Update: Startup Seattle funding avoids City Council budget axe, allowing initiative to proceed

There’s a chance that a key priority of Seattle’s tech industry, and one of outgoing Mayor Mike McGinn’s signature achievements, may be quietly killed or delayed indefinitely by the Seattle City Council this week. Whether or not that happens, the fight has already strained relations between councilmembers and leaders in the local startup community, which consists of over 700 companies.

“These politicians are just classically shortsighted,” said Chris Devore of the struggle. “I’m so pissed I can’t even speak.”

A co-founder of startup accelerator and seed fund Founders Co-op, Devore was one of the first backers of Startup Seattle, an initiative designed to support and grow Seattle’s startup community.

An initially private project launched in spring 2011, Startup Seattle was funded by Microsoft and prominent local startup funders TechStars and Founders Co-op. It sprang from the belief that Seattle needed to compete with the fierce efforts of other cities to grow their tech sectors — even if just by providing a local contact for companies considering opening offices in the city, such as Facebook, or entrepreneurs thinking of starting a business here. At first, the initiative consisted of only a website and part-time staffer, Red Russak.

After a series of meetings between local tech CEOs, Mayor McGinn and city councilmembers, Startup Seattle was handed off to Seattle’s Office of Economic Development (OED) last May. The understanding among stakeholders was that a staffer would be hired to manage the project by August. Among other duties, that person would help early-stage companies navigate regulations and real estate, create a promotional campaign to attract tech companies and talent to Seattle, and foster partnerships between local schools and tech organizations.

As a metric for its own success, the initiative would shoot to grow the number of startups in Seattle and the number of people employed in the sector, by 10 percent annually. It would also assess the University District as a potential site for an “innovation hub,” where favorable conditions are created to foster the establishment of new companies.

Russak, who was the founder and sole employee of the original Startup Seattle, said the initiative was an effort to connect employers and qualified applicants, and to create events and support groups for people starting local companies.

“We were super happy when the city took this over,” Russak said. “When companies like Dell, or startups from New York or Japan, were trying to figure out whether to invest in Seattle or send employees here, you know who was on the other end of the phone when they called? Me! Not some professional who understands the economy of the city. This was a welcome move.”

At the time, University of Washington’s chair of Computer Science and Engineering Ed Lazowska lauded the program. “The city put a stake in the ground to do something really important,” he said, “and the time is right for this kind of transformation.”

Despite the initial agreement, the projected date for hiring a Startup Seattle staffer came and went. Ever hopeful, leaders in Seattle’s startup community continued to meet with councilmembers to explain the importance of the effort.

Nonetheless, at a November 8th City Council Budget Committee meeting, an anonymous amendment to the 2014 budget was proposed that would have effectively killed Startup Seattle – eliminating the $151,000 designated to OED to hire a staffer, manage the project and website and create marketing materials. While the proposal’s sponsors were not named in official budgeting documentation, councilmembers Nick Licata and Jean Godden were the only ones to voice support for it at the meeting.

Godden argued that the initiative amounted to preferential treatment for startups. “A dedicated person for the [startup] sector seems a little much,” she said during the meeting. “The fashion industry is a good-sized one in Seattle. Why would we want to do just this particular community? We have to be equitable among industries.”

Licata argued that Seattle is already “ranked in the top five, if not the top three, for the number of startups being started in major cities around the country.” Additional help wasn’t needed from the public sector, he said. Licata also claimed there were no metrics attached to the project.

Council member Tom Rasmussen agreed that the council needed more information on the initiative, but wasn’t on board with the plan to kill Startup Seattle. Neither were the rest of the councilmembers at the meeting.

Outgoing councilman Richard Conlin offered a particularly vigorous defense of the initiative. “I find it interesting that the startup community comes in here and says, ‘This is what we need.’ And we’re saying, ‘Wait wait, you don’t need that. You need something else,’” said Conlin. “I think we’ve got a community that’s gotten itself together, and come to us with a proposal. It’s been fully briefed. This is critical for the economic development we’re going to have.”

Conlin noted that the city already offers this sort of service to the maritime and music industries, among others.

