Baltimore's Internet Economy as I See It

There are a lot of creative people in Baltimore working with Internet technology. At events like SocialDevCampEast, Beehive, Refresh, Bmore on Rails, Twin Tech, Outlet, or Ignite, you'll meet a ton of them. Many technical people in and around Baltimore have a national following, and I've run into them at far-flung events like Techcrunch50 and Lone Star Ruby Conference. We have several successful entrepreneurs in our midst who have built great Internet businesses. A recent accounting of greater Baltimore's IT industry gives us top rankings for many tech indicators. Baltimore's economy definitely has the human capital to succeed in the Internet industry.

Yet few of these talented people are starting or working for product companies. I rarely meet someone who's involved in making something that he or she owns. Baltimore's Internet economy, as far as I can tell, mostly comprises consulting work, services, and government contracting. Those sectors are very strong, and bring a lot of wealth to our region, but product companies have much more potential to improve the long-term prospects of our economy. Because they involve greater risk, product companies create a lot of wealth for investors and early employees, who then go on to invest in the next round of startups. Service businesses have less growth potential since they are ultimately constrained by the hourly labor of their employees. When they don't work, income doesn't come in.

Why should it be this way? How do we encourage more product-based technology companies to form here? Starting a risky venture requires a leap of faith and a maverick move against the grain of what society expects you to do, so how can society foster these choices? In an email, Dave Troy gave me a great metaphor:

"...you can't make a wild mushroom grow. The only thing you can do is be sure the conditions are right. That means there needs to be enough biomass in the underlying organism, there has to be sufficient food, moisture, and the temperature has to be right. The mushroom has to want to grow on its own."

I don't presume to be any kind of a "startup mushroom farmer", as I am still working on my first startup. But I do think we have the potential makings of a startup ecosystem in place:

• Exemplars of success: Advertising.com, BillMeLater, Image Cafe, and other companies were started here, and there's a strong software game industry in Hunt Valley.
• Integrated economy: Baltimore and DC are closely connected, being less than an hour away by train or car. We are part an Amtrak corridor connecting us to Philadelphia, New York, and Boston.
• Low cost of living: you can buy a lot of house in Baltimore in a nice neighborhood (including one of the best-planned great places in America) and lead the kind of urban, connected lifestyle much prized by creative people.
• Tolerance and diversity: Although our neighborhoods are largely segregated, it's still the kind of town where noncomformists can feel at home. We've got John Waters, the High Zero festival, Theater Project, Creative Alliance, and the Visionary Arts Museum, just to name a few examples.
  
• Community spirit: In my experience, people in Baltimore really want you to succeed at whatever you're starting or trying. If you want to make a movie or start a business or become an activist, few in this community will tell you that you can't; most will say "that's cool, how can I help?" I experienced this vividly when I helped found the Baltimore Improv Group and Ignite Baltimore. People in this city could not have been more supportive.
• Culture and recreation: The greater Baltimore area encompasses many amenities that entrepreneurial people enjoy. Museums, symphonies, parks, book stores, art house movie theaters, coffee shops, major league sports franchises, etc.
• Excellent university: There are many good schools in Baltimore, but Johns Hopkins in particular has a global reputation, and is a fertile recruiting ground for local technology companies.
• Talent pool: there are over 100,000 IT workers in Maryland according to the Economic Alliance of Greater Baltimore [link requires registration]. The Washington-Baltimore region is first in the US in the number of residents holding Bachelor's and graduate degrees.
  

With a little more investment of energy, time, and resources, I believe we could capitalize on these assets by priming the conditions for startup growth. Here are some ideas for what else we could do:

• More visible angel investment: If I have the skills and ambition to start a technology company, how do I meet someone who has the capital and appetite for risk to invest in one, or tell me my idea needs more thinking through? As Dave Troy puts it:

"One of the valuable functions of an angel community is that it creates a mechanism for telling silly entrepreneurs to go pound sand; or to come back with a better idea or team. We don't have a very functional mechanism for handling any of that here right now. What we have is some risk-averse investors telling potentially good entrepreneurs to pound sand, and we have a lot of silly entrepreneurs pursuing ideas that they probably shouldn't. So, towards the notion of 'supporting' local startups, in my opinion the best way to 'support' them is not to encourage them or patronize them, necessarily, but rather to find ways for them to fail more quickly.

"...We need faster failures and quicker morphing of bad teams into good ones, and the pursuit of good ideas instead of bad ones...we need to provide real, objective guidance mechanisms to help entrepreneurs navigate the money and power networks they will need to master in order to succeed..."

Awesomely enough, Dave recently announced the formation of Baltimore Angels, and at last count 14 angels have signed on.

• Develop a bootstrap network: Baltimore does not lack for ambition or ideas. I know of at least nine companies in various stages of growth (600block, Localist, Ipiqi, MPTrax, Ubernote, SpotCrime, AwayFind, DiscoverED, Sleep.FM -- these are software companies, because that's the field I follow). We should build up a bootstrap network to support and mentor such entrepreneurs and connect them to potential investors.
• Reach out to students: Jared Goralnick pointed out to me that technical people graduating from college today assume they have only one choice - to get a high-paying, stable job (i.e., at a big consulting or contracting firm). It's an admittedly attractive choice - who would turn down the chance to make $80,000 or more right out of college? But students need to know there are other options that could prove more lucrative: starting their own company or joining a startup, options which may payoff financially but will no doubt payoff in terms of the business and technical education they offer. Recent college graduates can take bigger risks as they have less to lose and more to gain, but few students get that message. Jared is organizing an event scheduled for 4/11, watch his blog for more details.
  
• Encourage self-organization: No formal entity could have started SocialDevCampEast, Coworking, Refresh, Outlet, or Ignite, but entities like GBTC, the University of Baltimore, and many local businesses have shown tremendous support for them. These groups are all run at low-cost with little or no budget, and they still need help. Our business and government leaders could do wonders by helping with facility rental, marketing, or publicity, or by attending the events, speaking at them, and mixing with the technical community.
• Improved communications: I'd love for someone to start a blog chronicling the local startup scene and self-organizing tech events.
• GBTC Round Table: I hear really good things about the GBTC's round table groups. If there was a group that focused on startup technology companies, I bet people would flock to it, as there aren't many opportunities for local Internet entrepreneurs to mingle exclusively with their peers. It would also demonstrate GBTC's commitment to helping product companies.
  

I've made some generalizations here, and what I've written is pretty specific to my experiences, but it's from the heart. My own startup, OtherInbox, is based in Austin, Texas, because that's where the principal founder is located, but also because it's a really ideal place to start a technology company. It's got all of the support mechanisms I mentioned above, and has had a few rounds of successful startups, so now the startup community is self-sustaining. Technical people in Austin can't help but encounter many examples of success, and there are a lot of investors willing to mentor them and invest in their dreams. Truly, Austin is ripe for wild mushroom growth -- yet Austin is more culturally and economically isolated than Baltimore. If they can do it, why can't we?

I'm a entrepeneur and technologist, a hacker and improvisor, and I want to spend my life starting and running technology companies. I'm also a transplanted son of Baltimore, with many friends and connections and roots here, and I really love this city. I want to make my dreams come true here, and I'm committed to doing whatever I can to make this the kind of place where every entrepeneur has that chance. So let's get going!

Thanks to Dave Troy, Stephen Muirhead, Bill Mill, Prescott Gaylord, and Jared Goralnick, who read drafts of this post and gave me great feedback.