(GeekWire photo illustration / photo by Kevin Lisota)
Huge funding. New unicorns. More tech talent. Acquisitions. IPOs.
The startup scene in Seattle is booming.
PitchBook and NVCA released the latest figures from their Q2 Venture Monitor this week. Startups from the Seattle area raised a record $ 3.1 billion in 205 deals in the first half of 2021. That’s $ 1.8 billion on 162 deals in the same period last year.
It’s not just Seattle. Other startup hubs like the Bay Area ($ 54.1 billion) and New York City ($ 22.4 billion) are also putting massive funding marks in a different stadium than Seattle.
But by its own standards, Seattle’s startup scene has never been this strong.
The larger region is also growing. Tech companies across the Pacific Northwest raised more than $ 5 billion this year, according to GeekWire’s Funding Tracker. That is more than double compared to the same period last year.
At the national level, VC deactivation has already reached $ 150 billion and will surpass last year’s record of $ 156.2 billion, according to Venture Monitor. The 2021 IPO dollar volume has also surpassed last year’s record levels, and the same goes for mergers and acquisitions.
Much of the recent venture capital funding comes from so-called mega-rounds that have shaped several new unicorns, or from private tech startups valued at more than $ 1 billion. Fast growing Seattle area companies including Highspot, Zenoti, Outreach, Rec Room, and Amperity have raised venture capital rounds of $ 100 million or more in the past six months.
There are now at least 12 “unicorns” in the Seattle area – just five years ago when GeekWire analyzed CB Insights’ list of unicorns, no Seattle-based startup made it.
Seattle lost a unicorn this year. But that was because Okta bought security startup Auth0 for a whopping $ 6.5 billion – one of the largest acquisitions in Seattle tech history and a reflection of the maturity of the ecosystem.
The pandemic accelerated the adoption of digital technologies, which helped boost sales for the bevy of business-to-business enterprise technology companies in the region. Seattle has also seen a spate of startup activity in the life sciences lately.
Three Seattle area companies – Sana Biotechnology, Impel Neuropharma, and Paymentus – went public with a traditional IPO this year, and Icosovax filed an application just last week. Last month, Seattle-based Nautilus Biotechnology, led by Isilon Systems co-founder Sujal Patel, went public through a SPAC merger. Pet sitter startup Rover is also preparing to go public via SPAC, while mobile remittance company Remitly recently submitted initial IPOs.
The market is “very frothy at the moment,” said Greg Gottesman, managing director of Pioneer Square Labs in Seattle.
“With the Fed pumping trillions of dollars into the economy, it’s no surprise that this additional liquidity has found its way into the private market,” he told GeekWire. “However, if you believe that the pandemic has resulted in massive changes and relocations, I can’t think of a better place to bet right now than new technology trying to capitalize on those changes for both consumers and businesses.”
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The new funding will help Seattle startups increase their hiring and lay the groundwork for even more growth.
Data from Adam Schoenfeld’s Seattle Startup Hiring Tracker shows 8,518 vacancies in 393 startups – that is 2,968 vacancies in the same quarter of the previous year. The companies hired 4,562 additional employees in the second quarter of this year, increasing the total workforce by 6.4% from the first quarter.
And the pool of available talent that you can hire from is growing all the time.
The Seattle area created more than 48,000 tech jobs from 2016 to 2020, an increase of more than 35% – faster than any other major US tech market, according to new analysis by real estate company CBRE.
Much of the growth in tech jobs is being driven by their hometown tech giants Microsoft and Amazon, both of which rose sharply during the pandemic. Microsoft has nearly 3,000 open positions in the region and Amazon has more than 13,000. There’s also the expansion of Silicon Valley engineering outposts in the Seattle area, with Facebook, Google, and others continuing to expand their presence.
Having these giants close by can help nurture available talent, but it can also make it difficult for startups to offer competitive salaries. And some theorize that big tech companies – not just Amazon and Microsoft, but Expedia, T-Mobile, Zillow Group, Zulily, F5 Networks, and others – are crippling Seattle’s startup scene and sucking up potential entrepreneurial talent.
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However, Heather Redman, managing partner at Flying Fish in Seattle, said she is seeing more and more people coming from Amazon in particular to start businesses. Some recent examples are Shipium, Dendron, Freightweb, Pandion, and others.
There’s also a company like Convoy, a Seattle-based digital freight startup that was founded by two former Amazons in 2015 and was worth nearly $ 3 billion in 2019 and continues to grow. Now there are former Convoy employees starting their own businesses like Candidate and Common Room.
It’s another example of Seattle’s evolution as a startup city, climbing into the top 10 annual global startup ecosystem rankings by Startup Genome last year.
Newer startups now also have access to more local funding and advice, with early stage firms like Flying Fish, Pioneer Square Labs, and Fuse having come into the market for the past decade, providing local capital for companies just starting out stand.
There are even programs like Venture Out that are specifically designed to help people quit large tech companies and start startups.
Meanwhile, long-standing firms in the Seattle area, including Madrona Venture Group, Voyager Capital, and Founders’ Co-op, have raised funds in recent years. The region’s angel investor community is also growing, Madrona found in a recent survey.
Seattle’s startup scene looks set to grow even more. “We expect to continue breaking fundraising and hiring records as the year progresses,” said Redman.
However, she added that if the city does not address issues such as housing affordability, “we risk losing that momentum in a few years”.
Tech hubs like Seattle have become opportunity centers for some while displacing others. More tech money flowing into the region could mean an expanded tax base, but it could also exacerbate the housing density dilemma.
For now, however, “this region remains a great place to live and work compared to alternatives,” Redman said.