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How America’s two tech hubs are converging

Posted by hkarner - 13. Mai 2017

Date: 11-05-2017
Source: The Economist

More than ever, Seattle and Silicon Valley are joined at the hip

WOULD your region care to be the next Silicon Valley? In most of the world’s technology hubs, local leaders scramble to say “yes”. But ask the question in and around Seattle, the other big tech cluster on America’s west coast, and more often than not the answer is “no”—followed by explanations of why the city and its surrounds are different from the San Francisco Bay Area. The truth may be more complex: in recent years the Seattle area has become a complement to the valley. Some even argue that the two regions, though 800 miles (1,300km) apart, are becoming one.

They have similar roots, notes Margaret O’Mara, a historian at the University of Washington (UW). Each grew rapidly during a gold rush in the 19th century. Later both benefited from military spending. Silicon Valley ultimately focused on producing small things, including microprocessors, and Seattle on bigger ones, such as aeroplanes (Boeing was for decades the city’s economic anchor). This difference in dimension persists. The valley has plenty of giant firms, but its focus is mainly on startups and smartphones. In contrast, Seattle is still more of a company town, with Amazon and Microsoft, both builders of big data centres, looming large.That, and the fact that Seattle and its suburbs are less than a fifth the size of Silicon Valley, has created a different business culture. In Seattle, for example, job-hopping is less common, as is swapping full-time employment for the uncertain life of an entrepreneur. Seattle has spawned firms such as Avvo, an online marketplace for legal services, and Zillow, a real-estate site, but the startup scene is underdeveloped. UW is a good gauge: it now has one of America’s best computer-science departments but produces nowhere near as many new firms as Stanford University.

Local politics differ, too. Seattleites don’t want their city to become like San Francisco, which is dominated by affluent, techie types. Their city council has just approved a new programme requiring property developers to include cheap units in their projects or to pay a fee. The aim is to ensure that Seattle remains America’s second-most economically integrated city (as defined by RedFin, a data provider). San Francisco ranks 14th. “In the playground parents don’t just talk about the next big thing,” says Ed Lazowska, a professor of computer science at UW.

That is one reason, besides nature’s attractions, cheaper housing and no state income tax, why exhausted Valleyites flock north. “You get better quality of life for half the cost,” says Simon Crosby, co-founder of Bromium, a computer-security firm, who has made the move from California. Bromium is based in Cupertino, also the home of Apple, and he regularly takes the “nerd bird”, as flights between the two tech clusters are called (they are full of geeks who live in Seattle and work in the valley). Venture capitalists often make the two-hour commute, too. Most money invested in Seattle startups comes from California; the north-western city only has a handful of VC firms, such as Ignition Partners and the Madrona Venture Group.

Another link between the two cities is cloud computing. Most startups in and around San Francisco run their business on Amazon Web Services, the e-commerce giant’s cloud-computing platform. Its momentum is such that some in Silicon Valley have started to fret that it will one day become as dominant as Windows, the operating system made by Microsoft, once was.

For now it is Seattle that is more worried about being dominated by its neighbour to the south. The city hosts nearly 90 engineering offices that firms have opened to find new talent to hire. A third have a Californian parent. John Cook, who co-founded GeekWire, which covers the local tech industry, argued recently that, although the new offices add to Seattle’s tech scene, they had taken “a lot of oxygen” out of the startup ecosystem by hoovering up highly qualified staff. That triggered a debate about the disadvantages of outside investment. Other effects of tech migration are equally contentious: home values have increased by a tenth in the past 12 months, according to Zillow.

Complaints about being overrun by Californians have a long tradition in Seattle, but the risk that the area becomes a Silicon Valley overflow zone preoccupies many. “We have to choose to remain different,” says Tren Griffin, a Microsoft veteran. Chris DeVore, an angel investor who runs the Seattle branch of Techstars, a chain of accelerators, says more needs to be done to grow local startups. “Microsoft and Amazon were a bit of an accident,” he says.

Regardless, Seattle and Silicon Valley are now joined at the hip. The best approach is to make that connection as efficient as possible, says Rich Barton, a serial entrepreneur. He not only started Zillow and Expedia, a giant online travel site, among other Seattle firms, but is a partner at Benchmark, a leading VC firm in the valley. Rather than relying on flights, which are often delayed or cancelled due to bad weather, he says, someone should build a high-speed rail line. Together, he quips, that old west-coast dream, popular again after the election of Donald Trump, would be within reach: “We could form our own country and secede.”

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