Xconomist of the Week: Sean MacLeod Says Stop Trying to Be SF
One of the most popular parlor games in Seattle, and every other city that isn’t in the center of the technology universe, starts with people asking themselves this: How can we become more like the San Francisco Bay Area?
Sean MacLeod, president of Seattle’s Stratos Product Development and one of our Xconomists, says he’s heard enough of that gripe. Instead of peering over its shoulder at the juggernaut to the south, MacLeod says Seattle should embrace its strengths and the niche it’s developed in the broader innovation economy—even if that means building companies that big corporate owners come into town to buy.
“Just like the weather, we need something to complain about. I hear it at venture forums and I hear it at the meetings of the minds in the technology space,” MacLeod says. “I just think that we’re really super good at certain things. And part of that is getting these small companies started that have really unique value propositions, or really unique technology and science.
“There are some cornerstones to our city that have really helped drive that, and we should embrace that and not try to be anybody else.”
It’s the kind of contrarian take I’ve heard and read a few other times around the Seattle tech scene, but not as much as I’ve heard the gripe that Seattle just isn’t doing enough to be like the Bay Area.
Seattle definitely isn’t alone in this bit of entrepreneurial navel-gazing. Just ask any VC or politician in Boston if they’re interested in having “the next Facebook” stay in town. Or if leaders in cities like San Diego or Detroit think much about trying to build a Silicon Valley-like ecosystem. Or if New Yorkers think they can pour enough money into their scene to challenge those punks out West.
You’ll hear a version of that why-not-us complaint everywhere you go, from big U.S. cities to emerging economies overseas. But MacLeod’s point is that you can’t capture lightning in a bottle twice, and Silicon Valley is one of those combinations of circumstances that just come together sometimes in history.
Not that other technology scenes should quit trying to be better. But starting with your own strengths and building a better version of yourself should be the real goal, MacLeod says.
There’s a good example in the shopping that Philips has done in the Seattle area over the years, MacLeod says. Philips has tapped into the Northwest’s strength in heart defibrillators, through the acquisition of the former Seattle-based company known as HeartStream. The Netherlands-based electronics giant has also made notable acquisitions around the Northwest that include Snoqualmie-based Optiva, the maker of the Sonicare toothbrush, and ATL Ultrasound, which is now a Philips division that makes cart-based ultrasound machines.
“This is the center of ultrasound,” MacLeod notes. “All that core science was developed at the UW and spun out into two or three powerhouses in the ultrasound business, and they’re all focused here.”
The thread extends through other industries too, like IT infrastructure. One of the biggest and most discussed turnaround and acquisition stories of the past several years in Seattle has been Isilon Systems, the network-attached storage company that sold to EMC for $2.25 billion in cash in 2010.
“That’s one I heard a lot of griping about,” MacLeod says, because they wondered why Isilon couldn’t just stay independent and take on someone the size of an EMC. But he says it doesn’t have to be a bad thing to have your local stars vacuumed up by a bigger company, particularly if your region builds a brand as a place for innovators to flourish.
“I think from a business perspective you look at it and say, they were built to get to that point where an EMC can take them on,” MacLeod says. “Because EMC can’t do that kind of work. They can’t be small and do creative work in that space. And Isilons aren’t built to go that large.”
In the video gaming industry, Seattle saw a big deal go down last year with the Electronic Arts acquisition of PopCap Games, a longtime leader in casual games, for $750 million in up-front cash and stock.
Nuance has been busy in the region too, snapping up Swype last year for around $100 million in cash, adding to the portfolio of mobile startups that have turned the larger company’s Pioneer Square offices into a local center of innovative mobile technologies.
The PopCap, Isilon, and Swype deals are also instructive of what appears to be a newer trend in big acquisitions, MacLeod says. The acquiring companies are often opting to keep a local branch operation full of people from the acquired company, and then keep hiring.
That’s different than what many acquirers have done in the past, when they just harvested the most valuable products from the company they were acquiring, and closed down or greatly cut back on the local operations.
You also see Silicon Valley companies embracing the trend by seeking to establish beachheads in Seattle. Many of those companies—Google, Facebook, and Zynga to name a few— have been hungry for technical talent that once was housed mostly at Microsoft or Amazon.
“There is a recognized talent pool that is here … that isn’t just going to get up and run down to the Bay Area,” he says. “And these large companies are coming in and acquiring, and leaving the marketing and the R&D in place.”
That’s not to say it’s all sunshine and roses to be the source of corporate takeovers. Mergers and acquisitions are famously ineffective at boosting the larger companies’ fortunes over the long term. And there’s no guarantees of stability once you’re on board, either—just ask PopCap, which recently laid off 50 people and may have to close its Irish office as the game industry grapples with big systematic changes.
So sure, any region could always use more anchor tenants. Amazon’s starting to step into that role, with mind-boggling ambitions in infrastructure, media, devices, and commerce. And the Seattle area’s education system definitely could use a boost, particularly in the area of college programs for in-demand technology professions like software engineering and data science.
But, MacLeod says, people who care about the technology community should focus on turning up the volume on what they already have—not pining for a mythical future in which they become the junior version of Silicon Valley.
“To try to emulate something else would be kind of an unnatural act,” he says. “We’re unique and have a unique culture. Embrace it.”