Where Is the Seattle Cloud: No Local Startups Among Amazon Web Services’ $100K Finalists

11/7/08Follow @gthuang

Today, Amazon announced the seven finalists in its Amazon Web Services (AWS) startup challenge. These are young companies that are using the Seattle giant’s cloud-computing platform to build their businesses, and Amazon is rewarding the ones it thinks are the most promising. The grand prize is $50K in cash and $50K in AWS credits and a “potential investment offer from Amazon,” according to its website.

The finalists are: Encoding, Knewton, MedCommons, Sonian, Pixily, Yieldex, and Zephyr. They represent a really wide range of products, from video encoding to email and document management to Health 2.0. What they don’t represent is the Seattle area. What gives?

Tons of tech companies use Amazon Web Services as a resource, and to help grow their businesses. Last year’s contest drew some 900 entrants, and this year’s pool was probably even larger. You’d think there would be more, not fewer, innovative startups building on Amazon’s platform in Seattle, as compared to other places, if only because of local familiarity, experience, contacts, and so forth.

I asked a few ex-Amazon entrepreneurs whether today’s list says anything about local startups’ desire to build on the cloud platform. “My hunch is that the main reason for the lower participation levels in Seattle is probably related to a reduced amount of marketing outreach they did here for the startup challenge,” says Dave Schappell, founder and CEO of TeachStreet. This makes sense to me, given that Amazon probably wants to reach out to entrepreneurs in other geographic regions where it has less inherent influence.

Indeed, some prominent locals, including Jeff Lawson, the founder of telephony startup Twilio, see Amazon Web Services as a crucial tool for young companies around here. “We’re big consumers of AWS for critical, real-time systems, and I think it was a great decision despite the few, highly publicized outages they’ve had,” he says.

Lawson points out the advantages of having Amazon manage the hardware, and paying only for what you need. “Whatever Amazon’s downtime is, if we manage the hardware ourselves, it will be more,” he says. “Compare [AWS] to buying hardware to meet your spike demand, and wasting thousands of dollars on hardware and hosting those machines that mostly sit idle.”

Kevin Flaherty, co-founder and vice president of marketing for Wetpaint, chimed in as well. “We use AWS and have found it to be a fantastic resource,” he says. “From a startup perspective, AWS needs to be in the consideration set when it comes to scaling a business.”

So, why there are no finalists from the area remains anyone’s guess. Maybe it’s an artifact of the outreach and selection process, but maybe not. In any case, the startup finalists are presenting their ideas to Amazon’s judges at Seattle headquarters this month. There will be an Amazon event on November 20, where the winner will be announced.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

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