Commentary: Here are the problems with Seattle’s Startup Initiative

Editor’s Note: Nick Licata is a Seattle City Councilmember.

Recently, a Seattle Times editorial lauded the Seattle City Council for requiring clear goals, measurable outcomes, effectiveness and accountability standards for funding projects in our 2014 budget.

Nick Licata

Nick Licata

For the most part, we accomplished that this year. But one exception struck me as failing to meet all of those criteria. It was not a big request, requiring only a $151,000 ongoing yearly expense plus inflation. Nevertheless, the project’s demonstrated need for city funding was weak. There were no measurable public benefits listed and, in the past, it had been provided by the private sector.

I’m talking about the Startup Seattle Initiative. The initiative is a new effort, by the City’s Office of Economic Development (OED), to support the growth of Seattle’s startup high tech sector. As one of the project’s proponents described it, Startup Seattle provides a concierge service for startup businesses to help themselves find the resources they need to stay in Seattle rather than leave for greener pastures.

It includes $126,000 for a new staff position to manage maintaining a website and developing marketing materials and $25,000 to cover various program costs.

The Office of Economic Development officially launched Startup Seattle this year with the $20,000 purchase of its website domain from a private entity that could no longer afford to operate it. The website, startupseattle.com, includes event listings such as weekly meetings of Open Coffee, where early stage investors and entrepreneurs can socialize and network.

It also notes job opportunities. Staples.com, one notice announced, was number two in e-commerce and seeking individuals to join their development team. The average annual salary for startups jobs in Seattle is $84,000, according to Simply Hired, a technology company that operates job search engines in 24 countries.

It’s important to keep these good paying jobs in Seattle. But if success is measured by the number of startups forming, Seattle is already a success.

startuphubsseattle1

(Click for larger image)

Last July, GeekWire ranked us the second of three top U.S. cities for startups. Austin, Texas was number one and Boulder, Colorado number three. This summer, Entrepreneur Magazine ranked Seattle number five in its list of the 25 best U.S. cities for tech startups. The problem is not that we need to attract more startups. We need to retain more.

Retention of startups is a challenge. A number of cities have seen startups purchased by larger companies and relocated. Last year, the Philadelphia Tribune noted that since 2007, four companies, which made up more than $1 billion of Philadelphia’s startup economy, had left the city in search of investment capital — something beyond the scope of Startup Seattle.

If Startup Seattle does not address the problem of long-term investment, it is also programmatically vague. There are several basic questions left unanswered by the initiative: Why are we using public funds for this project? What are our measurable results?

Photo via RootStartup

Photo via RootStartup

For example, another similar OED project funded by the city budget this year, a business assistance service for restaurants, was designated $130,000. In that case, the city required that certain conditions be met by the OED before funds were spent: The chair of the Council’s Committee on Economic Resiliency and Regional Relations had to file a certification with the City Clerk that the OED had developed a sustainable, long-term business plan to diversify funding beyond city coffers.

That’s something that was lacking in the Startup Seattle Initiative proposal and is why I initially suggested we drop it from the budget until it could be justified to the council.

Without enough support for that approach, I offered an amendment requiring that before OED receive any money for Startup Seattle, it had to satisfactorily answer council questions about the initiative and Seattle’s existing early stage technology sector; present a sustainable, long-term plan for maintaining Startup Seattle and identify possible 2014 funding commitments from non-city partners. Only councilmembers Jean Godden and Tom Rasmussen voted for that amendment.

In a final effort to achieve accountability, I offered another amendment allowing the Office of Economic Development to spend the funds before responding to the Council’s questions and conditions by next summer. That amendment passed.

OED’s report will present a three-year work plan with targeted and measurable outcomes, will identify monetary and in-kind commitments from non-city partners and will include an analysis of whether Startup Seattle could be sustained in the future if transferred to a non-city entity and provided with reduced or no city funding. You can read more here.

While the city has a proper role to play in supporting and encouraging economic development, it has to be done in a way that demands public benefits in exchange for public assistance. The City Council has yet to receive any guarantees to that effect, but the discussion can be brought forward again when OED reports back on September 1, 2014.

Nick Licata is a City of Seattle Councilmember. Follow him on Twitter @nicklicata. This commentary originally appeared on Crosscut.com.

Editor’s Note: GeekWire co-founder John Cook was one of the participants in the city’s planning meetings for the Startup Seattle initiative.

  • That Guy

    Oh hell, might as well do it. What’s another couple hundred grand in a city government that wastes much bigger amounts but can’t deliver basic services?

  • RunTheNumbers

    Mr. Licata, this sounds like a bit of revisionist history, and it seems the goal posts of this conversation are moving. Previously, the argument was whether this initiative held any value for the City; now, it’s whether their focus is correct. I personally find this disingenuous.

    You mention the need to retain more startups (as opposed to simply generate more startups) and cite a single example of a scenario in another city as the basis for that argument. That’s a welcome discussion, but it is presented under false pretense as a zero-sum, black-or-white contrast of “the problem is not that we need to attract more startups. We need to retain more.” FWIW, I see these as two separate problems that require different approaches to achieve success. Both are worthy of consideration.

    What’s being glossed over is the fact that Seattle still needs to grow the startup community. Success is *not* measured by quantity; it’s quality. And the measurable benefit to the City is in real job growth, which brings the economic ripple effect with it. There is as much measurable benefit in a startup as there is in retention of existing companies. From a strategic perspective, I’d suggest it’s “better”, from a public perspective, to create 1000 new jobs in 100 startups than 1000 new jobs in 5 existing companies. (Think diversification.)

    I very much agree with you that any initiative funded by the City should be held to standards that show real, tangible benefits to the public. However, filling in that list of bullet points is tangential to understanding the strategy for the initiative.

    • That Guy

      This startups office is just one more example of a city government that wastes money like crazy. As soon as they pave the streets and maintain the parks, we can talk — about fixing the schools and synchronizing the street lights. We don’t need to hand over $200,000 a year to some glorified p.r. hack.

      • RunTheNumbers

        Great point. Although, it would be worthwhile having a discussion about the ROI this role generates (or maintains.) It *is* economic development, or at least that’s the area it falls under. If the role generates more revenues for the city, then maybe we can be in a better position to maintain the streets and parks.

        • That Guy

          First, perform basic city government functions. We have a gigantic backlog of those. If there’s anything left over, cut taxes. We really don’t need to hand over $200,000 a year to one more flack with city hall connections who will do nothing but create another set of Power Point slides.

  • lunarmobiscuit

    The reality is that while Red did a great job in setting up StartupSeattle.com, Councilman Likata is asking the right questions. What does it do for the ecosystem, and how are we measuring that success?

    Clearly the proposal was missing those answers, and I hope Red addresses them.

    Meanwhile, anecdotally, I can point to multiple, measurable outcomes in my use of that website. I have received applications to Fledge, noting they found it on StartupSeattle. Same with audience members to our Demo Days, and mentors for our program. Plus Red, while he was running the site, personally helped out in providing valuable advice and connections within the startup ecosystem.

    • That Guy

      Why can’t Seattle’s greedy venture capitalists toss off the $200,000 instead of asking the taxpayers to bail them out? Wait, I know why: They’re greedy.

  • Bryan Mistele

    When will government learn that this type of thing always fails? Haven’t we had enough of government trying to encourage green-tech companies like Solyndra and countless others to realize that government doesn’t foster innovation. Entrepreneurs do, so government should get out of the way instead of trying to constantly get involved in areas of the private sector that they weren’t setup to be involved in.