[Editor’s Note: Tren Griffin, a longtime member of the Seattle region’s technology community, responded earlier this week to New York-based venture capitalist Fred Wilson’s statement that Seattle is a “third tier” tech city, prompting Wilson to rethink his position. In this guest commentary, Griffin expands on that conversation.]
In a very thoughtful post, Fred Wilson identified an interesting set of facts and conclusions: “…the companies that have come out of Seattle over the past thirty years put NYC and L.A. and probably even Boston to shame. So on a dollars in/dollars in, Seattle outperforms. By a lot.”
The most interesting and important takeaway from the phenomenon Fred describes is to identify which success factors made this happen and how other cities might learn from this example. What can be learned from this success? The truth is that there is no single cause or formula and instead this success is a result of many factors feeding back on themselves. Success breeds success.
1. Every city is unique and will not be able to fully replicate what has happened in Silicon Valley, New York, Los Angeles, Chicago or Seattle. Find a way for your city to create a unique, sustainable, competitive advantage over other cities. Don’t just compete on price. Develop specialized industry clusters of expertise and capability, but do not forget software. Every business is a software business. You will miss some trends like social but can hit others out of the park, as tape measure home runs, like software and wireless. My friend Tim Porter at Madrona writes:
“When you build long-term business in large categories that matter, it creates a virtuous cycle. Industries were born in Seattle. Specifically: Wireless (McCaw), operating systems and productivity software (Microsoft), and e-commerce (Amazon). These foundational platform companies then spin-off new entrepreneurs and business for decades. This virtuous cycle is core to any major innovation ecosystem. The famous Valley history starts with Fairchild and Stanford.”
There is also aerospace (Boeing), medical equipment (Physio–Control) and biotechnology (Immunex).
2. A city can rely on neighboring cities for some necessary elements of success, like venture finance. Have a strong local venture capital community but do not fail to leverage something like the greatest pool of venture capital ever assembled, just two hours away by plane. Given that San Francisco is so close, there is no shortage of venture capital if you have the right team, have created a significant innovation, and target an attractive market. Bill Gates Sr. said to me in 1980, “There’s more venture capital money in one building in Sand Hill road than in all of Seattle.” That is still true. Seattle venture capitalists also invest in businesses in Silicon Valley so they retain first-class skills and contacts. Avoid “not invented here.” Learn from other cities and cultures. Cultivate friendships with leaders in other cities. Learn from them. It is possible to have too many startups, since talent can be diluted so far that possible successes do not survive. There are no formulas for how much venture capital is “just right” as in the Goldilocks’ story. Amateur angel investors can be helpful but they are not a substitute for professional venture capital investors, including at the seed stage.
3. Have a top tier research university. If a smaller city does not have a research university or the necessary scale to create one, that city should affiliate with a city that has one. A diverse group of universities and colleges in a city is an additional success factor, but the research university is the pillar around which modern businesses and major cities are being built. In the case of Seattle it is the University of Washington. I helped Bill Gates Sr. create the first tech transfer organization for the UW in 1980. As Warren Buffett says, if you’re sitting in the shade on a hot day it is because someone planted a seedling long ago. The number of seedlings like the Technology Alliance that Bill Gates Sr. planted in his community over the years is stunning.
4. Have a culture that values real work and learning. A city that rolls up its sleeves and does real work will prosper. Make life attractive for the workers in the city including increasing housing supply as a major priority. Dan Levitan points out that great cities attract entrepreneurs who want to work there. He says, “Of the big four only Bill Gates grew up here. Schultz, Sinegal, and Bezos all chose to move here. Rascoff, Barton, Glaser, Singh, Vadon, Cavens as well.” Welcome new residents. People can move to Seattle and build a new life and a better community. Build lots more homes. Avoid NIMBY attitudes that freeze change. Have great environmental attitudes and practices. Attractive living conditions help recruit graduates from all major research universities. Recognize and move to fix mistakes like poor past decisions on rapid mass transit, mental health, substance abuse, and public schools. Now. Make strength out of weaknesses like sometimes-lousy winter weather. Dig in and get work done when the sun doesn’t shine. Be a community that reads a lot and broadly. Support art and artists of all kinds.
5. Make products that customers will pay real money for. Don’t be a poseur. More doing and less yapping. Build and actually ship great products. Learn how to sell and do it early and often. Tim Porter says, “Have a culture of ‘sticking to it’ and building for the long term.”
