How Seattle Startups Could Lead the World: Five Technology Themes to Watch
As I reflect on my time in the Northwest, I find myself gravitating toward the bigger picture: which areas of technology and business innovation is this region poised to really own over the next few years? After giving us the likes of Microsoft, Amazon, Boeing, McCaw Cellular, and Starbucks, surely Seattle is ready for an encore or two?
It’s a topic that comes up often in tech startup circles. For example, on Tuesday, TechFlash put together a provocative panel and town hall discussion on the future of startup financing—but it ended up being about much more than financing. I wish I could have been there, but I’ve been on the East Coast this week.
During the event, the founders of Avvo, BigOven, BuddyTV, Jackson Fish Market, Wetpaint, and other prominent Seattle Web startups talked about the various tradeoffs between bootstrapping, taking angel money, and venture capital. I reported on this topic back in late 2008, and things haven’t changed all that much since, although company valuations are lower and it seems like more entrepreneurs are bootstrapping out of necessity.
One point of discussion in particular caught my eye from the TechFlash writeup of the event: the need for entrepreneurs to think bigger, balanced against giving up equity to VCs. “I don’t see how the small-time thinking of ‘I want control, I want control, I want control’ is going to create the incredible successful outcomes that not only Seattle needs but our industry needs in a time of change,” said Ben Elowitz of Seattle-based Wetpaint.
Entrepreneur and investor Andy Sack, from TechStars, RevenueLoan, and Founder’s Co-op, had a bit of a conflicted take on the venture capital industry, according to the report. He called the business “a racket,” but also said VCs are misunderstood in the entrepreneur community. In the end, his main message was consistent with Elowitz’s. “I think as a community Seattle has fallen behind other cities, and as a community we need to stop whining and start kicking some ass,” Sack said.
Michael Arrington of TechCrunch concurred, talking about the success of companies like Twitter, and the importance of dreaming big: “Where are the people here in Seattle saying, ‘We want to be the pulse of the planet’?” he asked.
Here’s where I stand: I think it’s mostly a cultural issue. Seattleites tend to be more reserved and laid-back than their counterparts in Silicon Valley or Boston. And they are a bit more isolated from the rest of the world than those other geographies. That doesn’t mean they don’t want their startup to rule the world (it might even be an advantage). And in fact, lately I’ve been thinking about the ways in which Seattle tech startups could rule the world. These are my five best guesses at the moment:
1. Alternative financing schemes
Seattle is quickly becoming an epicenter of new models and structures for financing companies (complementary to VC). Founder’s Co-op is blazing trails at the low end of seed-stage funding deals, by following an angel-like structure and getting in before most VCs will. TechStars is looking to replicate in Seattle the model of mentorship and seed-stage investment that it pioneered in Boulder and Boston. RevenueLoan is a new company and fund, backed by lead investor Voyager Capital, that is looking to invest in startups and get returns as a percentage of their revenues, rather than taking equity. All in all, entrepreneurs have more diverse options than they did a year or two ago.
2. “Gamification” of the Web
Thanks in part to the success of Zynga and Foursquare (or at least buzz) in making money from social video-game mechanics—virtual currencies, reward points, leader boards, and the like—every Internet entrepreneur and his brother (not to mention VCs) are staking out new territory in this field. But Seattle has a leg up on most regions, because of its extraordinarily rich talent pool in the gaming industry. Some companies to watch closely: BigDoor Media in software platforms for Web publishers, Bobber Interactive in financial services, Mindbloom in health and wellness, BuddyTV in fan sites, and Seattle’s current Web darling, Cheezburger Network, in humor and entertainment blogs.
3. New kinds of e-commerce
This thing called Amazon.com keeps growing. They don’t talk to the press. They don’t talk about competitors. They don’t really talk to anyone. But they keep focusing on customers, selling more of other people’s products, shipping more Kindles, and doing it all quickly and reliably. The Amazon ecosystem, including its wealthy alums, is now poised to lead the next wave of startups. Meanwhile, a new generation of independent companies like Bonanzle (marketplace for niche items), Tippr (group buying platform), Zulily (private sales), and 1000Markets (handcrafted gifts) are out making their names in new territories.
4. “Boring” old enterprise software
Sometimes boring is good—like when you’re trying to make money, not lose it. Last I checked, Microsoft still dominates the engineering talent pool around Seattle. No surprise then that making software for big businesses continues to be a major strength of the region. Here are some small companies that are not necessarily sexy, but are helping businesses be more efficient in crucial areas of IT: Apptio, Winshuttle, Verdiem, Dexterra, Jetstream Software, Smartsheet, Napera Networks, and ExtraHop Networks (just to name a few). Meanwhile, don’t take your eye off of bigger companies like Isilon Systems, Concur Technologies, and F5 Networks—they seem to be killing it these days.
5. Wildcard technologies
These are the high-risk, high-reward companies that are trying to make technological breakthroughs in a number of fields outside of software. Here are just a few examples: Modumetal, MicroGreen Polymers, and EnerG2 in nanotech and advanced materials for applications ranging from construction and transportation to consumer markets and defense. LaserMotive in beaming power wirelessly to everything from unmanned aircraft to futuristic space elevators. Cray in pushing the state of the art in supercomputing. TerraPower in fundamentally reshaping the future of nuclear energy. And did I mention geo-engineering to combat climate change, hurricane stopping, and malaria interventions from Intellectual Ventures? Even if only one of these far-out projects succeeds, it will change society forever.
So it seems like the Seattle tech community is very much in the race to change the world. We’ll be watching closely to see which companies pan out, and which ones fade away.