Washington Business Journal

Business leaders say the metro area has a stronger track record of innovation than Atlanta, Austin, New York City, Boston, Miami and Raleigh, according to a survey of 185 local executives. The online nonpartisan survey of Greater Washington business leaders was a joint initiative of the Washington Business Journal and Cherry Bekaert LLP CPA & Advisors. Brand consultant McGinn and Co. and market research company REPASS conducted the survey.

The takeaway? Greater Washington businesses are not suffering from a lack of innovation-inspired self-esteem, generally giving themselves and the region high marks.

Forty-nine percent of survey respondents gave their organizations a “B” grade when it came to innovation activities. Companies with a formal innovation process tended to give themselves higher marks.

One quarter gave their own organizations an “A” grade, 22 percent a “C” and just 4 percent gave their organizations a “D” or lower.

The survey also found that:

• On average, nearly 20 percent of survey respondents’ companies were allocated to innovation. Firms with less than $100 million in revenue are less likely to allocate funds toward innovation while firms with $100 million in revenue or more allocate between 1 and 9 percent.

• About 46 percent of those surveyed said their organizations had a formal innovation process, while 47 percent said they did not. Public companies with $500 million or more in revenue are the most likely to have a formal innovation process, according to the survey.

• The person most likely dedicated to driving the innovation process is the CEO, with the chief information or technology officer a distant second.

Venture capitalist and innovation consultant Jonathan Aberman, managing partner of Amplifier Ventures LLC, said it is important for companies and organizations – especially large ones – to put into place formal innovation processes — or risk losing their competitive edge.

But the innovation process requires a conscious effort by the company to attract the creative workforce needed and buy-in from senior management to truly create ways to spur innovation.

“In order to encourage innovation you have to create a culture that rewards individual behavior around the concept of creativity,” Aberman said. “In order to do that you have to have a compensation structure, an information technology structure and a real estate structure and training structure that is in place to reward those kinds of behaviors.”

Companies can create “innovation centers” within the company — such as Booz Allen Hamilton’s Innovation Center in the District — or train employees in creativity and innovation and disburse them throughout the company, according to Aberman.

Smaller companies are less likely to have a formal innovation process because they must by their very nature be innovative in order to grow and beat out the larger competition – or else they fold, Aberman said.

Companies also incentivize innovation with company recognition, according to 62 percent of survey respondents. Another 41 percent (they could answer more than one) said financial rewards were also used to help spur innovation. About 20 percent of respondents said they provided no innovation incentives.

And the biggest barriers to innovation include the government, with 33 percent of survey respondents, too many regulations or policies being a close second with 30 percent, and politics coming in a distant third with 16 percent.

“In order to encourage innovation you have to create a culture that rewards individual behavior around the concept of creativity,” Aberman said. “In order to do that you have to have a compensation structure, an information technology structure and a real estate structure and training structure that is in place to reward those kinds of behaviors.”

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I am currently working with Washington Business Journal on video interviews with leading Washington executives. Along with Executive Producer Tracey Madigan, I spent the summer conducting the interviews as an offshoot of my research for The 2030 Group, the organization of local business leaders working to shore up Greater Washington’s economic future. You can catch the first Profiles in Innovation video, with Honest Tea’s Seth Goldman discussing what makes D.C. an “ideas region,” above, and watch for the next installment featuring TrackMaven CEO Allen Gannett coming next week.

Watch now: Interview with Seth Goldman of Honest Tea.

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The local entrepreneurs who landed an investment from billionaire Mark Cubanon ABC’s “Shark Tank” for their fitness app Sworkit didn’t end up closing the deal — agreeing to disagree on several deal points, including how to value the startup.

Ben Young, CEO of parent company Nexercise Inc., and Greg Coleman, its president and chief operating officer, garnered attention in February for securing what they called the biggest tech deal in the show’s history. Cuban, the owner of the NBA’s Dallas Mavericks and chairman of AXS TV, would invest $1.5 million in return for 10 percent of the business, plus $1.5 million worth of unsold ad inventory on the app.

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Greater Washington builds great startups – we just can’t keep them here.

Over the past 20 years, 105 D.C. area startups were sold for more than $1 billion, but only 16 of those deals kept the businesses in the region, according to a new report examining innovation in the D.C. area. And out of 6,000 business sales over the last 20 years, about 75 percent were to out-of-region purchasers.

