How did DC tech change in 2023?

While pulling together the nominees for this year’s Technical.ly Awards (check them out here!), I couldn’t help but notice that 2023 brought huge changes to the local ecosystem. Some were welcome (hello, Cava IPO and the resurrection of Code for DC aka Civic Tech DC) and others, not so much. But if nothing else, it certainly was a year to prove just how resilient y’all are, even when the rug is pulled out from under you.

As we settle up all of the remaining budget issues and start to plant seeds for the new year, it’s always important to reflect on how far we’ve come — and how we can carry those lessons forward. To help, we asked James Barlia, VP of Revolution’s Rise of the Rest Seed Fund, to share his thoughts.

Let’s take a step down memory lane, shall we?

The fall of Silicon Valley Bank

No one can forget about arguably the biggest event of the year: the collapse of Silicon Valley Bank (SVB), formerly a haven for DC founders. After starting the year on shaky ground with funding uncertainties, in March, CEOs had to scramble to find a new home for their money after the bank shut down suddenly.

It began when SVB announced plans to sell $1.75 billion in stock shares, igniting a panic, a stock plunge and a recommendation for founders to move their money — fast. And after reportedly considering a sale, it formally closed a few days later.

Founders in DC noted just how much SVB contributed to the ecosystem, especially for early-stage companies. One founder who spoke to Technical.ly anonymously, though, said they felt it wouldn’t spell doom for the local ecosystem.

“This is not going to be the end of tech. Entrepreneurship will still happen,” they said. “It might not be as with SVB, it might be with a different bank, but if you think that this bank failing will ruin tech for the rest of eternity, then I would have to disagree with you.”

Eight months later, those words seem to ring true. While Barlia said the news sent a bit of a shockwave through the ecosystem, he’s encouraged by the growth he’s seen since.

“What I was encouraged by is the ability of both startups and investors and everyone in the tech ecosystem to rally around each other and almost rally around the bank, too, a little bit. But it definitely created some uncertainty,” Barlia told Technical.ly. “However, I do feel like the venture startup and venture ecosystem has bounced back.”

Amazon’s awakening

A few days after the SVB news, there was another moment of misfortune, this time in Northern Virginia. Amazon announced that it would pause construction on PenPlace, the second phase of the HQ2 build in Arlington — a bit of a double whammy after the layoffs that occurred in late 2022.

Michael Farren, a senior research fellow at the Mercatus Center at George Mason University, said at the time that the decision wasn’t very unexpected.

“I thought it made complete sense, given the economic environment and the changing economic factors, that Amazon, and the tech industry in general, is facing as compared to the decisions and commitments that Amazon made in 2017 and 2018 when they were launching Amazon HQ2,” Farren told Technical.ly.

But a few months later, there was still a win to share. In May, the tech giant officially opened Metropolitan Park, phase one of HQ2 and a build five years in the making. The two 22-story buildings, named Jasper and Merlin, feature 2.1 million square feet of office space.

For Arlington Economic Development Director Ryan Touhill, it was a sign of good things to come.

“Because of HQ2, the county and the Commonwealth accelerated funding for the expansion of transit options, our tech talent pipeline and new affordable housing opportunities,” he told Technical.ly in May. “And Amazon is contributing to the community through significant investments in affordable housing, education and our nonprofit community.”

A different DC

In, again, March (were we OK then, guys?), there was yet another change that rocked the ecosystem. Deputy Mayor for Planning and Economic Development John Falcicchio, long known as a supporter of DC startups and Mayor Bowser’s right-hand man, resigned amidst sexual harassment allegations. This caused another shift in DC tech as DC CTO Lindsey Parker was promoted to chief of staff.

Over the summer, DC released the results of its investigation into Falcicchio, which substantiated claims of physical advances and inappropriate messages by Falcicchio to two staffers. Claims of retaliation were unsubstantiated, although that doesn’t mean something didn’t happen, just that there’s no physical evidence. DC Council also called for an outside review of the investigation.

But that wasn’t the only change in DC government this year. 2023 also officially kicked off the downtown redevelopment efforts. In May, Mayor Bowser released the Downtown Action Plan, which outlined the future “vibrant, robust downtown that contributes to the overall vibrancy of our city” and changing office buildings into residences.

Barlia thinks those efforts could really coincide with the growth of the ecosystem. He’s predicting an influx of startups in DC created by folks leaving tech companies, especially from the surrounding areas. In the next few years, he’s also expecting that someone will come in and create a central location for startups in DC — and that there could definitely be room for it downtown.

“A lot of commercial real estate is going to have to be reimagined, their vacancy is pretty high and property managers, property owners want to figure out ways to use the space efficiently,” Barlia said. “I feel like there’s certainly a physical location available, it’s just a matter of an individual or a group of individuals actually putting forth the effort.”

A second salad-based IPO

The summer brought a celebration to the hospitality scene as fast-casual chain Cava followed in Sweetgreen’s footsteps and made its official IPO in June. Making a not-so-casual $318 million in the process, the move solidified the rise of hospitality tech in DC and set a path for others to follow.

The one big difference between Cava’s IPO and Sweetgreen’s is that Cava was and is a DC company, and it’s committed to staying in the area and growing the ecosystem.

“It’s empowering for young entrepreneurs and founders to want to get into the food tech space or the food space,” Eman Pahlavani, cofounder of Rosslyn, Virginia catering tech startup HUNGRY, told Technical.ly then. “[It means] that you can start a company in the DMV, you can grow it really quickly and ultimately have a successful outcome via an exit or an IPO. … For college students who are looking for a path, trying to make their own way, I think this is a great blueprint to follow.”

An artificial end

The end of the year brought a few fewer huge, shattering moments. There were noteworthy departures, like Kate Goodall’s decision to leave Halcyon, Robert Stolle leaving VIPC and Chris Monroe’s exit from IonQ. There were wins, like the launch of the DC Startup Calendar, the launch of the QLab and Gallaudet’s AR helmet, and Virginia’s EDA Tech Hub nods. And losses, like the potential return to privacy by FiscalNote and IronNet’s bankruptcy.

But if we could describe 2023 in one word, we might very well pick “AI.” Everywhere we turned this year, founders were building companies with artificial intelligence, adding it to their existing technologies and figuring out how to add it to the daily workflow. And that was officially earmarked in the AI executive order released by President Joe Biden at the end of October.

“The workforce implications are particularly important — IT teams must understand AI systems before being able to make risk-based decisions, which is why AI talent acquisition is highlighted,” iTech AG’s Laura Stash told Technical.ly last month. “Right now, the current goal for enterprises and government must be to hire, change processes and provide training so organizations are comfortable with and aware of AI, and how it can be used successfully while maintaining security – this includes all forms of AI, like predictive AI, generative AI and human-in-the-loop AI.”

Barlia isn’t so convinced AI is the only future, he actually thinks a lot of the technology’s value has already been captured by founders. But he is eager to see where the ecosystem goes from here. To him, the tough conditions and struggle for VC funding in 2022 and 2023 are gearing up for a really strong 2024.

“The IPO window is starting to open, we’re seeing signs of liquidity. I think investors are starting to get more comfortable with this new environment,” Barlia said. “And I think scarcity breeds success and, ultimately, I think this reset could be a really great thing for everyone in the ecosystem.”