alterra Energy Services Richard Thompson, President, Thompson Associates John Kenny, COO and Co-founder, e-luminate Group, Inc. Margaret (Maggie) Kavalaris, Partner, Sonnenschein, Nath & Rosenthal LLP Hilton Augustine, Chairman and CEO, GMSI, Inc. Charles Planck, CEO, Affinity Lab Matt Vorhees, President, Anybill Barry Hurewitz, Partner, WilmerHale LLP Peter Corbett, President, iStrategy Association and Non-Profit Steve Moore, President and CEO, Washington, DC Economic Partnership Penny Pickett, former Director of the DC Technology Council C. Matthew Hudson, Jr., Senior Pastor, Matthews Memorial Baptist Church Matt Erskine, President, Greater Washington Initiative Angie Lawry, Director of Communications, Greater Washington Initiative Roger London, Program Director, The Chesapeake Crescent Sally Kram, Consortium of Universities Henry Turner, Director Washington, DC Small Business Development Center

Jeff Reid, Executive Director, National Foundation for Teaching Entrepreneurship Owen Jackson, Director, DC Minority Business Enterprise Center

APPENDIX II:

DC Entrepreneur Survey Detail

DC Entrepreneur Survey 1 ANGLE Technology Group

APPENDIX II: Summary of Responses Section 1, Question 1

What is your definition of an "entrepreneur"? Response Text An individual who strives to build a sustainable business from scratch. Some who makes something from nothing. Someone who goes into business for themselves A person with the passion and drive to take great ideas and turn them into great products or services. Someone who starts up a new business for an area. Its more than just starting up a business - the business model is new for that area. A person that turns an idea into a product or service people actually use. Someone who makes their own opportunities Someone that looks for opportunities all around them, then as they find a niche, they push to find the empty space that needs filled. An entrepreneur is an individual who is willing to jump off the proverbial ledge to pursue their dream. They believe so much in their vision that they will build it from scratch, even without any help and do all that it takes to turn their vision for a company into reality. Someone who starts a business. a business innovator. someone who drives business forward by sticking his/her neck on the line to move the market forward. An individual who sees a new product or process and is willing to work to take it to market Someone with an idea for a product or service that puts forth the time effort and resources to turn it into a business. A person who starts & runs a business. Someone who lives for bringing his/her vision of business (dream) to life and has a plan for ensuring that their dream can be realized. An individual who drives themselve to create a business with a sense of purpose, vision, and intensity much greater than mortals Loaded question, but here goes. Someone who is passionate about what that do. Someone who does it for the heart and not for the money (well, maybe a little bit for the money). Someone that wants to solve a problem. A starter. That's a ridiculous question. Next. A person expending personal resources to further innovation. Independant Thinker one who tries to put an idea into action. Creator a new business "One who tries" An entrepreneur is a person who recognizes the opportunity in adversity. One who thrives off identifying impending maladies that permeates society and willfully takes the initiative to try to correct it for the good of that society, their pocket, their investor/employee's pocket while enduring oppositions, disappointments, insults(yes, my developer just called me a dunce). One who have mastered the act of moving against our inertia. A person taking non-trivial risk in starting a business that does something new/different in his market.

Answered 26Skipped 5

Section 1, Question 2


What is your entrepreneurial experience? Response Percent

Response Count

I have never started a new business before, but I am interested in learning more about entrepreneurship.

0.0% 0

I have never started a new business before, but I am thinking about starting my own business. 13.3% 4

I am currently working on my new business on a part-time basis. 30.0% 9I am currently working on my new business on a full-time basis. 43.3% 13 I am not currently working on my own business, but I have started my own business in the past. 13.3% 4

I am not currently working on my own business, but I have successfully exited a previous venture. 0.0% 0



If you have started or are interested in starting your own business, what is your primary motivation for doing so? (check up to 3)

Answer Options Response Percent

Response Count

I just fell into it. 13.3% 4I want to avoid boredom. 6.7% 2I want to be my own boss. 56.7% 17 I want to build something long-lasting. 53.3% 16 I want to change the world. 66.7% 20 I want to control my own destiny. 56.7% 17 I want to create something from scratch. 36.7% 11 I want to experience a new challenge. 33.3% 10 I want to make lots of money. 26.7% 8I want to see if my great idea really works. 43.3% 13 I don't know. 0.0% 0Other 10.0% 3




What is your age?


Response Count

<23 3.2% 123-30 51.6% 16 30-39 25.8% 840-49 9.7% 350-59 9.7% 360-69 0.0% 0

70 0.0% 0Answered 31

Skipped 0


What is your highest level of education?


Response Count

Some high school 0.0% 0Completed high school 0.0% 0Some college 3.2% 1Completed AA or equivalent 0.0% 0Completed Bachelor's or equivalent 61.3% 19 Some graduate 16.1% 5Completed graduate degree 19.4% 6



What subject areas have you specialized in? (check all that apply)


Response Count

Business (e.g., economics, finance, marketing, management) 63.3% 19 Engineering (e.g., computer science, mechanical engineering) 36.7% 11 Liberal Arts (e.g., languages, history, political science, law) 53.3% 16 Science (e.g., life sciences, physical sciences, medicine) 10.0% 3




What is your academic affiliation? (check all that apply)


Response Count

I am not affiliated with any academic institution right now. 79.3% 23 I am a high school student. 0.0% 0I am an undergraduate student. 3.4% 1I am a graduate student. 13.8% 4I am a high school teacher. 0.0% 0I am a college/university professor. 0.0% 0I am on a high school administration or staff. 0.0% 0I am on a college/university administration or staff. 0.0% 0I am on a high school Board of Directors/Advisors/Trustees/Governors. 0.0% 0I am on a college/university Board of Directors/Advisors/Trustees/Governors. 3.4% 1



What is your citizenship?


Response Count

U.S. 90.0% 27 Non-U.S. 10.0% 3



Where do you live?


Response Count

DC 40.0% 12 MD 16.7% 5VA 43.3% 13 Other Mid-Atlantic 0.0% 0Other U.S. 0.0% 0Other non-U.S. 0.0% 0




If you are not a native of Washington, DC, then where are you from?


