Mayor Mike McGinn at the startup roundtable. Photos Aaron Fishbone

Can the City of Seattle do more to support startups?

That was the question raised Tuesday night by Seattle Mayor Mike McGinn, as he brought together more than a dozen tech and startup leaders to share thoughts on what’s missing from the tech community.

From tech incubators to private universities to startup job advertisements at Sea-Tac Airport, McGinn got an earful on how to make Seattle’s startup hub even stronger.

McGinn called innovation a “strength in the city,” and stressed that he’s “all in” when it comes to touting the importance of Seattle’s startup climate. He also proposed a “startup commission” of sorts, made up of industry leaders, to help propel the city forward in creating the best place “to start up a new business.”

“I can’t figure this out alone,” said McGinn, taking advice from staffers that “commission” might not be the best moniker for the working group. “I really do need your expertise to figure out what’s the best way to use the resources of the city.”

It’s certainly a timely topic given the efforts of New York City Mayor Michael Bloomberg to galvanize that city into a top tech hub. That’s been the source of a lot of discussion on GeekWire recently, with pointed questions about why New York has been able to — at least from the public perception standpoint — leapfrog Seattle’s startup ecosystem. It was also a topic at Tuesday’s Technology Alliance luncheon in which several tech leaders offered feedback on what could be done to improve the Seattle tech community.

Tuesday’s free-flowing discussion — which included thoughts from Peter Wilson of Facebook, Marc Nager of Startup Weekend, Bo Lu of FutureAdvisor and others — was divided into five main topic areas.

There was a lot to cover during the 90-minute meeting, and we’ll do our best to summarize the high points in the notes below.

1. Education, and establishment of a private university

Amy Bohutinsky

Amy Bohutinsky, chief marketing officer at Zillow followed up on an earlier GeekWire column to stress the importance of cultivating engineers, suggesting that support of a private university might be one method to make sure that more tech talent is created.

She said, “Most people here know the stats of the small number of computer science degrees that are granted every year at the UW, and how 80-some percent of people are turned away from the program. We just are not growing enough engineering talent within the city to support all of these startups … when we are competing with big Bay Area companies who are opening up offices here, and we are all competing against each other for the small pool of very good talent. A startup is only as good as its talent.”

Bohutinsky asked McGinn what the city could do to support the private university concept, similar to what Mayor Bloomberg rolled out in New York with the recent announcement of Cornell University’s high-tech campus on Roosevelt Island.

Mayor’s McGinn’s response: “I think it was a great idea, and count me jealous of Bloomberg for thinking of it first. In fact, there was a round of conversation in our office of what are the assets that we have that might be available for something like that. I don’t know that we’ve developed that list, yet. Seattle is interesting in that the UW is clearly a world-class research institution…. But then, in terms of research and computer science and the like, it drops pretty quickly.

We don’t have the deep bench that other cities have where there are multiple institutions in different tiers…. If you compare our city to other cities, we don’t have the same depth …. so that is something we’d like to change. So, yeah, absolutely interested in exploring it…. One of our bigger challenges … is that a lot of the students who graduate from our public school system aren’t ready for the community college system, and they have to spend a ton of (time) on remedial work, so we have a problem at every step of the way in terms of educating people for tech careers.”

Citing the defeat of I-1098, which would have raised funds for education by imposing an income tax on the wealthiest citizens in the state, McGinn said, “We are boxed in on educational funding on the state and local level.”

In terms of attracting more educational institutions to Seattle or making land available, McGinn added that he’s “totally open to it.”

2. Taxes

Dave Schappell

TeachStreet co-founder and Amazon.com employee Dave Schappell discussed the business and occupation tax, which he described as “painful” for startups since it is taken off top-line revenue without regard to profitability. “It is not very startup friendly or a way to attract people to the city,” said Schappell.

