Finally, we have 14 major colleges and universities
and over 100 government research labs which
collectively represent a dispersed research base
around the Internet, including the Corporation for
National Research Initiatives (CNRI), MitreTek and
academic centers such as the University of Marylands
Human Interface Computer Lab and its ATM center,
George Washington Universitys digitization lab and
George Mason Universitys virtual reality simulated
learning project and its Ballston supercomputer center.
Collectively, these components support a formidable and
growing power base in this new digital economy which is
linked to the network bridge and critical mass of the
The Security Community
The encryption and security expertise created by the
national security community-- the Central Intelligence
Agency (CIA), National Security Agency (NSA), Defense
Intelligence Agency (DIA) and others-- is at the very core of
information discovery, retrieval, analysis and visualization
for the entire world. This community continues to drive
computer and network R&D and innovation.
Abundant Information Resources
This region enjoys proximity to and familiarity with the
largest base of information resources in the world-- that of
the federal government, health and bioscience organizations
and the nonprofit sector headquartered here, including
libraries, educational institutions, associations, public policy
groups, arts & humanities organizations and scores of
others. Such information and content is valuable by itself,
and the ability of the people here to put it into context will
increase not only the information value, but the market and
financial value over time.
A Telecommunications Hub
Originally focused on the federal governments needs, the
region has blossomed into a prolific telecommunications
center. In fact, it is arguably the telecommunications hub
anchored by the traditional local exchange and long-distance
carriers like MCI, Bell Atlantic/NYNEX, Cable & Wireless;
federal suppliers from AT&T to Sprint; and pushed by new
players on the block like LCI, MFS/UUNET and Global
Telecom. Beyond the carriers, there is significant innovation
in all aspects of communications as demonstrated by the
presence of such firms as Orbital Sciences, Comsat, and
Intelsat and new enterprises popping up in cellular, wireless,
satellite and digital broadcast systems (DBS).
The enormous opportunity presented by the convergence of
computers and communications was noted by Matthew
Lawlor of Online Resources & Communications in the
previous Forbes Magazine story. Responding to the question
"Why is capitalism spreading now [in the region]?" he
observed that "the greater Washington area is a place where
computers, communications and government intersect ....
This is the best area in the country to integrate software and
telecommunications." Exemplifying this convergence are
Lawlors own firm and emerging ones like WorldVoice,
CrossMedia and others.
One of the most revealing signs of entrepreneurial activity is
illustrated by the recent emergence of "industry angels" who
have been the social glue behind the success of Silicon
Valley. Today, individuals like Jim Kimsey, Mark Warner,
Rick Adams, Steve Case, David Thompson, Bill Melton and
dozens more are creating a vibrant new force that will fund
and propel innovation in this region. These are people who
have been there, who have the money and knowledge to act,
as well as the capacity to mentor and help. This is a regional
dynamic that has undergone a quantum change in just the
last five years.
An Incubator for Spin-Outs
The region has the entrepreneurial firms and infrastructures
from which new spin-outs are being created-- America
Online, MCI/Concert, the major system integrators and
telcos, and, paradoxically, the federal government itself.
That the movement is already well underway is
demonstrated by spin-outs like LCI, Freeloader, Concept
Five, Community Networks and more are on the way.
The Sweet Smell of Success
Nothing succeeds like success! People in this region smell
the scent of success and wealth, and its tantalizing aroma is
having a broad impact. This is a very real phenomenon, and
nothing has hit this region with such impact since the late
1960s. An irresistible force is building and it is creating the
spirit so vital to a vibrant entrepreneurial area.
Now bring all of these resources together in one place-- a
robust Internet infrastructure, the security communitys legacy,
the center of telecommunications, the worlds largest repository
of information, a growing flock of industry angels,
entrepreneurial spin-outs and the enticing scent of success. Is it a
compelling picture? You bet it is!
But none of this would mean much without the entrepreneurial
spirit and attitude. Where is it coming from? For one, the large
population of researchers and developers-- many of whom are
knowledgeable in communications, the Internet or content
production. They no longer consider a traditional employer as a
secure home for life. This economic uncertainty, coupled with
the empowering aspects of the communications revolution, is
rapidly changing the culture of this region. Link this with the
potential for profit and growth and one can understand that
something big is happening in the Potomac KnowledgeWay.
