DC Tech: What To Watch In 2016
Cybersecurity will be hot, federal agencies will spend hundreds of billions on tech and young startups will hire like crazy. 2016 is shaping up to be an interesting year for the DC tech ecosystem. We tapped a few heavy hitters to share what they see coming.
Cybersecurity, Internet of Things and virtual reality will dominate innovation
The DC region has been steadily building a hub of cybersecurity companies, targeting federal agencies and Fortune 500 companies. There’s no question that will continue, given the nature of the problem. “There are so many companies in the DC metro region that have quite a bit of venture funding trying to solve the issue of cybersecurity,” says Eastern Foundry principal Andrew Chang.
Some interesting companies to watch: FireEye has acquired several smaller prominent cybersecurity companies. Will that continue? And will companies like Arlington-based Endgame expand in 2016 or get acquired?
Other industries will pick up steam in the region, including the Internet of Things and virtual reality. IoT will help lead US consumer technology sales to a record-setting $287B in retail revenue in 2016, says the Consumer Technology Association. Smart home technology is expected to reach 8.9 million units sold (a 12% increase from ‘15), with $1.2B in revenue; fitness activity trackers will also increase 12% from 2015—hitting $1.3B—and smart watches will reach $3.7B, a 22% increase.
Virtual reality has been picking up steam in Silicon Valley and is starting to spread, says Andrew. It’s also been a technology widely used by the military for training and simulations. “It’s been in government for a while and now it’s time to come out to the general public,” he says.
Update on Eastern Foundry, the accelerator and co-working space helping tech companies connect with federal agencies: Andrew says the company is working with 71 companies and there are new plans to open a second location in Northern Virginia.
The ecosystem will expand, but will it be in the right way?
Too many people will continue trying to launch Internet firms because they're easy to start, but not enough people will start the more complicated companies tackling industries like aerospace, says NextGen Angels principal Dan Mindus.
Dan adds that the DC region needs giants like Blackboard. The edtech company was the last startup that really helped define the DC tech ecosystem, having gone public over a decade ago and creating an edtech ecosystem in the region, says Dan.
“We need more Blackboards,” Dan says. LivingSocial was supposed to be it, but the daily deal company hasn't quite lived up to the hype. The strongest contender for the next Blackboard is likely a cybersecurity company, Dan says.
Update on NextGen Angels: Dan tells us the network of young investors is expanding to 10 more cities this year, including Atlanta, Raleigh-Durham and Baltimore.
2016: The year DC realizes it’s a hub of entrepreneurship…for real
Year after year, entrepreneurs find ways to start great companies, and this is the year it finally becomes clearer that this is a great and developed entrepreneurial community, says TandemNSI principal Jonathan Aberman.
The region is made up of government contracting, life sciences, product and software development, media, hospitality and associations—and it all represents entrepreneurship, adds Jonathan. “It’s the most important meta trend that I expect to see more of in 2016.”
Startups are aging in a good way
Remember all those startups that launched three to four years ago? They’re now generating revenue and expanding their teams, says iStrategyLabs founder Peter Corbett. He expects lots of hiring in 2016, with a ton of job creation in tech and marketing. His own 80-person company will likely hit 100 people by the end of 2016.
Real estate could be a pain point for growing startups, especially those looking for anything under 30k SF. Peter says he’s paying just as much for his company’s 17k SF HQ in DC’s Shaw neighborhood as he’s paying for the company’s other office in Manhattan. Expanding the company’s workforce could mean expanding square footage, but he can add 50% to his workforce without having to move.
The city’s tech hubs have been Georgetown, Chinatown, Dupont and Shaw. But some new areas for creative companies to watch as potential home bases will be Uline Arena, an office/retail redevelopment in NoMa, and the Wharf, another mixed-use project along the Southwest waterfront.
Federal IT spending flat, but still OK
The federal government will spend $108B on IT, which is still substantial even though it isn't much higher or lower than the previous year. BirchGrove Consulting principal Ray Bjorklund says there are not a lot of new, big procurements coming out. As new technologies are introduced, older technologies become less expensive.
Cybersecurity will still be a big thing, but Ray says the private sector needs to develop the next wave of products. “I don’t know that they’re going to find anything brand-new, but the requirement is still there,” he says. Hackers are "finding novel ways to get around the new products."
The companies that will have the best year are those that aren’t pure IT, but that are also helping agencies manage large initiatives and programs using IT.