Response Count

U.S. - Mid-Atlantic 13.6% 3U.S. - Northeast 27.3% 6U.S. - Southeast 9.1% 2U.S. - Midwest 18.2% 4U.S. - Southwest 13.6% 3U.S. - Northwest 0.0% 0U.S. - California 0.0% 0Non-U.S. - North America 4.5% 1Non-U.S. - Central America 0.0% 0Non-U.S. - South America 0.0% 0Non-U.S. - Caribbean 0.0% 0Non-U.S. - Scandinavia 0.0% 0Non-U.S. - Western Europe 0.0% 0Non-U.S. - Eastern Europe 0.0% 0Non-U.S. - Former Soviet Union 0.0% 0Non-U.S. - Middle East North Africa (MENA) 4.5% 1Non-U.S. - Sub-Saharan Africa 4.5% 1Non-U.S. - Southwest Asia 0.0% 0Non-U.S. - Southeast Asia 0.0% 0Non-U.S. - Asia 4.5% 1Non-U.S. - Australia / Oceania 0.0% 0



How long have you lived in the Washington, DC, area?


Response Count

<1 year 6.7% 21-3 years 26.7% 83-5 years 10.0% 35-10 years 16.7% 510+ years 40.0% 12



Why did you decide to relocate to or live in DC? (check all that apply)



Response Count

Cosmopolitan culture 34.5% 10 Education 24.1% 7Family 31.0% 9Government 10.3% 3Innovative/entrepreneurial environment 24.1% 7Investor community 3.4% 1Job 44.8% 13 Military 0.0% 0NGO/non-profit/charity/association 10.3% 3Urban lifestyle 41.4% 12 Weather 6.9% 2Other 6.9% 2




How would you best categorize your venture's growth objectives?


Response Count

"Lifestyle" business 17.9% 5Small/Mid-Size Enterprise 25.0% 7Growth 25.0% 7High growth 32.1% 9



What industry does your venture work in? (check all that apply)


Response Count

Advertising 32.1% 9Aerospace 0.0% 0Automotive 3.6% 1Biotechnology 0.0% 0Business Consulting 17.9% 5Computers – hardware 3.6% 1Computers – software 25.0% 7Construction 0.0% 0Consumer products 21.4% 6Education 7.1% 2Electronics 3.6% 1Energy 3.6% 1Entertainment & Media 32.1% 9Financial services 7.1% 2Health care 10.7% 3Insurance 0.0% 0Internet 78.6% 22 IT services 10.7% 3Legal 0.0% 0Life sciences 3.6% 1Marketing 32.1% 9Medical devices 0.0% 0Nanotechnology 0.0% 0Professional services 3.6% 1Real estate 0.0% 0Retail 10.7% 3Sales 0.0% 0Semiconductors 0.0% 0Sports 3.6% 1Telecommunications 3.6% 1Transportation 0.0% 0


Travel 3.6% 1Answered 28

Skipped 3


At which stage of development is your venture?


Response Count

Formulating idea 7.4% 2Developing business plan 11.1% 3Building prototype 22.2% 6Clinical trials 7.4% 2Product built 18.5% 5FDA approval 0.0% 0Initial customers/revenue 22.2% 6Growth stage 11.1% 3Expansion/pre-IPO stage 0.0% 0Late stage 0.0% 0



How have you funded your venture so far? (check all that apply)


Response Count

"Bootstrapped" (i.e., revenues) 74.1% 20 Founders (savings, credit cards, etc.) 70.4% 19 Friends & Family 14.8% 4Angel investors 18.5% 5Institutional investors 0.0% 0Corporate investors 0.0% 0Government programs 0.0% 0University programs 3.7% 1Other grants 0.0% 0Bank loans (or other debt financing) 3.7% 1Vendor financing 0.0% 0Other 0.0% 0



What are your venture's core competencies? (check all that apply)



Response Count

Business process outsourcing 10.7% 3Clinical trials 0.0% 0Government contracting 0.0% 0Manufacturing 3.6% 1Offshore services 0.0% 0Product development 35.7% 10 Professional services 21.4% 6Research 10.7% 3Systems integration 0.0% 0Technology commercialization 7.1% 2Technology platform 35.7% 10 Technology products 25.0% 7Technology services 42.9% 12 Other 21.4% 6



Who are your target customers? (check all that apply)


Response Count

Consumer 67.9% 19 Education 21.4% 6Enterprise 35.7% 10 Government 7.1% 2Non-profit/assocation 17.9% 5Small/Mid-Size Enterprise (SME) 42.9% 12 Small-Office/Home-Office (SOHO) 25.0% 7Other 14.3% 4



Where are your target customers? (check all that apply)

Answer Options Response Response


Percent Count

Local (DC area) 60.7% 17 Regional (Mid-Atlantic) 46.4% 13 National (U.S.) 92.9% 26 Foreign/international 50.0% 14



What kind of facility are you currently using? (check all that apply)


Response Count

Virtual 46.4% 13 DC - Home-based 32.1% 9DC - Temporary/flex facility 0.0% 0DC - Sublease 0.0% 0DC - Shared facility 3.6% 1DC - Leased facility 10.7% 3DC - Owned facility 0.0% 0DC - Other 0.0% 0Outside DC - Home-based 21.4% 6Outside DC - Temporary/flex facility 3.6% 1Outside DC - Sublease 3.6% 1Outside DC - Shared facility 0.0% 0Outside DC - Leased facility 3.6% 1Outside DC - Owned facility 0.0% 0Outside DC - Other 3.6% 1




Which of these would you find useful to help you as an entrepreneur? (check all that apply)


Response Count

Education programs - entrepreneur-focused 80.8% 21 Education programs - executive-focused 34.6% 9Education programs - investor-focused 19.2% 5Networking events - education-focused 23.1% 6Networking events - entrepreneur-focused 61.5% 16 Networking events - general 46.2% 12 Networking events - government-focused 0.0% 0Networking events - industry-focused 50.0% 13 Networking events - investor-focused 46.2% 12 Networking events - life sciences-focused 15.4% 4Networking events - technology-focused 38.5% 10 Online tools - business-focused 46.2% 12 Online tools - entrepreneur-focused 46.2% 12 Online tools - executive-focused 23.1% 6Online tools - investor-focused 19.2% 5Peer groups - entrepreneur-focused 46.2% 12 Peer groups - executive-focused 34.6% 9Peer groups - investor-focused 19.2% 5Technology sourcing - government 3.8% 1Technology sourcing - university 15.4% 4