Due to the lack of support for an outright cut, Licata told Crosscut in an interview that he has sponsored an initiative with support from Godden and Rasmussen, which would instead delay funding for Startup Seattle indefinitely. The trio plans to introduce the proposal, which would include a request to the Office of Economic Development for more information about Seattle’s startup community, at the council meeting on Monday.

Godden did not respond to a request for an interview on the subject, but sent Crosscut a written statement saying that the new information the trio is seeking would deal exclusively with the growth of Seattle’s startup sector over the past few years.

In an interview, Licata said he expects the data requested in the new proposal will prove the industry is doing fine and doesn’t need any help. “If we’re going gangbusters here, what are we trying to fix?” he asked. Asked if he was concerned about Seattle’s ability to compete with the multimillion dollar efforts of other city governments to stimulate their startup communities — including New York; L.A.; Austin; Boston; Vancouver, B.C. and Las Vegas — Licata scoffed.

“Welcome to the market economy,” he said. “You can’t stop competition from coming. Maybe they [the people behind Startup Seattle] are socialists, and don’t believe in a market economy. There was a socialist candidate for city council. Maybe they voted for her.”

Licata added that the new proposal has “general support” from the council, and a good chance of passing due to its “positive approach.”

The slow process to hire a Startup Seattle staffer frustrated leaders of the local tech community, but attempts to kill the project have left them enraged. One tech CEO, who asked that this statement not be attributed, compared dealing with the city council to “teaching a caveman how a car works.”

Founders Co-op’s Devore called the latest council proposal a “procedural tactic that means fucking nothing. They’re trying to kill it, and they think this sounds better.”

“What do these people not understand about where jobs come from?” he asked. “We throw hundreds of millions at companies like Boeing, just to keep them from leaving. That doesn’t do anything to build the next generation of local companies. This is an extremely modest proposal, especially compared to the millions other cities are spending. We’re just asking for one person to help grow this industry.”

Office of Economic Development Director Steve Johnson was more diplomatic, but also expressed frustration with “public officials who really don’t understand the IT [information technology] sector at all.”

“IT cuts across every business sector we have in Seattle,” he said. “My fundamental disagreement with Licata is we’re not doing this because [the tech sector] needs help. We’re doing it because it’s a strength for the city and we can do even better. The notion that government only gets involved in an industry that’s suffering is not smart from an economic perspective.”

Johnson added that the efforts of other cities to attract and nurture tech companies could damage Seattle’s economy in years to come.

“In the 1950s, the highest per capita income was in Detroit,” said Johnson. “If you take the strategy of only partnering with industries when they’re struggling, I can easily see Seattle losing its prominence in tech. If we don’t support and build partnerships with this industry, we’re going to see significant decline in what we could’ve had in our economy. I’m not saying we need to spend hundreds of millions like we do on aerospace. If you spend $150,000 on a strategic partnership, which leads to companies employing hundreds of people, that’s a damn good investment. I feel pretty strongly about this.”

Startup Seattle founder Russak said he was aware of how slow government could be approving new initiatives. Council President Sally Clark agreed, saying that tech companies are used to moving fast and the governmental process could be a frustrating change for them.

“Startups exist in an environment where they see something that needs to be done, and changes are made in a second,” said Clark. “I understand that they would prefer us to move quicker… I think there are a few colleagues interested in parking the [Startup Seattle] funding for now, though, and waiting for more data on the need for help in the tech startup sector.”

Like Johnson, Russak believes this is the wrong way of looking at the issue. “There are people who say slow and steady wins the race, but they don’t live in the real world,” he said. “To win the race, you inject accelerators. Why does Seattle think we can be so relaxed when these other cities are busting their ass to grow their tech economies?”

When informed of Licata’s socialist comment, Russak was livid. “That’s just crazy talk,” he said. “We’re talking about the cheapest possible way to create more money and jobs in Seattle. They haven’t done any homework on this. We invite them to our monthly [startup tech events] to learn about the industry, and they always say they’re busy.”

“I don’t know why some of these people are in office,” he continued. “They’re so out of touch it’s embarrassing.”

Clark confirmed that the debate over delaying funding to Startup Seattle is scheduled to begin Monday, and will likely be settled by November 25.

This story, which originally appeared on Crosscut, is republished here in partnership with GeekWire.

Editor’s Note: GeekWire co-founder John Cook was one of the participants in the city’s planning meetings for the Startup Seattle initiative.