JBS International is a Maryland company on the cusp of the new economy.
The North Bethesda information technology, research and management consulting firm was founded by Gail Bassin and Jerri Shaw in 1985 as a three-person company, generating less than $100,000 in revenue that year. The company has since grown substantially by focusing on health and social services projects to more than 400 employees and annual revenues of more than $70 million. Its lengthy client roster includes the National Institutes of Health, U.S. Treasury Department, Johns Hopkins University and Science Applications International Corp.
JBS continually updates its programs and services, adds new ones and jumps on technological trends, such as starting a company Facebook page. Despite the success, Bassin, co-CEO and treasurer of JBS, still loses sleep trying to keep her business moving forward through the ups and downs of this economy.
“I worry about whether we will have enough work to keep all of our people,” Bassin said.
JBS is an example of the innovation economy, which relies on knowledge, technology, entrepreneurship and innovation, and is the wave of the future that more Maryland business executives need to pursue, many experts say.
Maryland generally gets good marks in reports on how well it is adapting to these trends, although some say the state erects too many hurdles for entrepreneurs. At least one study put Maryland in the bottom 20 percent of states for entrepreneurial activity.
“Maryland is in really good shape in industries that are thought to rely heavily on innovation like information technology and professional services,” said Gary Keith, vice president and regional economist with M&T Bank, the second largest bank in Maryland deposits.
The state ranks in the top three nationally in the quality of public education, “high value-added” services that include IT and work-force education, he said.
“The work force will be the key battleground of the future,” Keith said.
The innovation economy will need people with not only highly productive skills, but the ability to apply them in the workplace, he said.
Questions about state’s entrepreneurial environment
The Kauffman Foundation of Kansas City, Mo., which bills itself as “the world’s largest foundation devoted to entrepreneurship,” put Maryland in the bottom 20 percent of states for entrepreneurial activity in 2010, in a report released this year. Maryland had 240 entrepreneurs per 100,000 adults start businesses each month last year, which was below the national average of 340 per 100,000 each month, according to the research group. Nevada, Georgia and California had the highest rates.
Maryland’s activity last year also was down from 2009, when it had 290 entrepreneurs per 100,000 adults. Still, key regional competitor Virginia had the same rate as Maryland last year, and Pennsylvania had a lower rate.
Another indication of entrepreneurial activity is the annual Inc. magazine 500/5,000 list, which ranks mostly entrepreneurial private companies nationally according to how fast they grow revenues in the previous three years. Maryland had 18 companies on this year’s 500 list, the same as last year; Virginia had 37, down from 48 in 2010.
Keith took the Inc. list further, ranking states on how many companies they had on the 5,000 list as a share of total private firms. Maryland ranked third, with Virginia first.
“That’s a great testament to entrepreneurship,” he said.
But Todd Klein, founder and managing partner of Legend Ventures in Bethesda, said Maryland doesn’t do a particularly good job of celebrating its entrepreneurial successes.
“I remember the early days of Ciena. We had a visit or two from a public official, but beyond that no meaningful recognition, and our company had achieved the highest first-day valuation for any venture-backed startup in history at the time we went public,” he said.
The state tends to assume once a company succeeds, its need for a supportive ecosystem goes down, Klein said. “Every effort -- tax, employment or otherwise -- should be made to help existing successes stay here and remain independent,” he said.
Maryland should create a national center for entrepreneurship, said David Edgerley, an executive with HarVest Bank of Maryland and former secretary of the state Department of Business and Economic Development. “Because of all the federal government agencies here, I think it would a natural,” he said. “Congeal all our incubators under one umbrella and have national conferences here.”
Another former DBED secretary, Aris Melissaratos, now a senior adviser with Johns Hopkins University, said it’s important to emphasize people first, then business and technology.
“I am a big believer in investing strategically in the creation of intellectual property, in our university system and federal labs,” he said. “Invest in strategic economic development and new intellectual property creation, and remove regulatory and bureaucratic barriers.”
Besides imposing more regulations and other bureaucratic barriers, Maryland has higher taxes than nearby states, many business executives said. JBS has an office in Northern Virginia and could move its headquarters there, where taxes and some other costs would be lower, Bassin said.
“Maryland is not as business-friendly as Northern Virginia,” she said.
The perception the state is overregulated and too bureaucratic needs to be corrected by “a realization that we must be customer-oriented in order to attract and sustain investment in our state,” said M.H. Jim Estepp, CEO of the Greater Prince George’s Business Roundtable.
Although Maryland is a strong employer in innovative fields such as cybersecurity, business leaders are kept busy lobbying against new tax and regulatory legislation each session of the General Assembly, said Kathleen T. Snyder, president and CEO of the Maryland Chamber of Commerce.
Maryland still is a great place to start and grow a business, said Ted Leonsis, founder, chairman and majority owner of Monumental Sports & Entertainment, which comprises three professional sports teams, the Washington Capitals, Washington Wizards and Washington Mystics, as well as Verizon Center. The Potomac resident has founded several companies and been president of AOL.
“I’ve met some really good people here,” Leonsis said. “The University of Maryland runs some great programs for entrepreneurs. The governor works hard at promoting entrepreneurship.”
The Maryland Technology Development Corp., a private-public agency that provides funding and programs for tech and science businesses, has numerous programs, grants and loans to support early-stage businesses, said Robert A. Rosenbaum, president and executive director. “Entrepreneurs have many opportunities to access resources in this state,” he said.
Federal landscape changing
With the growth of federal budgets poised to slow down, many Maryland companies accustomed to getting government contracts are diversifying their client base to add more private companies and nonprofits. Federal spending as a percentage of gross domestic product actually shrank in Maryland in 2010 from 2009 for the first time in years.
“The public sector will still be felt here to a great extent,” Keith said. “But this is perhaps the biggest change that will be seen in the coming years in Maryland.”
“A new day is coming,” she said. “We will be highly impacted by the federal budget climate.”
Some federal agencies, especially on the military side, are reverting to taking the “lowest technically acceptable” bid rather than seeking the best value in contract bids, Bassin said.
“I haven’t seen that with civilian agencies yet, but what starts on the defense side usually comes over to the civilian side,” she said.
While education, transportation, venture capital programs, incubators and the like are important in rejuvenating the state’s economy, the culture must change before there is lasting, innovative development, some say.
“It is the culture that must be cultivated to attract the creative class of people who will want to come here and stay and grow businesses and jobs,” said Gary S. Murray Sr., founder and managing member of Human Vision of Landover. “Innovation is going to come from creative people, entrepreneurs, businesses creating jobs, but the public sector has to help.”
Contributor Steve Monroe provided material for this report.