Thursday, November 17, 2011

Alternative Energy Startup Company Quietly Leaves Montgomery for Howard County // While You Were Sleeping....

We need vision, not more kooky trickle-down corporate welfare

As Maryland and local government policymakers turn to old ways of propping up flagging, large industries, we are increasingly missing opportunities to harness the potential of our small businesses, start-ups, tech jobs and other growth sectors. I would suspect that in many instances, economic development dollars spent on small and local businesses would lead to greater local tax revenues and jobs activity than the same dollars spent on large multinational corporations. Indeed, Maryland Juice's first real guest post came from a recent graduate of Montgomery County public schools, who asked State and County leaders to place greater emphasis on startups and encouraging a local innovation economy.

The latest evidence of our lopsided priorities: while everyone was concerned about Maryland's large defense contractors leaving the area, one of Montgomery County's most interesting startups quietly left for neighboring Howard County. You can see a video demo of their MotionPower technology on their website, and news coverage of their solar window tech below:

I first found out about New Energy Technologies through a 2010 Gazette article: "Burtonsville firm finds new ways to utilize Mother Nature, Technology focuses on sun, motion to gather power." The piece noted:
New Energy Technologies Inc., a Burtonsville-based company, formed last year and is developing new alternative-energy products. The company grew out of Octillion Corp., another alternative energy developer that was founded in 1998, and has research sites in New Jersey, Florida and Massachusetts.

"I consider this the next generation of realistic alternative energy," said John Conklin, product and business development manager.

New Energy Technologies is working on two new products: MotionPower, a device laid on top of roads to generate electricity from the cars that drive over it, and SolarWindow, a clear liquid filled with tiny solar cells that can be sprayed onto window surfaces to gather energy.

Both are still in development stages, but the company's goal is to eventually make them commercially available.
Tim Hwang's guest column sparked my memory about the Gazette's article on New Energy Technologies, so I was going to check in on them. But I unfortunately discovered that last year they moved to Columbia, Maryland in nearby Howard County -- which lately is winning accolades as an "innovation county" under County Executive Ken Ulman. Well played, HoCo. Well played.....

In the meantime, Tim Hwang's column also elicited this comment from former candidate for D18 Delegate Dana Beyer:
If you'd like to speak to an entrepreneur you may speak with my son, David. He's CEO of, a Y-Combinator-incubated startup in San Francisco, that is now venture-backed. He helped start it in my basement in Chevy Chase, but moved to San Francisco because that's where the people are."
David Beyer, CEO of responded with this comment:
I definitely believe the local tech scene has promise, but I wouldn't move my company, to the Maryland area anytime soon.  As long as a critical mass of smart and interesting people are densely aggregated in Silicon Valley, it's hard to go anywhere else. Initiatives like Proudly Made in DC are a step in the right direction (though in DC). If Maryland can strongly encourage a set of incubators like Y Combinator or TechStars, it might encourage local engineers to take the risk. There are tons of great software and hardware engineers in the Maryland area. They just need the right inducement (and local support) to take a huge pay cut and take on extra risk.
It is worth noting a few things: a) full disclosure: I worked for Ms. Beyer's opponents in 2010, b) my current employer Demand Progress was founded by Aaron Swartz who created a software company called Infogami, that was also provided with start-up funding through Y Combinator's first Summer Founders Program. Does the entire D.C. metro-region face the risk of a long-term startup brain-drain to the Left Coast? I hope not.

Innovation-instigator Tim Hwang had a few off-the-top-of-his-head thoughts on what government can do to encourage startups.
I've heard a lot of stories about people leaving the area to go to San Francisco, New York, or sometimes Virginia because they just can't find capital here... I think there are a lot of creative ways to attract venture capital through the state. Here are a couple government policies off the top of my head:
  1. Social Investment Bonds - only applies to social ventures and non-profits (ie: here, here, and here).
  2. New Mexico put up money to expand venture capital funds located in the state leading to an additional $2 billion in venture capital investment over 10 years. This happened in 1994 after a start-up called "Microsoft" moved from New Mexico to Seattle to find venture capital and ended up creating a global empire. Alternatively, you could match on the business side instead of the VC side by giving "certificates" of some kind to businesses seeking matching grants and matching any angel funding to companies with certificates.
  3. Eliminate the capital gains taxes for start up corporations like what they're doing at the White House.
  4. Create separate guidelines for reporting for start-up businesses to streamline regulations.
  5. Publicly funded - privately managed venture capital corporation under the state with the revenues being recycled back into the fund.
  6. Putting a capital-gains differential on state income tax.
  7. Attracting accelerators like Y Combinator, etc to come to the State through free office space and grants in exchange for raising their own private capital and funding a target number of companies 
  8. There are several stages to venture capital as well that need to be noted. Typically companies goes through Bootstrapping (own money and loans), Seed, Angel, Series A, Series B, Series C, etc. before being sold or IPO'ing. From my own observations, most money in Maryland is closer to Series A and Series B, so there needs to be more support on the Seed and Angel funding rounds. An Angel tax credit would be a good example of a good policy. 
  9. Incubating and supporting projects within Maryland departments by bringing together mentors (for example using MSDE to mentor innovative ed tech companies).

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