Seattle no longer lies entirely in the long dark shadow of Bill Gates’ once-crushing Death Star. Hobbled by a host of events–antitrust suits, the departure of Gates as CEO, the rise of the Internet, the debacle of Vista–Microsoft has lost its dominance, even in its own backyard. There remain plenty of “Microsoft millionaires,” but Seattle’s startup scene today is more diverse, finding fresh roots in Amazon, born in the era of the Internet, or even Starbucks, which has arguably a stronger brand than Microsoft. As Andy Sack, a general partner in the Founders Co-op, a seed stage investment fund in Seattle, notes, “Microsoft does not hire entrepreneurs”–it hires star engineers and professional managers, not the kind of idea-driven individuals that start companies like Wetpaint, Zillow or 43 Things.
No matter where Seattle gets its entrepreneurs, the ecosystem is churning with energy. It’s “Seattle 2.0,” according to the Web site by that name that tracks activities in the community such as the two weekly Open Coffee meetings, Meetups, happy hours and other get-togethers. It’s helpful that the industry is supported by strong capital sources in Maveron, Voyager Capital, Vulcan Ventures, as well as many Silicon Valley firms with offices in the northwest. But it’s a “frontier mentality” that drives its growth to the point where, as Sack notes “deal flow is very strong.”
Sack spoke with FastCompany.com about what makes Seattle’s startup scene so strong.
What makes Seattle a great place to start a company?
Talent. So there’s great talent and I think what is different about Seattle’s talent than say San Francisco or Boston or even New York is I think a lot of the talent is either totally homegrown or from one of the big companies. I mean, as distinguished from Boston where a lot of the talent comes from Harvard, MIT, BU, BC–it’s predominantly either homegrown, people who have lived here all their lives or basically been moved because Amazon recruited them and they were like, “This sucks! I’m out of here,” and then they start something. I think the talent is really good because those companies do a good job recruiting the people that are here and stay here.
I think the other thing that makes it a great startup scene is a frontier spirit. There is a frontier spirit and an edge to Seattle. In the northwest there’s this whole wagon-trail kind of frontier and that lives here definitely more than in San Francisco, and so there’s that and then you’ve got this whole like coffee culture–Starbucks became super commercialized, but there’s definitely like this coffee culture-slash-edge: let’s stay up until all hours and bang our heads against the wall. I don’t personally do that, but it’s an interesting cultural mix. And then, you’ve got a bunch of friendly people, and so that milieu, I would say, with smart people, makes for a good startup scene.
How actively is the capital flowing into Seattle?
I think on the capital scene, there’s both a healthy venture scene in the northwest, I think more and more people in the Bay Area are going, “Wow! It’s super competitive down here. What’s going on up there? I hear there’s a lot going on up in Seattle.” So I’m seeing more Valley firms actually coming up here because they’re seeing really good companies forming.
And the angel community is pretty good. You have wealthy people from Microsoft and Amazon who understand technology and are willing to participate and then you have [my firm] Founders Coop. We have 20 entrepreneurs we pulled together. I think it’s kind of unique what we are doing, but I’d say it’s a little bit endemic of what’s happened in Seattle, which is collaborative: let’s support these things.
What role do Amazon, Microsoft, and Starbucks play in the community?
Let me first talk about the influence of those three companies. In terms of influence, I mean, there’s no question. I would say those companies help Seattle lend itself more towards e-commerce related activities of all kind. Amazon is the most entrepreneurial oriented. I think when people are at Amazon they learn basically how to operate on a low margin–Amazon is known for not marketing, but for really intimate customer experiences. So the people that leave there have that ingrained in them. Amazon, more than other companies, I would say, even now holds to its entrepreneurial roots much more so than Google or Yahoo. I love Amazon, you go in there and they pinch their pennies. There’s no lunch program.
So Amazon contributes. Microsoft, at this point, I would say Microsoft does not hire entrepreneurs, but the people that they mistakenly hire that become entrepreneurs–there’s definitely a bunch of people who are really smart who get dissatisfied. Microsoft teaches–it’s definitely an enterprise business, and they teach, I think, more than others, Microsoft does a good job of understanding markets and basically power strategy business. And you get enterprise oriented, infrastructure technology guys coming out of there who understand aggressive plays, so that’s Microsoft.
And Starbucks–I think still is the number one brand in America. So you’ve got a lot of people who understand brand and super high-quality service. There aren’t as many people leaving Starbucks for tech companies, but there’s no question they certainly influence the startup scene.
Does the University of Washington have some influence on the tech scene?
The University of Washington is a big state university and it’s the only game in town. So it’s very different than MIT, Harvard, and Stanford. What you are getting at University of Washington is very proactive; the tech transfer office in the last three years has totally changed. And it changed in a positive way, meaning very proactive business and so there are a number of companies coming out of the computer science program and so there’s a lot going on. It’s just not the same as those other schools.
What’s happening in Seattle’s startup scene that suggests it will endure?
Seattle feels much more vibrant in the last three or four years than it did from 2000 to 2004. There’s just a ton going on, covering the scene, cultivating the scene, pulling it together, etc. So there are a lot of new startups that I’m seeing as an investor. Deal flow is very strong right now.
So my prognosis is quite bullish for Seattle. In terms of exits, I think there are definitely some really good companies that as the M&A window opens up, I would expect to get purchased.