Sultans of Seattle

The Creation of A Startup Mecca

There is a saying among Native American Iroquois about the ‘East Wind’. They say it is the moose whose breath blows the grey mist and brings cold rain upon the earth. I imagine walking in Seattle and always feeling like the East wind has just blown over.

Part 1: Sultans of Grunge

One of my portrayals of America always will be that of a mosaic with 50 different sub-countries. My American friends would say: it’s ironic that you are an accountant but your math is quite weak for Canada is the 51st state but I love Canada and all that it represents enough not to commit that mistake.

If you have ever walked down the streets of downtown Manhattan quite frequently, you can sense that the air smells of money. Or, if you have been to New Orleans, it’s hard to escape Creole influences.

Personally, Seattle is synonymous with Grunge. Grunge is a sub-genre of Alternative Rock which was brought to life in the Mid-80's and represents a sub culture and the Seattle music underground.

Eddie Vedder (Pearl Jam) had this to say:

“When it comes to grunge or even just Seattle, I think there was one band that made the definitive music of the time. It wasn’t us or Nirvana, but Mudhoney. Nirvana delivered it to the world, but Mudhoney were the band of that time and sound”

It would be an injustice to call Seattle a sub-culture because it has a uniqueness of its own. However, in some respects, Grunge is also analogous to the growth of Seattle as a sub Silicon Valley ecosystem three hours (by flight) away from the initial startup mecca.

Whether it is Mudhoney, Nirvana , Pearl Jam, Mother Love Bone, or Soundgarden, Grunge defines Seattle. Personally, I am partial to Nirvana.

Part 2: The VC Fueled Startup Dynasty

Business Insider ranks Seattle #3 on deal growth. As per BI, Seattle witnessed 110% deal growth in 2015 and 27% average deal growth since 2012.

In the summer of 2016, Fred Wilson, co-founder of Union Square Ventures (a NY based VC firm) did not expect a backlash when he noted in a blog post that Seattle was a ‘third tier’ startup city behind First Tier Silicon Valley and Second Tier cities comprising New York, LA and Boston.

Silicon Valley venture capitalist Bill Gurley added to the flurry of tweets responsing to Fred Wilson, by calling Seattle an “amazing startup city”:

Seattle is an amazing startup city. All four pillars (Costco, Starbucks, Amazon, & Microsoft) were VC backed. https://t.co/FWb1bm0OoN

— Bill Gurley (@bgurley) June 7, 2016

Bill Gurley makes a great observation. All the four behemoths were backed by Venture Capital.

The startupgenome 2017 report on startup ecosystems highlights the key metrics responsible for a great startup ecosystem in Seattle.

On a lighter note, this infographic from geekwire captures the debate very well:

Part 3: What Does it Take To Create a Startup Mecca in Seattle

Globally, there has been a challenge to recreate an ecosystem comparable to Silicon Valley but it has proved hard to do so. The uniqueness of Silicon Valley is the story of the early ventures i.e. Intel, Apple and Xerox. However, when one studies Seattle or the Bay Area, the core elements of a startup mecca (applicable globally) are:

A Strong University / Educational setup/IPR Creation

As far as Seattle is concerned, the University of Washington is a great engineering school that fosters the right talent for Seattle.

The top 10 schools in the world with the most founders and capital raised are Stanford, UC Berkeley, MIT, IIT (India), Harvard, UPenn, Cornell, University of Michigan, Tel Aviv University, UT Austin.

The notable exception is Israel. It is in fact known as a “startup nation” for the number of startups compared to the size of the population. The Economist notes that Israel now has more high-tech start-ups and a larger venture capital industry per capita than any other country in the world. One of the unique aspects about Israel is that it’s mandatory military service serves as a boon to the startup community.

Reasonable cost of living (at the time)

Seattle offers a better standard of living for the same price than silicon valley does today. A good lifestyle is a key ingredient to spurring additional growth within the ecosystem.

Availability of Talent

The primary reason for Seattle’s sucess as a startup mecca has been the availability of talent — Microsoft, Starbucks, Amazon have fueled a vast influx of talent into Seattle. Combined with Venture Capital, talent has been a critical success factor.

However, Microsoft, Amazon and offices Bay Area tech behemoths compete with startups for talent. Therefore, availability of Venture Capital becomes key. For Silicon Valley, labour and capital abound.

Proximity to Growth Hubs/Global Connectedness

Seattle is less than 3 flight hours away from Silicon Valley which makes it an attractive outpost for Bay Area tech giants like Facebook and Google. Also, it is well connected to the global ecosystem:

(source: startupgenome.com)

Access to Resources and Venture Capital

In addition to Venture Capital, seed investors, Angel investors, Startup accelerators, advisors, startup event organizers, U/X designers are all critical elements of a vibrant startup ecosystem

Diversity and Immigration

Diversity and immigration can be great catalysts for creating a startup culture. One of the concerns of the local residents, though, can be the mass immigration of homogeneous talent such as tech employees moving to the city in droves but it does get compensated by the booming economy.

For a benchmarking of startup ecosystems around the world, a listing of top 20 startup ecosystems around the world, refer 2017 Global Startup Ecosystem Report from startupgenome:

The Next Chapter

Today, in addition to Pike’s Place, Starbucks Reserve is an exclusive destination for premium coffee:

Amazon Go is a revolutionary experiment in checkout free shopping:

A slew of new startups i.e. Zillow, Zullily, Porch, Chef, Redfin are reshaping Seattle’s startup landscape.

The history of Silicon Valley begins with the early settlers i.e. Intel and Kleiner Perkins. While it is hard to replicate legends, it is not impossible to create a similar ecosystem.

Silicon valley, however, will always be unique just as Seattle is.

But, who knows, the next time I write about Sultans, they may well be in Tel Aviv, Amsterdam, Berlin, Bangalore or Shanghai. It is and always will be a matter of time. As they say in Arabian Nights:

“So Scheherazade began”

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