Entrepreneurs Hope to Turn Baltimore into Tech Hub, but Challenges Remain

In a city primarily known for its blue-collar workforce, a group of eager entrepreneurs is working to turn Baltimore into a high-technology hub. 

Once famous for its manufacturing and shipping industries, the city has steadily increased its technology job base in the last decade. This year, Forbes’ listed the Baltimore metropolitan area as one of the top five cities for tech jobs.

Young entrepreneurs who recently chose to start their businesses in Baltimore said they were attracted by the city’s proximity to the nation’s capital and federal funding, affordable rent and access to top rated universities.

“Being a train ride away from business and technology hubs like New York and Boston allows for cost effective travel with potential clients and partners,” said Shervonne Cherry, from the local technology innovation agency MindGrub.

New entrepreneurs have access to programs to help them launch their businesses with guidance from a supportive network of veteran entrepreneurs. But researchers like Zoltan Acs, an entrepreneurship and economic development professor at George Mason University, said the community should not get carried away about Baltimore’s future as a major tech hub.

“This is not new. There have been startups before but nothing larger happened. It just has not taken off,” Acs said. The professor, who spent a lot of the time in Baltimore in the early 1990’s, remembers there was a lot of excitement about the possibility of creating a tech hub in Baltimore then.

“Fast forward and it has had some success, but never really emerged as a technology center. It continues to lose (companies’) headquarters (and Johns) Hopkins (University) was not the force they expected it to be. It just did not happen,” Acs said.

The reasons for this were hard to pinpoint, Acs said, but it relates to Baltimore being an insular place.

“If you look at any of the places that became big successes in technology--Seattle, Boston, Raleigh--they all have big migration, both domestic migration and international immigration,” Acs said. “Baltimore has not been able to attract people to come to Baltimore.”

A quarter of the population lives in poverty, unemployment is higher than the state average and—although the city is no longer one of the FBI’s top five deadliest cities--crime is still prevalent. Many Baltimoreans hope that a tech cluster could lift the area’s economy.  But building a robust one could be challenging.

The recent expansion of the Johns Hopkins Hospital System and the growth of companies like Under Armour have helped add jobs in the region.  But they haven’t helped establish Baltimore as a hotbed of technological innovation.

“There is no Xerox, or GE (General Electric) or Kodak” in Baltimore, he said.

However, the area’s recent accomplishments in technology-driven businesses make people hopeful that Baltimore is closer to becoming a technology hub.

Federal spending in the area brought a 39 percent boost in technology jobs over the last decade, according to Forbes. The number of jobs in science, technology, engineering, and mathematics also rose.

Mike Wolfe, a research analyst at California’s Milken Institute said that Maryland’s advancements in technology and its proximity to the heart of the federal government could help to boost Baltimore’s technology and startup community.

“There are so many ideas out there. If companies can get off the ground they would bring jobs to the area. That culture of success would attract investors as well,” said Anne Balduzzi, a longtime technology expert and founder of Same Grain, a Baltimore-based social networking startup.

Some of the entrepreneurs in the city’s growing tech startup community stayed in the area after attending local universities, while others are generations-old Baltimoreans. But they all think of Baltimore as the place for them to start their new company.

“It is a very civic-minded tech community of people who want to be there,” said Christopher Wink the editor and co-founder of technology news blog Technically Baltimore and Technically Philly. “Across the country people who make up undervalued technology communities are very passionate…You have to be. You are there because you care.”

And, as in most growing communities, people in Baltimore are eager to help each other and to make the area known as a technology hub, Wolfe said.

“We have really great entrepreneurs in Baltimore, who don’t sit back on their wealth but reinvest and improve the community,” said Sharon Paley, the chief operator for the Greater Baltimore Technology Council.

For example, Betamore, a center for entrepreneurship and technology located in Federal Hill, was created by three local entrepreneurs and innovators.  The recently-opened urban campus has open office space where entrepreneurs can bounce ideas off each other.  It also offers classes on technology and business development.

Many technology entrepreneurs meet at the Baltimore Technology Breakfast, a monthly meeting for startup founders to demo their products and get feedback. The event—which within a year grew from 40 attendees to 150 and expanded into Columbia--was the brainchild of Ron Schmelzer, the CEO of small business software developer Bizelo.