A Sector Map to the Regions Opportunities
One of the challenges facing investors, analysts and even
entrepreneurs is the need to understand that the Internet is
neither a market nor an industry. It is a mosaic of many diverse
sectors. We must take a sector view of the regions activity and
how it aligns with our core strengths. Such an analysis will help
us understand those areas of sustainable power versus those in
which we have only limited involvement. Here is a preliminary
and somewhat anecdotal view of the Potomac KnowledgeWay
sectors in which there is real and sustainable potential:
- Local Exchange and Long Distance
- Cellular and Wireless Satellite and DBS Services
- Converging Communication Applications and Services
- Communications Equipment and Adapters
Internet service and presence providers
World Wide Web-development businesses
- Intranet/Extranet Developers
- The systems integrators and new players like Concept
- Marketing Networks and Interactive Advertising
Creative firms like Potomac Interactive, Graffito/Active8,
Proxicom, Image Communications and Magnet Interactive
Internet/Web Development and Middleware Software
IBM InfoMarket, CNRI, Concept Five, Proxicom, Visix,
Relay Technologies, Freeloader, Excalibur, PLS and a
growing base of product technologies.
Health Information and Telemedicine Services
The many organizations that stretch along a corridor from
Johns Hopkins University in Baltimore, through NIH, and
down to the University of Virginia.
Related to, and yet distinct from healthcare, the biotech
community is anchored by NIH, Johns Hopkins University
and groups like American Type Culture Collection (ATCC)
from which an entire information industry will emerge.
The region already enjoys a concentration of financial
transaction services with firms like Transaction Network
Services, Inc. (TNSI), Intelidata, CyberCash, GE
Information Systems and Visa, as well as a transitioning
base with the Electronic Funds Transfer Association
(EFTA), NIST, and federal activity in Electronic Data
Geographic, Geospacial and Global Positioning Systems (GPS)
Ranging from GPS surveyors, to location and mapping
services, to intelligent highways and transportation systems.
Electronic Publishing and Media Products
Including the tremendous resources of the Washington Post,
USA Today, Reuters and the prestigious Freedom Forum
Newseum now being developed, as well as the emerging
communities of Internet businesses: Digital Commerce
Corporation, Womans Connection Online, Hearthstone and
the firms now operating on AOL.
Government, Arts, Humanities, Scientific and Historic
The above list, while certainly not exhaustive, identifies the
sectors in which we expect significant innovation,
entrepreneurial activity and growth in the years ahead.
Why the Movement Will Grow to a Force
This movement is still gaining strength. There are several
reasons why it is evolving into an economic engine for this
region and the world.
The region benefits from a strong underpinning of knowledge
which is its sustaining strength. One can argue that our
intellectual capital and reputation as a "learning region" may be
the attributes that most allow it to succeed as we undergo the
paradigm shift to a digital economy where knowledge is the
The region will experience a "second wave" of innovation and
entrepreneurial activity over the next 3-10 years. The regions
vast content storehouses will be "mined" by businesses and
individuals capitalizing on their knowledge and proximity. This
mining will be driven by the build-up of market expectations
and the demand for content-based products.
The regions growing concentration around digital networks is
making it a magnet. Not only are new companies starting here,
but established ones like Microstrategies, PSI, Associated
Communications and Nextel are among those being drawn here
by the workforce, the opportunities and the quality of life. IBM
is building up its Internet presence in the region after
downsizing in almost all other areas. There is good reason why.
For example, the December 3, 1996 Fortune Magazine rated the
greater Washington region as one of the top ten in the country
for living and opportunity-- important factors to the young
people of talent who are developing the new ideas, products and
The Federal government will continue to be a major player in
R&D, as a consumer and as an innovator. Government entities
created this digital network space and will continue to
significantly influence its evolution and outcome.
The fever has caught. People are thinking "new business" and,
better yet, they are thinking product businesses. Innovators are
thinking new start-ups. Angels are thinking investments.
Workers at all levels are once again thinking stock options. It is
a cultural change for this region.
Money moves to opportunity and the in-flow of capital is
growing. Venture financing and technology businesses in the
region have developed rapidly over the past several years, with
an 80% compound annual growth in venture capital invested
from 1991-1994. Despite the opportunities, we are still
relatively under-served. As competition for deals escalates,
Boston and Silicon Valley venture funds increasingly will look
to the deal flow and opportunity in our backyard.
