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Md. startup economy stakeholders looking beyond TEDCO

Thomas Sadowski vice chancellor for economic development at the University System of Maryland. (File photo)

Thomas Sadowski vice chancellor for economic development at the University System of Maryland. (File photo)

Maryland retains strong assets that can make it a hub of startup economic activity, despite the recent setbacks suffered by the state agency designated to spur that innovation.

Stakeholders have had mixed reaction to legislation that created oversight at TEDCO, the Maryland Technology Development Corporation, and the departure of some of the agency’s top leaders. But they still believe in the potential of the state’s startup economy.

“I really do believe that it’s that three-legged stool, government, industry and higher ed working together in more robust and meaningful ways,” said Thomas Sadowski, vice chancellor for economic development at the University System of Maryland. “I think that’s the source of not only some of our current success but certainly the source of our success going forward, pursuing and realizing that potential.”

TEDCO

A critical legislative audit issued in February led to a new law putting more attention on how TEDCO invests.

Lawmakers placed restrictions on how TEDCO invests its money and created more oversight of the agency in the law, which took effect June 1.

Mike Gill, Secretary of the Maryland Department of Business and Economic Development. (The Daily Record/Maximilian Franz)

Mike Gill, Secretary of the Maryland Department of Business and Economic Development. (The Daily Record/Maximilian Franz)

TEDCO announced in May that the leader of the Maryland Venture Fund, Andy Jones, and its chief marketing officer Parag Sheth would also be leaving. And George Davis, TEDCO’s CEO, said he would be stepping down later this summer after his contract with the agency expires.

Mike Gill, who served on TEDCO’s board when he was Maryland’s commerce secretary, said he believes Davis and Jones represented an ‘A-team’ for TEDCO. He said he’s worried about what kind of leadership the agency can attract now.

“With (Davis and Jones) exiting, they were an A-team. They were really the definition of an A-team,” Gill said. “Much better than a government agency could expect.”

Ron Gula, a co-founder of Tenable, a cybersecurity company that went public last year, felt TEDCO improved under Davis as well.

Gula left Tenable in 2016 and formed Gula Tech Adventures with his wife, Cyndi, to help build new cyber companies. He refers some fledgling startups to TEDCO to learn more about building a company.

“A lot of the basic 101 stuff, four or five years ago, I never would have said go to TEDCO, but now I do,” Gula said. “I’m worried that they won’t find somebody of that caliber.”

Replacements for Jones and Davis have not yet been found. Davis has said he will not leave until he finds a replacement for Jones.

TEDCO has also been one of the more consistent providers of seed-stage funding for startups. Other groups, including university funds and private funds have been also made these investments.

But scalable, follow-on funding, typically between $4-15 million, to help startups get to the Series A stage is also needed.

“What we still lack, and TEDCO and the Maryland Venture Fund were addressing it, not the lion’s share by any means, but a lack of investment capital for these innovative companies,” Gill said. “At the end of the day, the biggest disappointment is that TEDCO was on the right path and really starting to impact that important part of the puzzle, which is capital for cool companies with cool ideas.”

Building to potential

Almost everyone in Maryland agrees that the state has the strong underlying assets to create a thriving startup ecosystem.

Between academic research at its public and private universities and government talent at agencies like the National Security Agency and the National Institutes of Health, there are a number of places and people to generate the ideas that become companies.

That provides a great baseline, regardless of what support the state government provides. But building it out to reach its potential requires intentionality, Sadowski said.

“We have to be laser-focused on the job at hand, and we need to be good stewards of resources,” he said. “But at the same time, we need to be mindful of what the needs of the marketplace are.”

Gula sees the potential for growth and believes it comes from getting people outside of their niches.

In Maryland, particularly in cyber, many startups continue to primarily serve the government agencies they know best.

Differences keep people in niches, differences like Maryland vs. Virginia, agency vs. agency, and private sector vs. public sector, Gula said.

At the same time, he said, he knows the cybersecurity economy in Maryland is growing.

He is fielding more calls from Israeli cybersecurity companies that want to move to the state. He has also noticed more people now reach out to him with their own ideas that they want to capitalize.

But success will be when there are 10 Tenables, he said.

“I want 10 public cyber technology companies that are in the Maryland region. Once we get to that point, that’s how we know we got there,” he said.

Right now, Maryland is not close. The list of companies in Maryland looking to go public is short. Most startups get acquired or fail.

The ultimate disruptor could prove to be a catalyst for Maryland.

Amazon is building its second headquarters across the Potomac in Arlington, bringing significant private-sector opportunities to the area.

“Now having another big player like Amazon in the region is going to cause people to say, government services … you might want to look at some other opportunities in the area,’” Gula said. “I think this area has more to offer than just government.”


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