Mayor’s McGinn’s response: McGinn said that he’d favor a corporate income tax over a B&O tax. He noted that if companies have less than $100,000 in gross receipts they are exempt from the tax. But, he agreed, with Schappell. “You can be big, and losing a lot of money and you pay the same amount as someone who is the same size and making a lot of money. So, there is a real serious equity issue there. …We are a creature of the state, so our taxing authority is determined by what the state legislature gives to us, and the B&O tax is a fairly important piece of our overall tax revenue. Property taxes are big. Sales taxes are big… But I couldn’t do a corporate income tax in the City of Seattle even though I’d love to. I don’t have that authority…. ”

Kim Rachmeler, an ex-Amazon employee and angel investor, suggested that the city could put in a place an “amnesty” program in which startups could defer B&O taxes. “Many of these companies, we wish them to become the small acorns that grow into the oaks that shade us all, but they need some time to get there, so if they could have an amnesty period in which to grow larger and these taxes could conceivably be paid at a later date, that’s not eliminating the tax, but it is giving them a chance to get there.”

McGinn said he’s happy to look at deferrals, but said he wasn’t aware of his legal authority on that point. “We want to encourage startup activity, and we want to encourage risk. And we want to encourage businesses that are investing for the future. I just have a tax code right now that doesn’t give me many tools to do that.”

3. Public support and PR assistance from the Mayor

Chris DeVore

Chris DeVore of Founder’s Co-op discussed the importance of the Mayor to publicly trumpet the Seattle startup community.

DeVore said, “I’d ask you personally to stand up publicly, every chance you get, and say: ‘Digital innovation is the future of our economy and we want Seattle to be the place where startups are built and the brightest people in the world come to work.’ I know you do a lot of quality-of-life-work, but I don’t think I’ve ever heard you stand up and say (that) in the way that Bloomberg did…. Fundamentally, it is about staking a claim to Seattle as the city that cares about startups and innovation, and changing the world through innovation. It takes somebody to put their name on the line, and say: ‘I believe in this.’ Behavior comes from speech. Public declarations of intent lead to consistent behavior in other domains, so before I asked for any money or tax changes, if you begin to make that public commitment, I expect that other commitments will follow from that.”

Mayor McGinn’s response: “I’ve been trying to do that effectively, so if people have ideas on how to do it better….The line I try to use is that I still believe that somebody might start the next big thing in their spare bedroom or their garage, so I am happy to do that…. You find me the opportunities to sell tech, and I’ll do it.”

Socrata’s Kevin Merritt pointed out that New York successfully created a “digital roadmap,” which basically said “here’s where this city is going over the next five years.”

“It touched on 30 or 40 key areas, from elementary education to attracting startups to getting fiber optic communications throughout the city. And, basically, every time I see Bloomberg speak he is just reciting a little section of that,” he said.

McGinn said that the city needs help with that plan, and suggested a partnership with the startup community to help drive the process forward. He cited the effort of music community — supported by the city — to come together to promote Seattle as the City of Music. That included an installation at Sea-Tac Airport in which famous Seattle musicians provide announcements.

“Can we start thinking of that? Because you will drive more ideas, and we’ll just get a lot more done that way,” said McGinn. “We’ve done it with music, and I’d love to do it with startups.”

Ben Huh

Cheezburger CEO Ben Huh said that when he walks through SeaTac airport he wants to feel like there are technology companies based here. “I would love to see a board near the entrance or exit to the airport that says: ‘These are the tech startups that are hiring in this town. When you come to this airport, we are offering you jobs.” Huh also encouraged McGinn to get more engaged in the community, possibly participating in a Startup Weekend.

McGinn concluded: “You asked me to fix the tax code, that was hard. You asked me to fix the educational system, that was hard. Ask me how to work with all of you to promote Seattle, that’s easy.”