Which types of people do you need help finding for your venture? (check all that apply)


Response Count

Co-Founders 30.8% 8Startup executive team 15.4% 4Growth-stage executive team 30.8% 8Workers 30.8% 8Investors - angels / individual 57.7% 15 Investors - foundations / family offices 15.4% 4Investors - government 3.8% 1Investors - institutional 23.1% 6Investors - other 19.2% 5Lenders - commercial loans 7.7% 2Lenders - equipment leases 0.0% 0Lenders - factoring 0.0% 0Personal mentors 57.7% 15 Board of Advisors 34.6% 9


Board of Directors 26.9% 7Service providers 3.8% 1Outsourcing partners 3.8% 1



Does/will your venture have a need for any specific infrastructure within DC? (check all that apply)


Response Count

Facility - assembly 0.0% 0Facility - data center 21.1% 4Facility - distribution 0.0% 0Facility - manufacturing 0.0% 0Facility - retail 0.0% 0Facility - showroom 0.0% 0Facility - warehouse 0.0% 0Facility - wet labs 0.0% 0Land (for construction) 0.0% 0Office space (leased) 57.9% 11 Office space (owned) 10.5% 2Office space (shared) 52.6% 10 Office space (sublease) 21.1% 4Office space (temporary/flex) 36.8% 7Office space (virtual) 5.3% 1Transportation - airport 5.3% 1Transportation - car (traffic/commute) 10.5% 2Transportation - local (public) 10.5% 2Transportation - railroad 10.5% 2Transportation - shipping 0.0% 0



What professional services do/will you need for your venture? (check all that apply)


Response Count

Accounting 72.0% 18 Administrative assistant 24.0% 6Banking - commercial 48.0% 12 Banking - lending 8.0% 2Business consulting 12.0% 3Business process outsourcing 12.0% 3Event planning 16.0% 4


Executive coaching 28.0% 7Executive search 8.0% 2Insurance 36.0% 9Investment banking 4.0% 1IT services 44.0% 11 Legal 52.0% 13 Market research 20.0% 5Marketing 48.0% 12 PR/communications 44.0% 11 Real estate 4.0% 1Sales - channel 12.0% 3Sales - direct 16.0% 4Sales - inside 8.0% 2Staffing 28.0% 7Travel 12.0% 3Other 8.0% 2



Which areas of your venture would you most like assistance with? (check all that apply)


Response Count

Business plan development 30.4% 7Financial modeling 39.1% 9Fundraising - growth capital 21.7% 5Fundraising - seed funding 30.4% 7Idea generation - coming up with your own idea 0.0% 0Idea matching - finding someone else with an innovative idea 13.0% 3Idea validation - determining your idea's commercial prospects 43.5% 10 M&A - buy-side 4.3% 1M&A - sell-side 17.4% 4Market research 21.7% 5Operations - facilities, legal, financial 39.1% 9Operations - processes, procedures 26.1% 6Product development - mass production 8.7% 2Product development - prototyping 17.4% 4Recruiting - growth team (work force, professional leadership) 13.0% 3Recruiting - startup team (co-founders, mentors, advisors) 21.7% 5Sales - distribution channels 8.7% 2Sales - initial customers 26.1% 6Other 4.3% 1




What would help you make your venture even more successful? Response Text More writers and more resources. A collaborative environment to work in with like minded entrepreneurs Better industry connections brainstorming it with a helpful person or crowd I could use a way to meet other people involved in the early stages of a start up that I could learn from. Help reaching the next level to obtain neccesary finding, or grow revenue to support ambitious plans. Intellectual Property/Legal assistance Money, first. Then a dedicated community that really cared about promoting entrepreneurship. We miss these two elements, relative to the West. Early stage idea-matching and idea-validation (in a structured program. Ideally followed by mentor matching (or similar support through the process). Being more connected to movers and shakers who are thinking about me and looking for opportunities for our company. More active & connected startup community in DC. More web talent in the region. Someone who can deliver hands-on, real world services to get me from sole proprieter to corporation and financial modeling on my level...not jargon I do not understand Having a place to use as an office for weekly meetings. More time for one, but enough capital to quite my job so I could focus on this full time. Passionate workers. Completing our first round of institutional funding. I need more support in finding resources and knowledge about launching and growing a startup company. Linking my concept with that of another venture that is able to generate a higher level of traffic, to help with marketing the idea. Education, especially on operations topics Mentorship and networking with experienced professionals, who have worked in the niche technologies and know the markets well. An environment that provides access to a talent pool thats willing to try something new, fail fast, then get back on their feet fast.



What would help you become a better entrepreneur? Response Text An active mentor. Mentorship from those who've done what i'm hoping to do. Advisors, mentors figuring out the potential audience/audiences I'll let you know when I figure it out. Mentors A better community. Funding.


First off, getting funding. I was told by two tier one VC firms that they would fund me if I moved out West, but it is much harder in DC. Of course, resources like Tech Crunch and Western incubators would also be great, both for learning and probably more importantly networking. See #1 I could really use a mentor--who wants to introduce to everyone and bring me in everywhere she can--a hotshot CFO or consultant--preferably a woman because I am a woman. More access to peers & advisors. Some funding Education, networking and education. In that order. :) A bit of guidance. Networking events, and someone to bounce ideas off of. A staff that can continue my work when I'm busy coming up with new ideas. Education, especially on operations topics A broader network with other entrepreneurs and businesses in the area. I need a father figure(a mentor). I learn things the hard way, so having someone to remind me that its ok, will definitely save me lots of time. "A mistake becomes an error only when we fail to correct it." - JFK