“This can be extremely effective, especially when a place doesn’t have a strong venture capital (base) but has very strong public resources,” Wolfe said. “In general, we are seeing more of that.”

Like other metro areas with emerging technologies communities--like Philadelphia, Pittsburgh, Dallas, Chicago and Atlanta--Baltimore offers multiple programs to speed up a company’s growth such as the technology council’s On Ramp program for pre-funded companies.

BeerGvr, an app that allows people to buy friends drinks remotely, is one of the tech council’s On Ramp startups. Co-founder Sean Kennedy said On Ramp gave them “huge benefits in term of the amount of feedback and connections and networking opportunities.”

Deb Tillett, the head of Baltimore’s Emerging Technology Center, said more people are trying to start up businesses in the city. The center is a nonprofit that works with early-stage technology and biotechnology companies in two locations in Baltimore City. Tillett said that a decade ago, the center worked with only 25 companies but now they work with at least 90 companies on any given day, she said.

As companies grow more successful, Brenner encourages companies to move out and give new start-ups the chance to use the space.

“The idea is that starting companies would be ready to be on their own in up to 18 months,” Brenner said.
To develop a tech cluster in Baltimore, Wolfe said that the area needs to play up to its strengths:  federal funding and a huge talent-base from the universities to draw from.

But Baltimore needs a stronger investment community to keep entrepreneurs from leaving the area, said  Govind Rao, a biochemical engineering professor at the University of Maryland Baltimore. Rao said that a lot of his students, who could go on to start companies in the area, leave the state in search of investors.

“As a state we are focusing a great deal of energy in education but then we export the students to other states because we are not providing opportunities here,” he said. “Even if you want to start (a company), the capital isn’t available.”

Researchers agree.

“A disadvantage is that the state, for the last couple of years, has been weak in terms of attracting venture capital to the area,” Wolfe said.

Baltimore ranked 14th in terms of money invested in the third quarter of 2012, according to figures released by the National Venture Capital Association, a trade association. So far this year, the Baltimore region has received $93.17 million in venture capital compared to $51.78 million received last year over the same period. However, this pales in comparison to the billions of dollars that technology hubs like San Francisco, New York and Boston receive from investors.

Even in the last quarter, the Washington, D.C., area -- 7th in the rankings--received more than $235 million in investments. And, the association data shows, the money invested in Baltimore is limited to a handful of companies that offer specific services. Most of the 11 companies that the association listed on their report provided services in biotechnology, software, medical devices and media.

In Baltimore and other cities with growing technology hubs where funding is scarce, entrepreneurs ask friends and family for money or reach into their savings to develop their ideas. Out-of-state investors usually fund projects related to cyber security or biotechnology but other startups have to work hard to get the money that would help them with their business, Balduzzi said.

Other entrepreneurs can go to the Baltimore Angels—a group of angel investors who were once entrepreneurs and now want to help others to launch their ideas. They have invested $442,500 to support new companies in the past 12 months--which is a small sum compared to the $10 million that Alliance of Angels, a Seattle angel group, invested into the Pacific Northwest region last year.

One of their investments, a parking garage locator and rental service called Parking Panda has reached 20,000 users in the Baltimore and Washington areas and it’s looking to expand. Its founder, Nick Miller, who used to work at Living Social, said Baltimore is the right tight-knit community to start a business.

“(Baltimore) is much smaller than San Francisco, New York or even D.C., but there is an advantage of being small,” Miller said. “We are really entrenched in the community, we know everyone really well.”

Other recent programs like the Emerging Technology Center AccelerateBaltimore--the city’s first business accelerator to help startups get off the ground—also connect new businesses with potential investors and resources.

The program, sponsored by the Baltimore-based Abell Foundation, will eventually provide six companies with $25,000, free office space and classes to learn how to face the challenges of the market. Graduates of the program--which include entrepreneurs who developed a mobile app to quiz people on their news knowledge to a crowdfunding gift-giving website--were required to stay in Baltimore for at least five years. This is no longer a requirement for companies applying to be part of the 2013 cohort.

Those types of programs help facilitate the commercialization of research and can help attract venture capital. They can be very beneficial if done right, Wolfe said. But it can be very difficult.

“There is no recipe for success. It depends on so many factors,” Wolfe said. He added that whether Baltimore could become a technology cluster remains to be seen.

 

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