4. Innovation hubs and density

Former Amazon.com worker Kim Rachmeler presented the idea to create more density of startups and those who support startups, suggesting that the Mayor support a branch of General Assembly. “It matters that you feel as though you are not alone and you are around people who understand. It matters that you feel as though you can walk down the street and go in a different doorway and get what you need. A startup requires an ecology that supports that, and by putting a lot of these services and people in a small geographic area, it creates that density that is supportive.”

Kushal Chakrabarti of Vittana added: “There are startups that are leaving here to go to the Valley because it is a density thing. You literally go into a Starbucks and you see the VC that you’ve been talking to, and that’s an opportunity to pitch…. We need those highly dense hubs, whether it be in Pioneer Square or South Lake Union, where that serendipity comes out.”

Mayor McGinn’s response: “I really like this idea, and I think we need to develop it more….We are not Silicon Valley yet. We are just not there. But whatever we can do to increase that density, and opportunity and it is the serendipitous encounters that are part of it.”

Facebook’s Peter Wilson said it is not so much about density as it is an educated workforce: “There are three things you need, which is educated people, research and money. We have the last two here, and the reason I’d do a startup in San Francisco versus here is I can hire new graduates with computer science degrees in California, and until you fix that, all of the other stuff is sort of window dressing.”

5. Strengthen ties between the city, startups and the UW

Kevin Merritt of Socrata presented the idea of getting engineers at the UW excited about startups, noting that big technology companies like Amazon.com and Microsoft already have the resources to run internship programs. “We need to create a deliberate consortium between the city, the venture community and the University of Washington to create program where engineers at the University of Washington have a quick-and-easy path to land in true startups, I am talking 5, 10, 20-person companies…. to acclimate those engineers to what’s going on industry and to plant the seed with them maybe working for a startup — versus working for Amazon or Microsoft — is something that you want to do.”

Comments

  • Avocats

    Gee, how about we encourage SEIU to harass all startups in South Lake Union?  That way they’ll be prepared for how we treat innovation and success in Seattle. 

  • http://twitter.com/Justin_Wilcox Justin Wilcox

    Interesting that attracting and encouraging more Angel investment wasn’t a prominent theme.  The #1 reason startups leave Seattle is that there’s far more investment $ in the Bay Area.  I’d suggest, if we had more angel and institutional investors here, not only would we not lose top innovators (Twilio team, Tony Wright, etc.) because of our huge talent pool, we might actually steal some back.

    • johnhcook

      Angel financing was discussed to some degree last night at the meeting. But it seems like that’s a problem, while well documented here, isn’t one for the Mayor’s office to take on. Perhaps I am wrong on this. Do you have ways that the city actually could spark more angels in Seattle to step up? 

      • http://twitter.com/Justin_Wilcox Justin Wilcox

        Excellent point. What if I were the Mayor’s Director of Startup Development?  My gut says…

        1. Start a “Seattle is the City of Angels” campaign. Let the Bay be the capital of VC, Seattle can stake a claim as the Angel capital of America.

        2. Team up with @sechrest:twitter and @StartupCity:twitter to promote & host events where the Angel-curious can learn the ins-and-outs of effective early-stage investing. 

        3. Leverage @techstars:twitter demo day & @nwangelconf:twitter to promote angel investment as an exciting way to give back to the community while making the most of your $. 

        3. Team up with the governor and @StartupWA:twitter team to start a state-wide “Invest Locally, grow Globally” campaign. Make sure Seattle is seen as the investment hub for those opportunities.

        4. Encourage @StartupCity to build a microsite that lists the top 25 active angels in Seattle by $ or deals. Spark a little competition and  amongst angels here, and in other cities.

        I’m no expert on politics, but if we collectively decided to become the “City of Angels”, my gut is there are a number of ways we could make it happen especially with support from the city.

        • Rayburt456

          This is exactly right.  Folks talk about Seattle being a 2nd tier city and having to go to the Bay Area to find investors…yada, yada, yada.  NO city owns the Angels capital of the world…let’s make Seattle that place.    The face that The Shark Tank has found an audience suggests there is an opening here.  Have the city host education events about AI….