What do you think DC needs in order to grow its entrepreneur community? Response Text A local incubator and a more aggressive media company covering all of the growth in the area. A hub for all interested parties to meet at and work in regularly. More resources for starting companies and bringing people together - much of DCs pop. is transitory networking events, friendly crowd, people open to helping or working with those people who are maybe not male, not from Harvard or Yale, and maybe not Caucasian (said only partly in jest). Everyone I know that decides to leave government contracting moves away. Anything that makes DC more friendly to non-government related business would keep more potential entrepreneurs and early stage employees here. Direction, funding, support of entrepreneurs DC needs an epicenter for entrepreneurial activity. We are spread to thin around the metro area, which diffuses the energy and support required to nurture successful ventures. Specifically, this means that DC needs a central organizing force, whether that is a city organization, incubator, or agency responsible for bringing entrepreneurs together with the advice, resources, and partners they need. This entity needs to make a bold statement to the community and provide a significant level of services on a weekly basis to create an epicenter of activity, which is coordinated with VA and MD partners so there is reinforcement of events/services and not overlap/competition. More information on funding opportunities. Better fund and fundraising sources. More time dedicated from seasoned entrepreneurs to guide us. More devotion by successful people and the community to making us an entrepreneurial hub. See #1. Also, more integration between the VA tech corridor & DC/MD communities. A communications effort intended to help present DC as an entrepreneur-friendly area. Tax breaks or tax credits for small business (sole proprietor or single member LLC) Low interest loans for small business--all the banks are focused on big business and there are no breaks for small guys A change in old habits. More knowledge sharing. More collaboration. More openness. A better repuatation overall as a great place to start and run a business. Real space that is affordable


A technology incubator. My first job out of college was at a high tech start up in the South Bronx (NY) and we were located in a technology incubator that helped us grow. A better community. The valley seems so open but DC is very "clubbish". It's not as welcoming as those who are in the "club" think it is. Funding. More tech industry cohesiveness/interaction. More active institutional investors. DC has a great tech community that's growing rapidly. DCETC might be a great org to help out and assist us entrepreneurs wanting to get a start. More success stories would do the trick. And a change in the image of DC, which is currently viewed as a slow moving boring city. Financial & mentoring opportunities More meetups, networking events and a lot of brainstorming events. Facilitation for legal issues would also help the startups focus more on the product. Some of the best minds in DC are stuck in various 9 - 5 scattered across the city. DC needs to create an action plan that addresses this problem. My venture is already fairly successful as it's my second business and I've been at this for a while. But I consistently see people discouraged to start technology ventures since most SBDC advice is not geared toward startups/product-oriented/technology oriented companies but rather toward service oriented organizations. All of the technology community that's currently getting attention in this area is focused around government contracting... which is not going to continue to be a high growth area and certainly is not going to capture attention from other cities (as our best and brightest that want to take risks instead flock to the west coast)



What do you think DC needs in order to grove its investor community? Response Text Successful companies that have exits. A hub for all interested parties to meet at and work in regularly. networking events, friendly crowd, people open to helping or working with those people who are maybe not male, not from Harvard or Yale, and maybe not Caucasian (said only partly in jest). A start up incubator would be a solid start. better connections between capital and ideas. DC needs true seed and early stage investors. Not just institutions that pay lip service but those that will make noise putting real money to work to fund entrepreneurs when they need support the most. Seed stage deals drive the flow of down road investment activity and economic development. The more we can do to attract innovative ventures to the region, to compel government employees to spin out their inventions and to make it easier for high risk high reward businesses, the more entrepreneurial growth we will see. ? Fertilizer. Without a doubt, successes. But we also need individuals from companies like AOL and Discovery who have made it to start investing in new companies, like PayPal, Google, eBay, Expedia, and so on are doing for their communities. We also need people to be willing to take risks in order to achieve big gains. They want doubles here, not triples and home runs. See #4. I think it has a good investor community--we have several VC backed clients--we would like a way to develop relationships with the investors as we are on the ground level and can be a resource they recommend and also find companies that might need VC $


A few major exits wouldn't hurt. We need more investors who are willing to take risks on very early-stage ideas, and people who will do so in a high-profile way such that they'll attract talent / ideas / new businesses to the region. Investor fairs or networking where the investors can tell us in real world language what they are looking for and what they need. See number 3 More publicized events and incubators. Y! Combinator is a great concept. We need something similar. Risk-takers. DC investors should be encouraged to look within for deals. The Valley is successful because investors there are willing to take multiple risks with the hope of offsetting those risks on a single exit. I think support of the more traditional community, such as economic development groups and the city would be a huge help. Right now it's all young people pushing this. The older guard is as helpful as they are technical about technology ventures (i.e., not much happening there). I think our young community has been successful at building awareness, but more people who understand the business side of things and are willing to provide inexpensive coworking, support, administrative, small loans or other incubation oriented services could go a long way.



How would you improve this survey? Response Text try to determine if there is a community with lots of fragile ideas - that is just too intimidated by things as they are. This survey is a good start! Seemed pretty good. Ask what people are doing now that works, real world case studies can show a better direction and where the need is. A few spelling mistakes (i.e. Section 3, Q2) no suggestions. great survey. thanks! It seems pretty good--in one multiple choice I was looking for "Technology" and it was not a choice. Also a text box on "other" would give you more info Offer any existing resources at the end. You have a question that says somehting like: why did you move to DC? I was born here, so the language made that question not apply to me. It should be changed to something like, "if you moved to DC recently what was the reason for your move?" Hope that helps. Thanks. It's well thought. I dunno. make it shorter.


