D.C. group tries to build tech nest egg with new incubator

To boost the District's minor stake in the technology industry, the Washington, DC Economic Partnership is spearheading an effort to set up a tech incubator in the city.

Steve Moore, the group's chief executive, said it is time for the District to be "more opportunistic" in attracting technology companies that can help D.C.'s economy.

However, local tech advocates question whether an incubator is enough of an incentive for new businesses to move to D.C. if the high costs of doing business in the District are not addressed.

Compared with businesses in the Maryland and Northern Virginia suburbs, companies in the District face higher income and property taxes, higher unemployment insurance and tougher recruiting challenges due to the high cost of living and low-ranked public school system.

Even with tax breaks from D.C., online marketing company New Media Strategies saved money by leaving its Dupont Circle headquarters in 2003 for a larger office in Rosslyn.

The city's NET2000 legislation, which took affect in April 2001, created wage credits, relocation reimbursements and reductions or exemptions on various taxes, including franchise, property, sales and capital gains tax.

But awareness of the tax breaks is low and more must be done to promote them, Moore said.

Another problem is that incubators are perceived as difficult to implement, and their success can be hard to quantify.

"I don't think there is really much more than anecdotal evidence on what they can contribute," said Mark Levine, managing director of D.C.-based venture capital firm Core Capital.

Some groups, like Maryland's Technology Development Corp. and Virginia's Center for Innovative Technology, have had success, and Moore and others in D.C. aim to replicate it.

As long as a disciplined screening method is used to select member companies with strong growth potential, an incubator can work in the District, said Penny Pickett, a former D.C. Tech Council president.

The economic partnership plans to conduct a feasibility study that would characterize the elements of a successful incubator and determine how the project fits into an overall strategy of gaining a bigger piece in the tech industry. The study will be the first of its kind in D.C. to gauge the resources and potential for a thriving tech sector.

D.C.'s intellectual capital and financial assets demonstrate that the city has the potential, but the District has not figured out how to capitalize on it, said Darold Hamlin, chief executive of the Emerging Technology Consortium.

The problem, he and others say, is the lack of an infrastructure to connect D.C.'s technology resources. Connecting researchers and innovators with business leaders creates the jobs and salaries needed in high-cost cities, Hamlin said.

"We need to foster an environment that gets the academics out of the lab and the business folks out from behind their desktops and PDAs," said Ken Tolson, chief operating officer of the consortium.

An advisory group of chief executives and former board members of the D.C. Tech Council, which formally integrated with the Economic Partnership Feb. 1, will meet in late March with Neil Albert, the deputy mayor for economic development, to discuss implementing the study.

D.C. currently has one private incubator, Affinity Lab LLC, which provides space and operational services for emerging companies but is not specifically for technology businesses.

"There's no question, locating in the District isn't the cheapest choice," said Dave Wolf, vice president of Internet application design agency Cynergy Systems, at 706 Seventh St. SE. "But if you're creative you can find some incredible spaces that really fit the startup mold."

D.C. has been a fruitful environment for his company, which has opened branches in San Diego, Grand Rapids, Mich., and Rochester, N.Y., in the last three years.

"If it wasn't for the city and our success here, there is no way we would have grown the way did," Wolf said.



Already hatched

Technology incubators are not new to D.C. or the region. Most have settled into a niche after the dot-com crash. Here are some of the public and private incubators still nurturing tech companies.



Affinity Lab LLC

2451 18th St. NW, D.C.



Fairfax Innovation Center at Mason Enterprise Center

4031 University Drive, Fairfax



INC.spire Incubator (Greater Reston Chamber of Commerce)

1763 Fountain Drive, Reston



Prince George's County Technology Assistance Center (TAC)

1100 Mercantile Lane, Largo



Maryland Technology Development Center

9700 Great Seneca Highway, Rockville