          The S in Seattle is for Startups.  The A is for Angels.

          SEATTLE:  Startups Everywhere; Angels That Totally Love Entrepreneurs  

        • http://twitter.com/JonathanMPaul Jonathan Paul

          Great ideas, Justin. I especially like #4. Make it an AngelList of sorts just for Seattle, a place where startups can connect with local Angels. 

          • Victoria Oldridge

            I second that–as an entrepreneur here, these connections need to be more accessible.

        • http://www.allianceofangels.com/ Yi-Jian Ngo

          The Seattle angel community is already working with Geekwire to develop a series of articles which will raise the awareness of angel investing in local circles and encourage increased participation in angel investing. Stay tuned….

  • http://www.puzzazz.com/ Roy Leban

    I was contacted about possibly participating in this forum and exchanged some email with somebody in the mayor’s office about doing so. Alas, I live in Redmond and Puzzazz is based in Redmond. I’m guessing that’s why I wasn’t on the final list. It underscores what I think is one of the big problems, a tangent to point #5 — all of the cities in the Seattle area should work together, not independently. Seattle is the largest city in the area but it has only 15% of the population.

    Seattle shouldn’t do things to lure people or companies away from Redmond. Redmond shouldn’t do things to get companies to move from Bellevue. To the extent that we lure companies anywhere, it should be companies from California or New York or North Carolina. If we think of it as Us vs. Them, it is not Seattle against everybody else, where Redmond, Kirkland, Bellevue, etc., are part of Them. It should be everybody in this region against other regions. We should all be thinking about working together to strengthen our region for our mutual benefit.

    For example…

    1) There already is a private university in the area — DigiPen in Redmond. It offers both Bachelors and Masters degrees And Kirkland and Redmond share the Lake Washington Institute of Technology. Seattle should support those existing institutions, and the Eastside should support UW, Seattle University, the Art Institute of Seattle, etc.

    2) Changing the tax structure in Seattle would not make a difference to my startup. What if all of the cities got together to change things for the better? BTW, the Redmond B&O tax is a reasonable cost but it has wacky rules about when it applies that are startup-unfriendly. If your startup ever has a business meeting in Redmond, you owe the Redmond B&O tax. Let’s clean this up together.

    3) Last I checked, SeaTac isn’t in Seattle. It would be awful if there was signage there promoting startups in one city in our region and no other. How would you feel if only startups actually located in the city of Seatac were promoted? (was even a single startup from Seatac at the meeting?)

    4) I think this one is wrong. Relatively speaking, Silicon Valley is very undense. What it has is quantity spread over a larger area, in many cities. We want many hubs, many clusters, and many, many startups, and we don’t want them all, or even a majority, in Seattle.

    5) This one is also wrong. It should be “Strengthen ties between all the region’s cities, startups, and educational institutions” and then I’d agree with it.

    In summary, kudos to Mayor McGinn for realizing things can be improved, but if you try to do things that benefit Seattle to the detriment of the rest of the region, you will have a lot of people (85%) unhappy with you.

    • Guest

      This is a great point (Seattle v. Redmond v. Bellevue) rather than working together, they are often working independently or at cross-purposes.

      • http://twitter.com/RedRussak Red Russak

        Instead of working independently, why not funnel efforts through a central organization to list events, startups, resources, etc and properly represent all regions as one? ;-)

        • ChuksOnwuneme

          Sounds like your pitch :)

    • http://twitter.com/JonathanMPaul Jonathan Paul

      Some good points, Roy. I agree that the Mayor’s office should promote a region wide initiative with other cities (Bellevue, Redmond and I’d even through Tacoma in the lot with the UW-extension down there being so tech focused). However, to your point of Silicon Valley being undense, if you look at the trends coming out of the bay area, the majority of startups are setting up shop in San Francisco proper. It used to be most set up in the south bay / palo alto, but now something like 60% of startups in the area are in SF. 

