Starting a Company in Seattle: Pros and Cons
Seattle is a great city, full of passionate entrepreneurs, with plenty of capital, billion-dollar success stories, and a high standard of living. But is it a good place to build a company, grow it over time, and go big? To find out, let’s look at the city’s pros and cons.
Pros:
Loyalty
In the Valley, there is a tendency to jump between startups frequently. If a company happens to be the startup of the hour, the resumes flow in. But when the tide turns, and a startup enters the trough of sorrow? People jump ship.
Startup-hopping may plague startups in the Valley, but it is rare in Seattle. It isn’t uncommon to see someone work for a company for five years or more. That’s one reason Giri Sreenivas, the founder of Mobilisafe, chose to base his company in the city. He knew he could hire a team that would stick around.
When people stay at startups for years, through the good times and the bad, it helps companies in many ways. It boosts morale, it shows investors that the entire team is dedicated to the mission, and it creates a culture that is more focused on the long term than on quarterly statements. That’s not to mention that the older a company is, the more likely it is to have a steady revenue stream that has been tested. Industry folks say that’s one of the main benefits of starting a company in Seattle.
Talent Pool
The talent shortage is one of the biggest problems for companies around the world. In particular, they struggle to find user-experience experts and quality engineers. The shortage affects most technology companies, causing salaries to go up, and splintering teams.
Seattle, however, appears to be immune from the shortage. For this reason alone, starting a company in the city makes sense. Not only does it have an incredibly deep pool of talent thanks to companies like Microsoft and Amazon, but staff tend to be loyal to their companies.
Location, Location, Location
While it’s fantastic to have a community that is thriving on its own, there are always going to be holes in one ecosystem that another can fill. In this case, Seattle has a few deficiencies that can largely be fixed by a short flight to Silicon Valley.
The two-hour flight means that if a company gets to the point that it wants to raise tens of millions of dollars more than it could in Seattle, then it could fly down to the Valley and raise the money there. Rich Barton, the co-founder of Zillow and Expedia, for instance, raised money in the Valley and still managed to take advantage of everything good that Seattle has to offer.
Startup Community = Family
One of the stranger pro-Seattle opinions I heard expressed while I was in Seattle was that the city is not nearly as cutthroat as other places, like New York or Silicon Valley. It’s not that the companies aren’t competitive, but directly competing companies can still be friends. There aren’t the feuds there are in the Valley.
According to John Cook, the co-founder of local startup voice Geekwire, there’s a collegial nature to the startup community. “People do work together here,” Cook says, “perhaps because there haven’t been too many bloodbath feuds among startups and/or VCs.”
It might seem counter-intuitive to think that less competition would lead to a better marketplace overall, but it is true that the collegial nature is a boon. Not only can ideas be passed freely, but they can be improved upon, and iterated upon more quickly.
Cons:
Investment Strategy
As I said yesterday, Seattle’s investment culture needs a bit of reform. There is capital, but it is constrained. The venture capitalist community doesn’t have the greatest track record, and it has missed a number of the largest exits in the area to firms in Silicon Valley, New York, and Boston.
On the angel investor side of the equation, the problem is worse. With the number of successful companies that have come out of the area, you might have expected that angel investors would have sprung up and reinvested the money back into the community. That hasn’t happened at scale yet, but it does seem to be changing.
Risk Aversion
While in the area, the most controversial idea I heard about Seattle and its problems was that the community is too risk averse. Opinions on this one are split right down the middle. So here are both sides.
On the one hand, we have people like Ben Huh of Cheezburger claiming that there are too many investors looking to invest “grandma’s money.” This leads to a culture of risk aversion, because the investors don’t want the entrepreneurs to go big. They instead want them to create a “lifestyle business.” Essentially: steady profit, little growth. This isn’t true of all investors, with the biggest firms being an exception to the rule, but the problem does exist.
Then there is the common sentiment in the area, according to several people I spoke with, that some of the entrepreneurs themselves start companies to make a nice living, but don’t go beyond that. Again, the lifestyle business model.
On the other hand, a large number of startups have taken huge risks and have gone big, from Amazon to Isilon. And that’s to say nothing of the Larry Page and James Cameron-backed Planetary Resources, a new company that wants to add “trillions to the GDP of the world” by mining asteroids.
Clearly, the situation isn’t black and white, but it is something to consider when choosing a city to start in.
Education
The University of Washington is a good school, filled with passionate teachers, and is starting to focus on startups. In fact, one session I attended had about 100 students and was focused entirely on if and when a student should join a startup.
However, the school is not Stanford, and it is not UIUC. It may turn out high quality engineers, and companies like RedFin may hire UW students on a continual basis, but that’s not necessarily enough to push the ecosystem to the next level.
The situation may change soon, though, as the school is really starting to invest in the startup community and in its Computer Science department. It’s still at the plan stage, but it could end up truly pushing UW forward.
There are pros and cons to every city and every startup ecosystem, but there is a key difference in Seattle. In Seattle, the city appears to revel in the good things, and has some plans in place to diminish the influence of the flaws. Those plans have a chance at reversing the problems.
It all comes back to that key question: Is Seattle a good place to build a company? The answer is yes and no. If you are looking to build “the next Instagram,” then it isn’t the best place to go. However, if you want to build a 100-year company with deep roots in a strong ecosystem, and be part of changing a city for the better, then the answer is yes.
Let’s just hope you don’t mind the rain.
[Image Credit: Hallie Bateman]
