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Seattle skyline and Rainier at sunsetEvery so often, folks ask me what’s going on with Seattle startups. In fact, it happened earlier this month when I sat down with Tableau Software CEO Christian Chabot, who recently returned from a year-long stint running his 2,800-person Seattle company from London.

An entrepreneur at heart, Chabot was curious about his adopted hometown: “What’s your feel for the startup community in Seattle?”

I told Chabot what I tell a lot of interested parties. While the larger tech industry in Seattle is absolutely on fire — driven by the growth of Amazon.com, the expansion of Expedia, T-Mobile’s rebirth and a Microsoft renaissance under Satya Nadella — the startup ecosystem is kind of muddling along.

geekwire200-decgw200Sure, there are some vibrant and dynamic young companies — and you can see them moving up the GeekWire 200 list as they continue to grow: Chef (#20 on the GeekWire 200); Adaptive Biotechnologies (#47); Qumulo (#60); OfferUp (#66); Arivale (#149); and Glowforge (#152).

But, for the most part, we’ve not seen a breakout success along the lines of a Tableau, Zillow or Zulily in quite some time. (The one counter example is in the biotech field: Juno Therapeutics).

The IPO pipeline in Seattle is relatively dry, and few companies have rocketed to that coveted “unicorn” status with a valuation of $1 billion or more. Few, if any Seattle companies, have grown from 50 employees to 500 employees in the course of five years.

Of the top 10 companies on the GeekWire 200 list of privately-held technology companies in the Pacific Northwest, just one is younger than six years. (Tune, founded in 2009 and ranked #10 on the list).

Many of the other companies in the top 10 — Redfin, DocuSign, K2, Moz, Avalara — are more than a decade old.

Sure, it can be a good thing to have longstanding companies — ones that are built to last — in our midst.

But when speaking with Chabot the other day, I worried about the “bench strength” of Seattle’s startup scene. Shouldn’t we be seeing more up-and-comers rising through the ranks?

Now, many venture capitalists and tech industry watchers may disagree with this assessment, but here are my theories on what’s going on and why we’re not seeing more startup activity.

Big companies suck up the oxygen: The growth of Amazon and the arrival of the Silicon Valley tech giants in Seattle has been an absolute boon to the economy. (See our list of engineering centers in Seattle established by large tech companies from outside the region). In the long-term, this is great news for Seattle, diversifying the tech ecosystem and creating new opportunities. But, more immediately, the oxygen is getting sucked out of the startup ecosystem as engineers, developers and designers choose to work at higher-paying and more stable big companies. Going to work for Twitter, Facebook, Salesforce.com, Uber or dozens of other powerful tech juggernauts holds sway for many.

Money, Money, Money: Seattle’s lineup of venture capital firms has dwindled over the years with the disappearance of firms such as OVP Venture Partners, Frazier Technology Ventures and others. While a number of Seattle angel investors have stepped up to the plate — namely Geoff Entress, Gary Rubens and Rudy Gadre — money isn’t sloshing around from home-grown sources, meaning early-stage entrepreneurs have fewer choices in their backyards.  Many entrepreneurs solve this capital crunch by heading south to raise money. While very much doable — see OfferUp, Tune, etc. — it doesn’t make things easy on entrepreneurs, especially compared to Silicon Valley. Startup funding in Washington state is up compared to the past few years — a trend one would expect given the robust tech market. But many still believe there is a capital shortfall in Seattle, one that is making it harder for the next generation of startups to take root.

A culture of longevity: I can’t tell you how many times I’ve run into key employees at Seattle area companies like Concur, Tableau and Zillow who’ve worked with their respective companies for five, 10 or even 15 years. This is a blessing, and a curse. While the longevity of employees helps build great and long-lasting companies, the lack of churn means that top entrepreneurial talent tends to stay tied up in existing companies, excited by opportunities and the larger mission at hand. (This is a testament to the cultures at these companies). Seattle doesn’t really have anything like the San Francisco Bay Area, where the PayPal mafia bankrolls countless startup endeavors. And it lacks the constant motion and churn that helps cultivate a new crop of startups. Take Tableau, for example, where much of the top executive team is the same as it was when it was a tiny startup.

OK, those are my thoughts. I am curious: What are you seeing in the startup ecosystem?

The GeekWire 200 —presented by our partners at EY — is derived from our broader list of more than 900 Pacific Northwest tech startups. The list is designed to provide a better understanding of the startup landscape in the Northwest.

To make sure your startup is eligible for inclusion in the GeekWire 200, first make sure it’s included in the broader Startup List. If so, there’s no need to submit it separately for the GeekWire 200. If your Pacific Northwest startup isn’t among the companies on that larger list, you can submit it for inclusion here, and our algorithm will crunch the numbers to see if your company makes next month’s GeekWire 200. (Please, no service providers, marketing agencies, etc.)

Thanks to everyone for checking out this month’s ranking. And, just a reminder, if you value resources like these, be sure to check out our list and map of out-of-town tech companies with Seattle engineering outposts as well as our list of startup incubators, co-working spaces and accelerators in the region.

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