APPENDIX III:

Revised Incubator Space List

Revised DC-ETC Culled Space ListNovember 13, 2008

Floor PlateNo. Address cont. Rent Term Metro Parking Other3 624 9th St. NW - YWCA 10,837 $37 FS 1-3 yrs 1 block fr MCI NA6 2000 14th St. NW - Reeves 12,000 $35-$50 NNN 5-10 yrs 1 block fr U Street 150, $$ ?8 1101 15th St. NW 15,707 $39.50-$43 FS 5-10 yrs Farragut N $175/mo

10 888 16th St. NW 25,591 Neg 1-3 yrs/S 3 blocks fr Farra N 200, $$ ?12 1200 18th St. NW- Ring Bldg 13,821 $36-$37 FS 5-10 yrs 3 blocks fr Farra N Across str15 1808-1814 Adams Mill Rd 10,962 $38-$39 + elec 5-10 yrs 5 blocks fr Wood Pk ?18 14301 Conn. Ave NW 10,241 $32 FS 5-10 yrs Van Ness $120/mo22 1325 G St. NW 12,194 $30 + elec 2-10 yrs/S Metro Ctr. $230/mo Lehman23 3210 Grace St NW 11,722 $40 + elec 5-10 yrs ? Limited27 1220 L St NW 18,503 $42-$44 FS 5-10 yrs McPherson Sq. $180/mo28 1828 L St NW 10,367 $46 FS 5-10 yrs 1 block fr Farra N $150/mo29 1920 L St NW 13,709 $46-$48 FS 5-10 yrs 1 block fr Farra N Yes, $$ ?30 1800 M St NW 13,747 $32.50 + elec 5-15 yrs 1 block fr Farra N 300, $$ ?32 2000 M St NW 19,742 $39-$49 FS 5-10 yrs 3 blocks fr Dupont Cr Yes, $$ ?34 2301 M St NW 15,040 $42-$45 FS Neg 4 blocks fr Foggy Bot Yes, $$ ?42 641 S St NW - Wonder Bread 12,004 Neg Neg < 1 block fr Shaw Free,surface Future renovation46 4200 Wisconsin Ave NW 18,190 $38.50 FS 3 yrs/S 0.5 mile Tenleytown $80/mo American Univ.47 5101 Wisconsin Ave NW 13,703 $35 FS 6 yrs/S Friendship Hgts. $108/mo2a 3400 Intl. Dr. - Intelsat 8,181 $32 FS 2 yrs Van Ness $120/mo Multiple flrs to get sf

NE 1 3400 New York Ave NE 15,000 $19 NNN Neg Not accessible Surface Class C spaceNE 2 2900 V Street NE 57,000 $14.25 NNN Neg Not accessible Surface Class C space

SE 1 225 Virginia Ave SE 421,000 $15.44 NNN 20 yr/S <0.5 mile Navy Yard ? DC govt sublease, no TI

DEV 1 McKinley HS - A wing 15,000 Neg Neg >0.6 mile NY Ave Surface? Prox to students?DEV 2 Capitol Gateway Marketplace 220,000 Neg Neg ? Pr. Delivery 2011, mixed use

58th & East Capitol St. NEDEV 3 Minnesota Benning ? NA NA Benning Road Surface? No office listed, Pr. Delivery 2011DEV 4 Minn. Benning Govt Ctr. 219,231 Neg Neg Benning Road Garage on site Govt employees, proj. delivery 2011

4058 Minnesota Ave NEDEV 5 East River Park Shopping Ctr 100,000 Neg Neg Benning Road ? Mixed use, proj. delivery NA

Minn. & Benning RD SE/SWDEV 6 Broadcast Center One 103,000 Neg Neg < 1 block fr Shaw ? Proj. delivery 2011 - mixed use

7th & S St. NW

APPENDIX IV:

Revised Preliminary Program Space Configuration

Revised Preliminary ProgramETC-DC Incubator Entrepreneurship Center

(4380 rsf version)

ExtendedSpace Function Size (SF) Number SF Total Finishes Comments/Other

Assembly Area 250 1 250 VCT, coated ceiling tile Empty room with power overhead

Individual Offices 120 12 1440 Standard finishes

Double Offices 240 6 1440 Standard finishes

Office Suites 750 2 1500 Standard finishes

Conference Room 150 2 300 Standard finishes

Video/teleconference Room 400 1 400 Standard finishes Doubles as standard meeting space

Digital Showroom 400 1 400 Standard finishes High-end lighting, utilities

Lobby/waiting area 150 1 150 Standard finishes Will not be occupied, directory only

Breakroom 150 1 150 Standard finishes, sink Appliances, coffee service

Mail/copy/fax room 120 1 120 Standard finishes Color copier

Communications 80 1 80 Standard finishes Incoming service

Receiving Area/Storage 80 1 80 Warehouse finishes

Future Expansion 12000 1 12000 Show as dashed line on exterior.

Subtotal: 18310

Core factor gross up (30%): 23803

Summary Notes:1. Reduced size of lobby from earlier version.2. Reduced size of conference rooms from earlier version.3. Reduced size of breakroom from earlier version.4. Removed restrooms from program as they will be in core area of building.5. Removed janitor closet as full service lease scenario.

Prepared By: Facility Logix, LLC for ANGLE Technology 11/13/2008

APPENDIX V:

Draft Pro Forma Operating Budget

Proposed DC-ETC Incubator FacilityRevised (8) Draft Pro Forma Operating Budget

12,000 GSF Phase I (7830 rsf) Plus 12,000 GSF Phase II (8620 rsf)

Description Year 1 Year 2 Year 3 Year 4 Year 5 AggregateIncome

(1) (2) Office Space Rental Income (7820 rsf) - Ph I 263,925$ 422,280$ 464,508$ 452,925$ 475,065$ 2,078,703$ (2) (3) Office Space Rental Income (8620 rsf) - Ph II -$ -$ 316,785$ 506,856$ 557,542$ 1,381,183$ (4) Assembly Area Income (fee-based) 20,000$ 24,000$ 28,000$ 32,000$ 36,000$ 140,000$ (5) Digital Showroom Income (fee-based) 37,500$ 45,000$ 52,500$ 60,000$ 67,500$ 262,500$ (6) Affiliate Income (fee-based) 48,000$ 60,000$ 72,000$ 84,000$ 96,000$ 360,000$ (7) City Operating Grant 450,000$ 300,000$ 250,000$ 200,000$ 150,000$ 1,350,000$ (8) Sponsor Revenue 50,000$ 55,000$ 60,000$ 65,000$ 70,000$ 300,000$ (9) Reimbursable copy costs 2,000$ 4,000$ 6,000$ 8,000$ 10,000$ 30,000$

Subtotal Rental Income: 871,425$ 910,280$ 1,249,793$ 1,408,781$ 1,462,107$ 5,902,385$

Expenses(10) Rent - Ph I (216,000)$ (225,720)$ (235,877)$ (246,492)$ (257,584)$ (1,181,673)$ (11) Rent - Ph II -$ -$ (235,800)$ (246,411)$ (257,499)$ (739,710)$ (12) Bad debt allowance - uncollected rents (36,943)$ (55,128)$ (93,379)$ (113,578)$ (123,211)$ (422,239)$