  • http://twitter.com/JonathanMPaul Jonathan Paul

    I’ve been hammering the Mayor on twitter for the past 6 months hoping he’d get an initiative off the ground like Bloomberg is doing in NYC. I’m glad he hosted such an important meeting yesterday. I very much enjoyed reading about the key ideas for improving the startup ecosystem. I posted on another GeekWire article published yesterday regarding my thoughts. For not attending the meeting, I’m amazed how closely my four core factors resemble what the group came up with: http://www.geekwire.com/2012/geek-street-improve-seattles-tech-economy/

  • Guest

    I think we need a more diverse startup community in Seattle. I left Seattle, as much as I hated to do so, because I was unable to find a job which interested me. Seattle is mostly an Internet startup culture—there are a lot of  software startups out there that aren’t social networking/social gaming/social shopping, but they seem to be outside of Seattle.

    I have no desire to do a social-whatever/Web 3.0 company. SF/NYC/Portland all have a lot of more interesting startups.

    I can’t wait to get back to Seattle, but you’ll need to court me with something more interesting than what I was seeing circa-2008 out of the Seattle startup community.

  • Scott BEnner

    Certainly we need to graduate more engineers, and we probably need a whole additional private campus founded with big money to do it.  (Others have written about this in the past.)  Eduation benefits from competition. 

    Chris DeVore was right on in saying that the mayor has got to be relentless in his messaging that he wants Seattle to do everything it can to support startups. 

    And that leads to the hub concept:  We are reclaiming acres of waterfront by tearing down the viaduct, some if it right on the edge of Pioneer Square, where startups are already common.  The city should help fund, gather donations by Allen, Gates, Bezos, etc. to build a facility to house startups, the nonprofits like NWEN that support them and the angel groups that invest in them. There would also be common space for the events and networking that those groups put on.  Putting those resources in one place next to the water and Pioneer Square with its combination of food, sports, old architecture, gritty realism and now increased housing (i.e. north parking lot development) would be a great draw for startups.  Few places in the US could match it for cultural capital.  Who is going to lead this???

  • http://www.facebook.com/ItsScottMcleod Scott A. McLeod

    Give me, and many, a reason to move back. I think #4 is key in creating a strong community.. Subsidize or tax break an area for technology companies, or for sub-leasing extra office space in say SLU.

  • Michelle_Seattle

    Seattle Angel to Entrepreneur: 1) What’s your idea?  2) Do you have a business plan? No. Go create one then come back 3) You have a business plan, do you have a product? No. Go create one then come back 4) You have a product, do you have any users? No. Go get some then come back 5) You have users, do you have any revenue? No. Go get revenue then come back 6) You have revenue, how much.  That’s it?  Go get more then come back 7) You have revenue, great, when you plan to be profitable?  That far out? 8) check back with me in a couple of months 9) You are profitable, and planning to go public?  How do I get in on the action?!?

    Bay Angel to Entrepreneur: 1) What’s your idea? 2) I like it, its novel 3) Is there a market? Awesome! 4) Great lets go fund it and make some money!  How more can I help.

    • johnhcook

      Wow, that’s a tough critique, but got to say one of the best summaries/comments I’ve seen summarizing how entrepreneurs feel about Seattle angels. 

    • http://twitter.com/bcrimmins Bob Crimmins

      While perhaps a caricature, this is beautifully succinct.  I don’t know who you are, Michelle, but it sounds like you’ve been there… done that.

    • Smash

      Spot on.

    • Rayburt456

      No wonder so may Bay Area angels lose their shirts.  This is a succinct summary of what happened in 1998-99.  Is it happening again?  I guess entrepreneurs with bad business ideas would love it there….perhaps those with real businesses and real growth opportunity might prefer a more discerning group of investors.

