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Seattle startups struggle to compete with tech giants for talent.
Seattle startups struggle to compete with tech giants for talent. (Photo via BigStock).

Seattle’s tech industry is on fire with Microsoft and Amazon growing like mad, and dozens of Silicon Valley tech giants — Google, Apple, Facebook, Oracle, Salesforce, Adobe, HP, Twitter (and dozens more) —expanding in the region with major engineering centers.

The University of Washington boasts one of the country’s top computer science and engineering programs, while the Seattle area has emerged as the epicenter of the cloud technology industry.

But it’s not all good news in Seattle.

With the larger companies taking root — driving up wages in what’s best described as a talent war — startup companies are having a tougher time competing for the engineers, developers and designers that can help build their companies.

In other words, the big companies are sucking up the talent, offering lucrative signing bonuses and out-of-this-world comp packages.

Over time, this will starve startups, diminishing their ability to compete. One could argue that one star engineer at a startup is more critical than one star engineer at a big company, since startups exist with relatively few people. The loss of one key employee to a bigger company can cause severe pain.

Portland, Oregon. Photo via Radworld
Portland, Oregon. Photo via Radworld.

Seattle’s tech industry is at a crossroads — will it be the bastion of the big companies or can it find a way to support a new generation of groundbreaking startups.

Just 175 miles south, it’s a far different story in Portland.

The city does not boast a major tech anchor tenant. (Yes, Intel employs thousands of engineers in nearby Hillsboro, and the semiconductor giant is the largest private employer in the state, but it really does not compete for the same type of software talent as startups do).

A few of the big Bay Area companies have established engineering centers in Portland, but nothing what like is happening in Seattle.

As a result, the startup ecosystem in Portland is in a unique situation. Some of the most creative, enterprising and intelligent Portland techies work at startups — and the startup companies can hire this talent for less than it would take in Seattle.

While a talented engineer in Seattle may be weighing job offers from Google, Amazon and Facebook, that same engineer in Portland does not have as many choices. As a result, salaries don’t inflate, and startups have a fighting chance to hire and retain employees.

This bodes well for the growth and evolution of Portland’s startup scene, one of the reasons why the city has seen some noteworthy acquisitions (Amazon.com acquired Elemental Technologies and CenturyLink acquired Orchestrate) of late.

Of course, the lack of larger tech companies in Portland has a negative side as well.

High-growth startups need these bigger (and sometimes more bureaucratic) companies for their own talent needs, poaching highly-skilled tech talent. Without that bigger talent pool, the ability to scale in a relatively elastic manner becomes rather challenging.

Over the years, this has been one of the reasons why fast-growing Portland startups moved their headquarters to the Bay Area with its deep pool of talent.

While Seattle and Portland have come to where they are through different journeys and exist at very different levels of scale, it’s very important to understand the needs of the startup ecosystem and to nurture that part of the economy to ensure that the region as a whole remains thriving and competitive.

Research studies prove that a healthy startup ecosystem is vital to a thriving economy. The Kauffman Foundation recently reported that virtually all net new job growth occurs from companies which are less than 5 years old (e.g. startups).

This is intuitively logical as when companies mature, they tend to shed jobs in their effort to stay competitive and profitable. So in spite of the recent wave of large tech companies establishing new offices in Seattle, a vibrant startup community remains an essential foundational element for the future of this region and for any 21st century community.

It will be interesting to watch which startup community finds more success in the next five years: Seattle or Portland.

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