(13) Labor(13a)Client Services Coordinator-fully burdened (29,925)$ (62,543)$ (65,358)$ (68,299)$ (71,372)$ (297,497)$ Business Manager-fully burdened (106,400)$ (110,656)$ (115,082)$ (119,686)$ (124,473)$ (576,297)$ Executive Director -fully burdened (332,500)$ (345,800)$ (359,632)$ (374,017)$ (388,978)$ (1,800,927)$

Administrative(14) Office supplies (5,000)$ (5,150)$ (5,305)$ (5,464)$ (5,628)$ (26,546)$ (14) Phone and Internet Service (3,000)$ (3,090)$ (3,183)$ (3,278)$ (3,377)$ (15,927)$ (15) Color copier rental and supplies (6,000)$ (6,180)$ (6,365)$ (6,556)$ (6,753)$ (31,855)$ Security cards and monitoring (2,500)$ (2,575)$ (2,652)$ (2,732)$ (2,814)$ (13,273)$ (16) Web-hosting (5,000)$ (2,500)$ (2,575)$ (2,652)$ (2,732)$ (15,459)$ (14) Postage (500)$ (515)$ (530)$ (546)$ (563)$ (2,655)$ Dues & subscriptions (1,500)$ (1,545)$ (1,591)$ (1,639)$ (1,688)$ (7,964)$ Catering - programmatic/other (5,000)$ (5,150)$ (5,305)$ (5,464)$ (5,628)$ (26,546)$ Advertising & marketing (5,000)$ (10,000)$ (10,300)$ (10,609)$ (10,927)$ (46,836)$ (17) Property insurance (4,560)$ (4,697)$ (9,675)$ (9,966)$ (10,265)$ (39,163)$ (18) Accounting fees (10,000)$ (10,300)$ (21,218)$ (21,855)$ (22,510)$ (85,883)$ (19) Legal fees (5,000)$ (5,150)$ (10,609)$ (10,927)$ (11,255)$ (42,941)$

(20) Capital Improvement & FFE (85,000)$ -$ (70,000)$ -$ -$ (155,000)$

Subtotal Expenses: (859,828) (856,699) (1,254,437) (1,250,170) (1,307,256) (5,528,390)$

Net Operating Reserve: 11,598 53,581 (4,644) 158,610 154,851 373,995

Prepared By: ANGLE Technology/Facility Logix 1 1/27/2009

Proposed DC-ETC Incubator FacilityRevised (8) Draft Pro Forma Operating Budget

12,000 GSF Phase I (7830 rsf) Plus 12,000 GSF Phase II (8620 rsf)

Notes Summary:(1) Rental revenue projections based on rate of $45 psf for office uses - includes 25% gross-up core factor, tenants stay for 3 years with 10% annual escalations upon entry.

Base rental rate escalates at ~4.5% annually.(2) Year 1 at 40% vacancy; following years assume 10% vacancy. Base rental rate escalates at 4.5% annually.(3) Rental revenue projections for Phase II space based on 8620 rsf (no digital showroom, no assembly area, no lobby) on rate of $49 psf for office uses - includes 25% gross-up core factor, tenants stay for 3 years with 10% annual escalations upon entry. Base rental rate escalates at ~4.5% annually.(4) Available on a per diem basis for $400 daily. Assumes 50 use days in year one, followed by 60 in year 2, 70 in year 3, 80 in year 4, and 90 in year 5.

No assembly room space in Phase II plan.(5) Available on a per diem basis for $750 daily. Assumes 50 use days in year one, followed by 60 in year 2, 70 in year 3, 80 in year 4, and 90 in year 5.

No digital showroom space in Phase II plan.(6) Affiliates pay $200/month for program participation. Assumes 20 Affiliates in year one, followed by 25 in year 2, 30 in year 3, 35 in year 4, and 40 in year 5.(7) District of Columbia City Grant - Iniitial year at $350,000, declining over latter 4 years.(8) Sponsors drawn from broad business and philanthropic community. Increase incrementally after year one.(9) Recover copy costs through reimbursable bill-backs to tenants.(10) Assumes full service base rental rate of $18 psf "As Is". Escalations at 4.5% annually after year one.(11) Assumes full service base rental rate of $19.65 (original $18 base escalated at 4.5% for two years) "As Is". Escalations at 4.5% annually after year one.(12) Assume 10% annually based on total rental and fee-based income.(13) Assume starting salary of $80K and $250K with 33% burden rate and annual 4% salary increases beginning in year 2.(13a) Assume starting salary of $45K and 50% Full Time Equivalent(FTE) in year one with 33% burden rate. Jumps to 100% FTE in years 2-5.(14) Costs based on incubator program staff only. Tenants pay own expenses for these items.(15) Color copier rental based on 2009 quoted price for business volume color copier. (16) Year one higher to allow for website design allowance in addition to web-hosting fees. Remaining years include hosting fee and revision allowance.(17) Use International Real Estate Mgmt (IREM) 2007 Data for DC Metropolitan area buildings escalated at 3% to get year 1 base. Doubled when Phase II online.(18) Doubled in year 3 to reflect additional costs associated with Phase II.(19) Doubled in year 3 to reflect additional costs associated with Phase II.(20) Includes additional expense for furniture and appliances in year 3 to furnish and equip Phase II.