      • Smash

        That’s awfully presumptuous of you.

    • Smash

      It really speaks to the difference in culture between Seattle and the Bay Area. In Seattle, a lot of potential angels aren’t actually entrepreneurs. With the notable exception of the early Amazon team and investors, many of the angels in Seattle were, as the expression goes, “born on third, thinking they hit a triple.” While I would never discount or disparage someone else’s hard work and career path, being employee 25+ at Microsoft isn’t the same as being part of the founding team of a startup. As a result, when you meet with them, you get a lot of the questions Michelle outlined. These, of course, are the wrong questions to ask a seed round startup.

      Meanwhile, like Seattle, the Bay Area is full of potential angel money, with the difference being that a lot of it is directly derived from people with seed stage startup experience in their background. Sure, some of them were employee 25+ at Google or Facebook or whatever, but many of them couple that with at least some experience looking for product/market fit at an early stage startup. As a result, the questions you get down there are much, much more relevant to seed round investing: What’s your idea? What hypotheses are you trying to prove? What vectors could the various tests you make around the hypothesis take you? And so on.

      Fundamentally, you are looking for two things out of your angels. Money is obvious. But on top of that you’re looking for someone who has been there, who can coach you through the trough of sorrow as another set of eyes, and who can help you scale after product/market fit.

      In the Seattle angel scene, Alliance of Angels is a fantastic example of the bad kind of investor, while TechStars is a great example of the kind of investor we need more of.

  • tryingtocalmdown

    Be very careful what you ask for from politicians of any stripe.  Of course McGinn said he wanted an income tax and I’m sure the techlefties all nodded their heads without understanding what the implications are of that.  It’s popular ONLY in Seattle and nowhere else.  The left leaning pols just need to shut up about an income tax. Plus, none of it would have gone to cities anyway.

    Do we really want the city of Seattle deeply invovled in the startup scene?  Or maybe fixing the streets, fixing the police dept., keeping the parks clean and safe, maintaining the water and sewer systems, keeping electric/power rates in check and listening to neighborhood concerns is what McGinn should be doing.  Gosh, he has an election in Nov. 2013.  Ya think he needs to burnish his image for that?  How better than to appeal to the egos of Seattle tech scene. Perfect.

    Not that he isn’t sincere in his desire to “help”.  The best thing he can do is use his big mouth as a booster, cajole broadband providers to increase bandwidth in underserved areas and maintain a productive dialog to remove barriers for startups that pop up in conversations such as these.

    Devore’s advice is the only thing that made any sense.  The city cannot do anything about eduation, unless they take over the school district (maybe not a bad idea).  The city cannot do anything about engineering degrees.

  • http://twitter.com/lunarmobiscuit Michael ‘Luni’ Libes

    Sounds like it was a great discussion.  But given the whole table is part of the tech (software) community, it makes me wonder where the mayor is gathering advise outside that sector?  There are startups in life sciences, clean tech, and social enterprise in this city too.  From the synopsis, the messaging is all great, but better yet if we drop the word “tech” ask the Mayor to promote startups of all kinds.

    • Rayburt456

      My guess is you get a seat at the table if you donate to his campaign.  Just guessing ;-) 

  • ChuksOnwuneme

    Really good discussions. Would be nice to see/hear follow ups. I was attracted to the Northwest from Dallas a few months ago, and love the fact that one thing this region has is ‘community’. This is an awesome trait, and something the greater Seattle area must not lose sight of. Like me, many tech folks will move up here from ‘the middle’, should we continue to build a vibrant community….you never know who’s watching. Then again, I am from the Dallas area, an area that is beginning to take initiatives like these, some even very aggressive measures to retain, moreso to attract talents. Take a cue from Austin, TX. I think we should also tout success stories…those travel far and wide. I am the adventurous type, and though I’m here to stay, the wider the startup support/community ecosystem is, the more the attraction to move up here will be….weather notwithstanding :)

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