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The debate over how Seattle stacks up to other startup cities around the U.S. continues.

Fred Wilson.
Fred Wilson. Photo via Wikipedia

Fred Wilson, co-founder of New York-based Union Square Ventures, penned a short blog post Monday about the different dynamics between first, second, and third tier startup ecosystems as it relates to both entrepreneurs and investors.

Silicon Valley is the “first tier,” Wilson noted. “You could simply focus on Silicon Valley and ignore every other part of the US and the world and do just fine as an investor,” he wrote.

Wilson, who noted that “I am doing this entire post from my head and not referring to any survey,” said the “second tier” includes New York City, Los Angeles, and Boston. “You could simply focus on NYC, LA, and Boston and ignore the bay area and other parts of the US and the world and do just fine as an investor,” he wrote.

Seattle, meanwhile, fell into Wilson’s “third tier,” which he describes as this:

This third tier is a decent place to be an entrepreneur and an investor. But there are challenges. Entrepreneurs in the third tier can access the talent and capital they need to be successful in these third tier markets but it is a bit harder to do both. Investors can be focused on these markets if they keep their fund sizes small enough or they can take a hybrid approach by being focused on these markets and also investing in the first and second tier markets.

Tren Griffin, a senior director at Microsoft since 2002 and a veteran of the Seattle tech scene, responded to Wilson on Twitter, noting the valuation of companies in Seattle like Zillow, Tableau, Concur, Microsoft, Amazon, and others.

While talent or quality of life have certainly not been an issue with Seattle’s startup ecosystem — people are moving to the city in droves, and almost every Silicon Valley tech giant now has an engineering center in the region — the city has long been critiqued for its general lack of investors, both from the angel side and VC.

“While it is sufficient to fund a major share of promising early stage startups, a lack of big VC funds causes a noticeable gap of later-stage investments — a key reason why the Seattle ecosystem is not among the global elite in 2015,” a report published by the Compass Group said last year.

But Griffin noted how folks in Seattle can easily leverage investors and others in San Francisco given the short distance between the two cities. He said of Seattle: “you do not necessarily need to raise here,” adding that there is “more funding discipline.”

Griffin also responded to a tweet sent out last month by Chris Devore, managing director of Techstars Seattle and general partner at Founders’ Co-op:

Griffin also referenced the GeekWire 200 list of startups in the Pacific Northwest, noting “fewer poseurs per capita.”

Silicon Valley venture capitalist Bill Gurley chimed in, calling Seattle an “amazing startup city”:

Brad Gerstner, founder of Silicon Valley-based Altimeter Capital, said Wilson “misspoke.”

While Griffin brings up legitimate examples of some long-standing valuable tech companies in the region, my colleague John Cook noted in December that there has been a recent lack of breakout successes in the Seattle startup ecosystem along the lines of a Tableau, Zillow, Zulily, or similar company. Cook noted that “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,” Cook wrote. “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.”

Wilson, meanwhile, ended his post by noting a “huge opportunity” for VCs who set up shop in these “third tier” cities or even smaller markets.

“There is a supremacism that exists in the first and second tiers of the startup world,” he wrote. “I find it annoying and always have. So waking up in a place like Nashville feels really good to me. It is a reminder that entrepreneurs exist everywhere and that is a wonderful thing.”

Update: Wilson responded on Twitter, noting that he wasn’t trying to diss anyone with his blog post.

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