Recent examples include the $1.65 billion purchase of Cvent Inc. by San Fransisco-based private equity firm Vista Equity Partners and the $532 million purchase of Opower Inc. by California-based Oracle Corp.

And when these companies are bought, it’s common for the acquirers to shift those workforces to other cities. More importantly, the executives and leaders who are able to start new companies often go with them, leading to the loss of top talent for the region.

So can the region create the entrepreneurial, innovative businesses it needs to spur growth? The short answer is yes, but the longer answer requires the business community to get involved by prioritizing local acquisitions, forming a new innovation entity and focusing on cutting-edge research to stay ahead of…

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Vista Equity Partners is betting big on Cvent Inc. — and the California private equity firm looks to be in it for the long term as it takes the event management software company private.

One thing is for sure: Vista is paying a high price for the Tysons company, according to Michael Faulkender, an associate finance professor at the University of Maryland. The nearly 70 percent premium is about twice as much as the 30 to 40 percent premium on share price he would expect in a deal like this.

That means the private equity group sees a financial upside much higher than the $36 per share it offered. It also means that existing shareholders were not eager to sell, which is why the offer is so much higher than the $21 per share the company had been trading at for the last several weeks.

Vista and Cvent can only realize that gain by taking the company private, freeing the company from the short-term interests and share prices that can prevent long-term investment.

“The private equity investors are not idiots,” Faulkender said. “The only way this is rational for them is that they think by taking it private and getting it focused they can get some big long-term gains.”

The purchase was the end result of an unsolicited offer for Cvent that triggered a bidding war, CEO Reggie Aggarwal told me. He said the company reviewed the multiple offers and picked the best one for shareholders that would allow the company to continue investing in the future. The ultimate purchase price of $1.65 billion is more than eight times revenue, putting it near the top for technology companies.

“They paid such a high premium it was difficult to say no,” Aggarwal said.

While he declined to say what the strategy would be when the company goes private — since the deal must still be approved by the shareholders — he said Cvent has made it clear it wants to grow organically and through acquisitions whenever possible and that Vista Equity Partners has “deep pockets” for additional purchases.

“We are going to be growing and acquiring companies and there is no reason to think that will change,” Aggarwal said.

When newly private, Cvent will be able to ditch the quarterly earnings reports that make it more difficult to balance the short-term gains many stock traders want with the long-term gains that private investors desires.

Jonathan Aberman, the managing director of Amplifier Ventures, a seed and early-stage venture capital fund based in McLean, said strategic pivots can be difficult — if not impossible — when a company has to appease shareholders.

“When you are a public company you pretty much have to manage yourself quarter to quarter,” Aberman said. “There aren’t a lot of long-term investors in the markets anymore.”

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I’ve never seen an approach to regionalism in Greater Washington quite like Bob Buchanan’s. It’s methodical, targeted and, for now, mostly covert. And that’s a good thing.

Buchanan, as you’ll recall, is a developer who in 2010 launched The 2030 Group to explore Washington’s future. I lamented at the time that the organization wasn’t really needed.

As data pointed to economic headwinds for the region a couple of years ago, Buchanan got more serious about his effort, enlisting the region’s top economist, Steve Fuller of George Mason University,  to study what Greater Washington’s economy would look like with less federal spending.

It’s been more than a year now, and the effort has mostly been behind the scenes. Fuller used the Cardinal Bank economic summit, where he has spoken for years, to unveil the first tranche of data. The group also paid to publish its work — dubbed the Roadmap for the Washington Region’s Economic Future —in the Business Journal in January.

But the real work is taking place in several “working groups.” As Buchanan says, some are farther along than others, such as the group exploring how to brand our region (starting with selling ourselves about what we are). There’s also an affordable housing group, higher education group and one exploring a regional transportation authority. Last fall, Buchanan, working with Jonathan Aberman of Amplifier Ventures, added another focus — how to develop our entrepreneurial culture. Aberman expects to issue a report…

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The Washington region could hit the billion-dollar mark in cybersecurity venture funding in 2016.

Jonathan Aberman, managing director of Amplifier Ventures, a seed and early-stage venture capital fund based in McLean, said big fourth-quarter investments in cybersecurity companies helped boost overall venture funding in 2015 – and will continue to grow in 2016. He said the Washington region, a growing center for cybersecurity business and research overall, will see more big deals in 2016.

“I wouldn’t be surprised to see $500 million to $1 billion in cyber deals over the next 12 months,” Aberman said. “I just think…

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