6. Have a culture that is not based on relative wealth. Founders who are missionary-style business builders will be developed locally from that culture and more missionary-style business builders will be attracted to move to the city. Missionaries survive the startup process far better and are motivated to build a lasting business rather than selling out. Mercenaries are much more likely to quit or sell early. A culture that values philanthropy and giving campaigns, like United Way, is a wonderful way to build stronger communities.
7. Have a culture where people respect and admire those who’ve built businesses and major nonprofits like Fred Hutchinson Cancer Research and the Seattle Children’s Hospital. You can get in big trouble for making a list since names get left off but here goes: Weyerhaeuser, Boeing, Paccar, Nordstrom, Costco, Microsoft, McCaw Cellular, VoiceStream, Western Wireless, Starbucks, Amazon, REI, Expeditors International, REI, Alaska Airlines, etc. That success will feed back in positive ways and create the next generation: Expedia, Zillow, Tableau, F5, aQuantive, Real Networks, Concur, Bungie, Big Fish, Valve, Juno Therapeutics, Seattle Genetics, etc. Valve alone is a huge private business that is very profitable. Then there’s the next generation: Avvo, Avalara, Apptio, Redfin, Impinj, Pitchbook, Trupanion, Smartsheet, Extrahop, Placed Chef, OfferUp, Tune. If you look at this list of companies you see a diverse economy than can adapt to change.
8. Have a culture of community involvement by business leaders and examples for people to see and learn from like the 1962 World’s Fair that actually earned a profit. Care about your community. Develop business leaders who are also community leaders like Eddie Carlson, Jim Ellis, Mary Gates, and Bill Gates Sr., Bill Gates, Melinda Gates, Craig McCaw and his brothers, The Nordstrom family, Howard Schultz, Tom Alberg, Rich Barton, Jeff Raikes, Nick Hanauer, Pete Higgins, Mike Slade, Dan Levitan, Satya Nadella, Brad Smith have been for Seattle. What can you say about Jeff Bezos, who is transforming the city in amazing ways, with Amazon occupying approximately 10 million square feet of office space? Develop the next generation of business leaders like Spencer Rascoff at Zillow and Tim Porter at Madrona. I’ve no doubt left names off my list but you get the picture. Celebrate smaller businesses, like Dick’s Drive-In, that create jobs. Support local producers! Be proud of your city. Preserve treasures like the Pike Place Market. Celebrate your history.
9. Have a culture that prizes values like loyalty and modesty. Don’t be a transactional town dominated by a “what have you done for me lately” attitude. Don’t celebrate fame. Instead celebrate achievement, hard work, leadership, innovation, and human kindness. Rich Barton says, “Employees and founders in Seattle are less entitled and cynical. They want to believe, they want to be part of teams, they want to see things through. Seattle is way healthier in work and non-work lifestyle. We don’t talk tech and who’s a unicorn etc. on the sidelines of the kids soccer games. We talk about kayaking and mountain climbing. We love to say thank you and not to brag. This is a Canadian and British Columbian trait. We are basically a sister city to Vancouver and share these modesty and politeness values. This means we self-advocate terribly and are not chest thumping provincialists. For example, the University of Washington computer science program is widely recognized as one of the top 4 or 5 programs in the country. Right up there with MIT, Stanford, CMU.” I am probably violating the modest rule that Rich Barton cites in writing this, so I may get issued a citation by the local modesty police force.
10. Have a culture where failure is not a badge of dishonor. No community does this better that Silicon Valley, but other cities can do this too. Failure is a necessary part of success. If a city and the people who live in it do not experience some failure they are not innovating enough and will not succeed for long. Learn from mistakes,
11. Have a culture where it is honorable to work at a startup. The startup life is not for everyone, but the people who do work for one should be treated like everyone else. They are no better or no worse than anyone else. Many people would be surprised how many cities look down on people who work at startups.
12. Don’t take yourself too seriously. Have fun. Be tolerant. Believe in equality and diversity. Be kind. Respect and help other people.
P.S. Here is Brad Smith showing a Seattle Technology Universe map in Davos. Everything is connected. You can make a difference like George Bailey did in the movie It’s a Wonderful Life.
Thanks to friends like Bill Gurley, Bruce Dunlevie, Tim Porter, Adley Bowden, Steven Sinfosky, Dan Levitan, Rich Barton, Pete Higgins, Mike Slade for input into this post. Most importantly, thanks to my personal hero Bill Gates Sr.