Overdone. Counterproductive. Tired. Whiny.
Those are some of the words I’ve heard in the past few weeks as the Seattle startup community looks itself in the mirror, debating our standing as an innovation hub in relation to Silicon Valley. We’ve had a pretty active discussion on GeekWire about it, and there’s been no shortage of chatter at local tech events.
Some have grown tired of the debate, saying it is time to shut up and start building some ground breaking companies. Others point out some notable wins in recent weeks, including Zillow’s IPO, PopCap’s sale and the meteoric rise of Zillow.
But, please, just humor me here for one moment as I’d like to talk a bit about how Seattle’s tech industry stacks up. I don’t want to chat about the Bay Area. I want to discuss New York.
On Tuesday afternoon, I (willingly) got tossed into the lion’s den when the organizers of the WTIA’s TechNW event asked me to moderate a panel titled “Seattle as Startup Ground.”
It was lively discussion to say the least, powered by the strong opinions of Redfin CEO Glenn Kelman; TechStars Seattle executive director Andy Sack; Lockerz CEO Kathy Savitt; and Zumobi founder John SanGiovanni.
Instead of Silicon Valley comparisons, the discussion centered around New York’s burgeoning startup scene.
There were a few fireworks and some juicy quotes, and certainly no shortage of strong views. I’ll have more of what the panelists said in a moment.
But, before I get into the specifics, there was another piece of news that crossed my desk this week that got me thinking a bit more about New York.
On Wednesday, I got my hands on a fresh copy of CB Insights’ quarterly venture capital report. As is typically the case, the report provided a detailed breakdown of venture capital investing during the past quarter, digging into specific categories, investment stages and — most importantly for this discussion — geographies.
And here’s where things get a little — well, let’s say, for all of those in the “Seattle Nice” camp — troubling. During the third quarter, venture capitalists invested $197 million in 29 deals in Washington state. That accounted for just two percent of the total venture capital pie.
Now, take a look at New York. Its share of the VC pie — an appropriate metaphor, I think, since New York-style pizza also was an ongoing topic during our panel — doubled from five percent to 10 percent. Meanwhile, New York startup companies attracted a whopping $831 million during the third quarter — more than four times the amount in Washington state.
Now, I know what you are thinking: New York is a bigger state, with more than three times the population base.
But here’s the deal: Not too long ago, Washington was out in front when it came to venture capital dollars.
Curious about this, I went back to an old report I wrote at the Seattle P-I. And there it was: In 2007, Washington companies attracted $1.3 billion in venture capital. New York registered $1.2 billion – an investment level that it could possibly eclipse this year.
So, what the heck happened?
Of course, there was a recession to deal with. But, given the Wall Street meltdown, one would think that New York of all places might take the bigger brunt of that fiasco.
It also got far easier (and cheaper) to start companies given the rise of cloud-based services like Amazon Web Services — but that trend helps startups whether they are in Seattle, San Jose or SoHo.
There have been some especially crappy weather years in Seattle, but I don’t think that led to a mass exodus of the region’s big brains and entrepreneurial talent.
So, what is it?
Kathy Savitt, the former Amazon.com executive who relocated Lockerz from Pittsburgh to Seattle two years ago, has a theory. And it is not really about Seattle as much as it is about New York, which she said rallied as a venture capital and entrepreneurial community four to five years ago.
“That venture capital community … threw down the gauntlet and said: ‘We are going to make it happen. We are going to be a hub. We are going to be #2 to San Francisco. This is the greatest city in the world, and we are going to do it. And I think a lot of that was driven by the venture capital community, and that became evident in the compensation packages, it became evident in the amount of time that, not just CEOs but rather board members who had had big successful outcomes, were spending with the entrepreneurs and helping them with their career track. If you ask me, the number one thing we can do –and it would be my challenge not just to our venture capital community here but to every successful entrepreneur … or senior executive… — is rise up for your city. This city should be #2 and ultimately should be akin, in my mind, to the Valley.”
(Earlier in the day, Isilon co-founder Sujal Patel offered a similar call to action).
Redfin CEO Glenn Kelman countered Savitt’s remarks by saying that it is unfair to put the weight on the venture capital community. “I don’t think (venture capitalist) Fred Wilson made New York. I think the entrepreneurs of New York made New York.”
At the end of the day, Kelman said many young engineers prefer to relocate to Silicon Valley or New York.
“I just come back to engineers, engineers, engineers. I don’t think it is any more complicated than that,” he said. “I don’t think there’s a shortage of capital, there’s a shortage of engineers with good ideas.”
Andy Sack, who is attempting to incubate a new class of entrepreneurs at TechStars and has rallied the venture capital community behind the effort, agreed that Seattle needs to cultivate “really hungry, ambitious, well educated, young talent.” New York, Boston and the Bay Area have that “in droves,” an advantage which eventually attracts capital.
“I just don’t look for excuses,” he said. “Whether you are a transplant (to Seattle) or not, I think you have to deal with the natural resources and the environment and make it happen. I think Seattle is a great place, as good as place as any, for building a great company.”
Savitt agreed, but noted that busy entrepreneurs usually don’t have time to take on the important leadership positions necessary to make a region a startup hotbed. And that, in her view, is what’s sorely lacking in Seattle.
“It has nothing to do about money. It has everything to do about leadership, and pride in a geographic area,” she said.
To the amazement of friends, I’ve never traveled to New York City. I don’t know the tech community there, nor do I profess any sort of deep knowledge of how it works or why it has risen so quickly.
In fact, I don’t particularly like the East Coast. I am a West Coaster, and I love Seattle. If innovation hubs were a fantasy football game, I’d still proudly hold on to Seattle as my starting QB.
But if the current trends continue and we don’t come together to foster a stronger, richer, vibrant community, that may not always be the case. The venture capital dollars tell part of the story.
But, at times, it does feel like what’s really needed in Seattle is a …. coach.