Prepared By: ANGLE Technology/Facility Logix 2 1/27/2009

APPENDIX VI:

Draft Capital Furnishings Budget

Draft Capital Furnishings BudgetETC-DC Incubator Entrepreneurship Center

Unit ExtendedDescription Quantity Cost Cost Comments

Office FurnitureDesk 30 $569 $17,070 72" Double PedestalDesk chair 30 $200 $6,000 Leather Dual FunctionFile cabinet- lateral, 2 drawer 30 $300 $8,999 36" wide, Black

Reception Desk 1 $2,800 $2,800 DMI Eclipse Reception Desk

Copier 1 $1,900 $1,900 Sharp AL-2080 Pegasus Copier

Fax Machine 1 $1,000 $1,000 Xerox FaxCentre 2121MB

Shredder 1 $130 $130 Staples 24-sheet strip cut shredder

Conference Room Tables - Lg 1 $6,608 $6,608 Aspen Conference tables, 28 rectangular @ $219, 4 connectors @119

Conference Room Chairs-Main 30 $65 $1,950 Situations Task Chairs with arms

Conference Room Table - Med 2 $600 $1,200 Basyx, oval conference table

Conference Room Chairs - Med 24 $150 $3,600 office star high back executive chair

Refrigerator 1 $270 $270 Avanti Refrigerator with Freezer

Microwave 1 $100 $100 Avanti Stainless Steel Microwave Oven

Dishwasher 1 $297 $297 Sears, Black Kenmore, 24in Built in

Break room tables 1 $240 $240 Balt Pneu-Flip Table

Break room chairs 4 $200 $800 Royal, 1101 Series Stackable Chairs

Video Teleconferencing Eqpt. 1 19,000$ 19,000$ Polycom Model - installed w/software/VA estimate

Phone system 1 $2,500 $2,500 Basic for conference room, front desk, program offices.

Modifcations - electrical/lighting 1 $10,000 $10,000 Allowance for digital showroom and assembly.

Total: $84,464

Prepared By: Facility Logix, LLC for ANGLE Technology 12/1/2008

APPENDIX VII:

DC Entrepreneur Survey Detail

(January 2009)

Schacknies commercial real estate network VA

Name What kind of startup are you working on? Except for money what do you need to take the next step? Where do you live?

Scott Tranter

Vlytics is a political data and analysis company

We have patents pending on a web-based platfpolitical data management.

You can get the full story here - www.vlytics.co

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orm for

m

I have actually been doing alright ingrowth with just my computer, cell would be interested in a space thatthat fostered/encouraged innovatio

Being a one man operation I am alpartners, employees, collaborators

terms of capital and sales phone and couch but I provided an environment n and growth.

ways on the lookout for , and sage advice. DC

Natalie HopkinsMedical/healthcare appointment scheduling emtimeliness (same day).

phasizing Mentorship & space DC

Maddie Grant Social Media Strategy Consulting Firm - www.socialfish.orgCurrently work remotely, so any offminded people sounds really awes

ice space shared with like-ome. DC

Mark Schacknies commercial real estate network

VC fundsmentorshipprogrammersaccess to DC's economic development agencies

VA

Greg Lavallee

Exploring small GPS/Mobile devices that tie intapplications and APIs to provide information abevents, past events, etc. with proximity capabilileveraging Twitter in a way similar to the DC Albut with more location aware posting.

o free web out current ties. Think of erts network, Space to build and modify GPS/mo

members with infrastructure and habile devices, team rdware knowledge. DC

Jai Hokimi (Zippyjobs.com)

A tech incubator would be great to have in DC stop all the startups from going to MD and VA.

and would help

Space, networking opportunities an(accounting, insurance, legal, etc...

d reduced cost services ) DC

Bryan Orme

My startup is called CreateDebate and is a socsite devoted to debating various issues and vieissues ranging from politics to current events torights. The website can be found at http://www.createdebate.com

ial networking wpoints on religion to civil We need to spread the word to var

and clubs that would find the site eintegrated marketing plan is our top

ious organizations, schools, xtremely useful, so an priority. VA

Danielle GaineDanielle Gainess

The organization is Reconnecting The Circle ("a non-profit 501(c)3 organization.

The mission is to encourage people to learn abAmerican people and cultures, and to develop ameaningful and complete perspective on Indian

We want to develop a platform that will allow Nyouth to upload content and create customizedpublications for distribution to schools and theirThe software will aggregate content from variouincluding news outlets, blogs, video, newsletternetworks so that youth can pick and choose froenhance their publications.

Our website is located here: www.reconnecting

RTC") and it is

out Native more Country.

ative American multi-media communities. s sources, s, and social m them to

thecircle.com

RTC needs mentorship, space, andvolunteers who can help us accomrunning our organization. We also relationships with educators and otrelationships with educators and other

team members or plish some of the tasks for need to forge deeper her relevant parties. VArelevant parties. VA

David James

CommunityGoals is a goal marketplace™, bringpeople with ideas, people who give money, andoffer solutions.

http://communitygoals.com

CommunityGoals (CG) catalyzes and supports change. Publish your goal online, get feedbackand find solutions.

CG serves three kinds of people:1. People with ideas, goals, and challenges2. People who want to give money to help solve3. People who want to provide services and ge

ing together people who

community , raise funds,

problemst paid

1. Finding the right programming tadifficult. Building a community in Dtakers could help convince programworth a chance.2. I have some legal questions that3. I may also consider restructuringcurrently setup as an LLC, but I mistructure.4. Mentorship, as suggested above

lent to assist has been C that really attracts risk-

mers that my project is

need clarification as well. a bit perhaps -- I am

ght consider a not-for-profit

, is not a bad idea, either VA

is

Matt Webster opensource database solutions

contacts contacts contacts! most fsolutions instead the most cost effelooking for the opportunity to get inalong with colleagues of those cusmy friend this is a good idea, my frme.

olks are using inherited ctive or most efficient. front of customers with tomers. if you can convince iend and you and convince

DC

Kash Rehman

The purpose of eFoodDistribution.com is to cresuccessful e-commerce food distribution businewebsite that will bring all food distribution compsingle platform where buyers will get the most cprices in a fast, efficient, effective and productiv

ate a ss and anies onto a ompetitive e manner.

I am desperately looking to hire andevelopment and Chief Technolog

experienced business y Officer for my company. MD

Steve Cobb

StarBurbs is a new online sports network and dmedia platform that connects professional athlefans and enables users to express opinions, forcommunities, and discover the hottest sports encontent. We are currently in private beta with acommunity in prep for our upcoming public launis a Delaware incorporated internet startup bas a Delaware incorporated internet startup basedWashington, DC area.

istributive tes with sports m fan tertainment

small testing ch. StarBurbs ed in the

Mentorship and guidance, legal andevelopers/employees, introductionin the developers/employees, introductionsand sports industries, customers, e

d accounting assistance, s and contacts in the tech and contacts in the techtc. VA

Pamela Skarda

The Sustainable Business Network of Washing(SBNOW.org) is launching a green business ceprogram, beginning in Washington, DC this SprDDOE was was to give us up to $2 million for itthe City's $130 million cut budget, I was told laswould not be happening per my original converStanley, Former Chief of Staff at DDOE in June

We are a "green tech" organization--creating cearound sustainable business practices to reducfootprint of businesses.