Capital Formation Dynamics
How significant is the growth in venture financing in the region?
No one knows for sure, but it is clearly accelerating. Consider
this anecdotal evidence:
The increasing number of IPOs is beginning to catch the
attention of global investors. It started with AOL, was paced by
such offerings as UUNET, CyberCash, Digex, Intelidata,
University Online and Allin Communications and now more are
being teed up.
Clearly, there have been some big plays like AT&T Venture
Fund II locating here, as well as some sizable private placements
including a Soros Group investment in Global Telecom.
We have seen important shifts, including a greater regional
focus by early Internet player New Enterprise Associates (NEA)
and the positioning of Friedman, Billings, Ramsey (FBR) as an
investment banker with its string of new Internet-related
offerings. We also see the formation of new venture funds such
as Fairfax Partners, Novak-Biddle, Embryon Capital, Bluewater,
Nepa Valley, Spacevest, CEO Venture Fund and, most recently,
FBRs Pegasus Fund. Certainly more are on the way. We are
even seeing very early stage funding with the Private Investors
Network and a new group called SPIN, as well as the facilitation
of efforts by Bill Washecka of Ernst & Young, the Mid-Atlantic
Venture Association (MAVA) and others.
There is increased deal flow. Its that basic. Dominion Income
backs Community of Science, General Atlantic invests in
Proxicom, Updata funds NetStart, private investors help
NetImpact, Zero Stage helps Intelligent Interactions and the list
A Catalyst For Growth
Leaders in the greater Washington area increasingly are coming
together to participate in and support the Potomac
KnowledgeWay Project. The Projects mission is to establish
this region as a hub of innovation in the digital economy and a
global center in the knowledge industries of the 21st century.
The effort, underway for over a year, is based on three strategies
with the key being a program to cultivate the entrepreneurs who
are working around digital networks. They are a new type of
entrepreneur-- what we call "netpreneurs." The Netpreneur
Program is creating a place-- virtually and physically-- where
the netpreneur community can come together and exchange
expertise as they thresh out the new rules of an embryonic
marketplace. The Program is creating the needed support
network to meet the unique needs of netpreneurs and to match
them with other netpreneurs, funders, advisors, the media and
partners. The Programs mission is to connect, inform and
promote, and we would welcome the opportunity to involve you
in the effort.
Why this focus? Consider this recent quote from "Making
Money on the Net," in the September 23, 1996 issue of Business
While corporate giants have been thrashing around
noisily in cyberspace, showing how not to make money
on the Net, scores of entrepreneurs have been quietly
tinkering-- creating new business models for retailing,
marketing, publishing, and advertising that work for
them and could perhaps point the way to an Internet
Peter Drucker once defined the entrepreneur as "someone who
does something new and gets it done." The action and
knowledge is with those "on the cutting edge" in this digital age,
the entrepreneurs like those at America Online, Yahoo,
Netscape, and UUNET. There is a growing, vibrant community
of netpreneurs in this region-- innovators who are getting new
things done around the Internet.
How Real is All This?
Let me paraphrase a discussion a close friend of mine had with a
Boston-based investment fund manager who manages $3 billion
for U.S. and international clients. Here was his assessment of
our region: "I travel around the world, to deal with clients, to
prospect for clients, to monitor projects, and to find new things
to invest in. I believe the North Carolina to Boston corridor has
the best current and prospective business potential in the world
and that the greater Washington area is the best spot within the
Last evening I participated in the second annual National
Information Infrastructure (NII) Awards program and spoke this
morning at its first Digital Footprints conference in New York
City. The NII Awards recognize todays excellence in
innovative, networked applications and services. One element
that confirms our vision is the geographic distribution of the 56
winners and finalists: nine were from San Francisco/Silicon
Valley, eight from greater Washington, six from the
Boston/Cambridge area, four from New York and New Jersey
and the remainder came from the rest of the country.
As people learn more about the breadth, diversity, innovation
and entrepreneurial successes that are transforming this region,
they will recognize it as one of the best spots in the world for
investment in this new digital age. Things are, indeed,
happening in the Potomac KnowledgeWay.
© 1999-2016 Morino Institute