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MarketWatch: Tech is thriving in D.C.’s backyard, despite lawmakers’ efforts to rein in the industry

Originally published: MarketWatch

By Jon Swartz

Tech companies specializing in defense contracts, AI, space, cloud computing and healthcare are thriving in the capital region

Big Tech has made itself at home in the Washington, D.C., area, despite a long-running attempt by the federal government to rein in the industry.

It may seem like a contradictory storyline for the region, which a few years ago landed HQ2, the second headquarters of Inc. AMZN, -1.25% — whose chairman, Jeff Bezos, is also owner of the Washington Post.

“The last 10 years have been the most intense. HQ2 helped reshape the identity of the area: It is no longer a government town,” said Victor Hoskins, chief executive of the Fairfax County Economic Development Authority. Hoskins spearheaded the campaign for HQ2 in 2018, winning out over several other U.S. cities, although the $2.5 billion megaproject is now on an indefinite delay — which Amazon insists is not related to the more than 18,000 layoffs it announced earlier this year.

HQ2 may be facing a hiccup, but local tech companies specializing in defense contracts, AI, space, cloud computing and healthcare are thriving.

Northern Virginia is home to 17,000 tech companies, nearly half of them in Fairfax, a concentration that has led to an insatiable thirst for workers. There are currently some 121,000 job openings in the region.

Construction cranes and piles of dirt are as common a sight locally as headquarters of Fortune 500 companies, including Capital One Financial Corp. COF, +0.59%, Hilton Worldwide Holdings Inc. HLT, +1.09% and Freddie Mac 0IKZ, -12.34%. In recent years, Nestle NESN, -0.33% and StarKist Tuna have also relocated their corporate headquarters to northern Virginia.

“The migration to California for gold in the 19th century, Hollywood [and] tech may stop, as working from home minimizes the need to go to the center of business,” said Matt Calkins, CEO of cloud-computing companyAppian Corp. APPN, -2.36%. The company employs about 800 people at its campus in Tysons, Va., which previously housed newspaper publisher Gannett Co. GCI, -0.50%. Appian plans to hire another 600 to 700 workers this year, adding to its total head count of 2,500.

Calkins, a native of Marin, Calif., who went to college on the East Coast before arriving in the D.C. area in 1994, said that people no longer feel compelled to move to California. His narrative is a familiar one among transplanted residents. “Here [in northern Virginia] there is no pressure to decamp. It is a sweet spot for building a company with local talent, funding and an affordable cost of living,” he said, noting that the area is home to some 60 colleges.

“We are at the dawn of an era of collaboration between humans and machines,” Calkins told MarketWatch. “It’s an exciting time for Appian, which is at the center of this movement with process automation, and for the region in general.”

Proximity to lawmakers — and contractors

The appeal of the nation’s capital goes far beyond its intellectual and financial charms: It is the epicenter of lobbyists, lawmakers, think tanks and government contractors.

This means tech’s major players are front and center in a region where legislators and federal agencies have declared war on what they say are the industry’s anticompetitive business practices — a war that includes a Justice Department lawsuit against Alphabet Inc.’s GOOGL, -0.39%GOOG, -0.52% Google’s ad-tech business. The search-engine giant has a 160,000-square-foot facility in the region, near Microsoft Corp.’s sprawling campus. Facebook parent Meta Platforms Inc. META, +1.12%, the recent target of an unsuccessful lawsuit by the Federal Trade Commission, opened a 100,000-square-foot data center nearby.

“Key to being here is, this is where all the rules and regulations haven’t been written yet. We need access to people in such a heavily regulated industry,” said Eric Ingram, CEO of the space-technology startup Scout, based in Alexandria, Va. Scout’s customers include the Department of Defense and NASA Goddard Space Flight Center.

A dynamic hub for innovation

One rich source of research is the Mitre Corp., a nonprofit that manages federally funded research and development centers that support government agencies across the aviation, defense, healthcare, homeland security and cybersecurity sectors. It was founded at MIT in 1958, at the height of the Cold War, but has increasingly pursued research in civilian fields such as healthcare.

Now, Mitre is in another technological race of sorts, in the pursuit of leadership for artificial intelligence, quantum computing and biotech, the group’s chief futurist, Charles Clancy, told MarketWatch.

Peraton CEO Stu Shea, meanwhile, likens the region’s dynamism to “fiefdoms growing off one another.” Peraton has mushroomed into a $7.2 billion company through acquisitions that have extended its reach into the space, intelligence, cybersecurity, defense, homeland security and healthcare industries. The 18,000-person company wants to add another 4,000 employees in 2023.

“It is a cycle of people, businesses, roads, data centers,” Shea told MarketWatch.

Of course, with growth comes challenges. “In this area, there are lots of startups and not enough office space,” said longtime business owner Tony Jimenez, CEO of IT company MicroTech. “And it’s a battle for the government to hire and keep good tech people.”

Still, there is plenty of room for old-fashioned entrepreneurs like Raymond Magee, CEO and founder of BloomCatch, a plant-recognition app.

“I came to work for the government from Chicago,” said Magee, who moved to the area in 2008 for a job at the U.S. Department of Agriculture, “and now I’m able to be an innovator who helps businesses and people.”

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