The Bloomberg folks are interested in the progrand Sustainable Seattle will be adopting the mo

We need office space and philanthropic funding

ton rtification ing. THe , but in light of t Fall this sation with Neil 2008.

rtifications e carbon

am in NYC del as well.

.

Office space and philanthropic funding. MD

so

Travis Hurant

1) Continued improvement of iLive.at.2) AreYouSafeDC, an iPhone application that ustatistics to determine a user's safety based onlocation.3) A sports ticketing application/platform to helpBaltimore sports organizations

ses crime their GPS

DC and Marketing and Sales expertiseDesign expertiseGeneral business management mentorship

DC

Kringle, A Corporation S

Its a sort of social/cleantech endeavor...but of cgadgets!

ole

It is simple systems process engineering whereour environmental requirements to garner positeconomic benefit.

ourse it has

I'm mailing out a DVD, which has a"raw" format. It is not "comprehensthat it is unwise to put all of one's e

But If you give me a mailing addres

Next step is a JAD-like session whgiven a thorough analysis and shakupdated from sources that I've beepast so many years...and we launc

in we change ive social and

past many years...and we launch

I feel the changes I am proposing spopular support!

great deal of my work in a ive", for I have been taught ggs into one basket...

s, I'll send you a copy!

erein the concepts are e-down. Information is

n able to identify over the h as many as possible!as many as possible!

hould receive very good VA

Payam Dastmalchi

Online Advertising network focused on the MEN(Middle East, North Africa)

A region mentorship, legal advice, accounting, space VA

Michael

The startup is a web platform offering innovativcampaigns, causes and non profits to raise moincreasing visibility of the project.

e new ways for ney while also

A large percentage of our time is scompliance/tax/legal issues. Beingsomeone once a month for just a fedirect us to the right form or answeto concentrate more time on the ac

An official meeting place would alsand help them stay focused.

We'd also really look forward to thewith other startups. This is why evnetworking is so important, but it tathis could be done "in-line", while warea, it would both save time and e

pent trying to figure out able to sit down with w minutes and have their

r questions would allow us tual work we do.

o really energize the team

opportunity to share ideas ent attendance and online kes considerable time. If e worked in a common nhance the encounters. DC

Clinical decision support software for cancer care African

MattA photo-related Facebook App (bonus points: wadvertising to monetize)

on't rely on Space outside of my home so I cannight. Mentorship so I don't have towheel. Blazing wifi and nearby coff

plug away late into the re-invent the startup ee. That's about it. DC

Brian Williammee Mobile device applications

Mentorship - I am fully capable of dI am doing everything I can to learnbut I would love to have some contbefore.

eveloping my product, and about running a business, acts that have been there

VA

Andrew Fields www.painpoint.comTech guidance and team to build, rcommunity based internet portal.

ollout and maintain tech DC

John Tindale Wireless HVAC & energy monitoring system. software development and selling partners. MD

Joshua Ho

Personal Notes Web Application

www.ubernote.com

Paying customers would be nice, bdevelopment to meet the needs of can in our market. Then we'll start

ut we need to continue users and get as big as we to build premium features.

MD

JoelRenee Estes

Clinical decision support software for cancer care American men & aging men are at high risk for cancer, yet each day they're choices are steerephysicians avoiding full disclosure & transparenpocket $20k for 'referral fee' of the $40k Medicafor typical radiation treatment. Stanford trained tool that shifts current paradigm and can end mOncology.

African. prostate d/influenced by cy. Urologists re payment oncologist has onopoly of US

Pilot program: self-funded employecosts of care & gain transparency toptions -ranked by national clinicalfinancial interest.

rs who need to control o the "best" treatment standards not vested

Texas

http://www.painpoint.com/�

h h E t it l

Shonika Proct

Hey Peter,

Awesome idea! It is definitely proactive and emcollective entrepreneurial spirit and I think by besmall business leaders we can bring more revepartnerships, ultimately saving them the moneywould probably put out to support whatever is thand. Having contracted with both DC and Feddefinitely far from an effective way of doing thinyour comments thread, it doesn't seem that evethat'. In order for this to work, people are goingthinking WE vs. ME. We have to pool ideas, resnetworks for this to work.

or

Anyway, I am teaching the next generation of thto do that. My start up focuses on coaching teeentrepreneurs (across the globe) who are runniniche businesses ranging from Hispanic traininmanufacturing. My focus is on building the entrmindset and holistic development prior to learntheory and how to start a business.

http://www.teenentrepreneurblog.com

braces the tter serving

nues and that they he task at before, it is gs. In reading ryone 'gets

to have to start ources and

Loaded question, because seldomuntil we see someone else who haneed 'office' space persay as mostcan be done virtually (Skype via wewould be awesome to have is a plarefridgerator and cost a gazillion dopresentations and venues w/integretc. (Just thought of an idea off thisoffline).

Also the creation of some kind of 2small business, corporations, publiplease make it inclusive of teens :)partnerships or joint venture opporgood starting point to get up to date

h Whil thought leaders

n ng emerging g services to epreneurial ing business

w o. While there are resources sucshows company who are certified iam certified and wouldn't mind partinnovative and doing something co

And lastly, 40% of the youth I workso if we can have some internation(Sister City Reps?) or something towith cultural idiosyncrasies and to eand manage our relationships acro

do we know what we need s it ;-) don't necessarily of my business coaching bcam) but what I think ce (that doesn't look like a llars) to host live

ated wireless to live feed which I will email you

.0 directory that includes c sector and non-profit (and ). When seeking tunities, I don't really know a information about who's h CBE di t it l as CB direc ory on y

n DC, while that is nice, I nering with others who are mplimentary to me.

with are outside of the U.S. al liason/ambassador that effect that can help us ffectively promote trade

ss borders. DC

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