Seattle’s advantage in tech rivalry with Silicon Valley

Silicon Valley has an increasingly aggressive rival for tech talent and entrepreneurs: the Seattle area. Once known primarily for Microsoft and Amazon, the region now hosts hundreds of tech firms big and small. Hadi Partovi has a good overview on Techcrunch.com:

In the 1990s and early 2000s [it was] common knowledge that most Seattle-based startups had only two viable exit strategies: go public, or get acquired by Microsoft.

This led to a lopsided startup ecosystem, with a very small number of tech titans, and a large number of relatively tiny startups, with very little in between. …

The last 10 years have seen a sea-change in this dynamic in Seattle, caused by two forces.

The first part of the change has been the rise of a new breed of large Seattle-based tech companies – companies that are still smaller than the two local titans, Microsoft and Amazon, yet large enough to fill out the middle tier of the tech ecosystem.

This group includes public companies such as Expedia, Zillow, Tableau, and Zulily, as well as very large acquisitions such as PopCap Games, Isilon, Big Fish Games or Bluekai. Along with older companies such as Adobe and Real, the home-grown tech industry in Seattle now has a sizeable number of companies not only at the $100 billion valuation, but throughout the $10 billion, $1 billion, or $100 million valuation ranges. …

The second force has been the increasing appearance of Silicon Valley engineering offices in the Seattle metro area. Google was one of the first major Silicon Valley offices to open an engineering office in Seattle, and in fact Google now has two engineering offices – one downtown in Seattle, and one in the suburb of Kirkland, WA. …

A decade after Google set up shop in this city, Seattle has seen an explosion of Silicon Valley companies setting up their second engineering office. Seattle is now home to engineering offices for Google, Facebook, Apple, Twitter, Salesforce, eBay, Dropbox, Uber, SpaceX, Taser, Palantir, Groupon, Hulo, Electronic Arts, Yahoo!, Pivotal Labs and many others …

Seattle’s secret weapon: relatively cheap housing

That’s a striking list. Virtually all Silicon Valley tech giants have a Seattle wing. But at some point, the dynamic may change from Expedia and Zillow co-founder Rich Barton’s characterization of Seattle as the “blond, scruffy-haired little brother of the star quarterback (Silicon Valley).”

That’s because the Seattle area has a huge advantage: housing is relatively affordable. Finding affordable housing in California isn’t just a problem for poor people. Many well-paid professionals are unable to afford to buy their own homes and start families.

According to bizjournals.com, in 2013, the San Francisco Bay Area/Silicon Valley had the highest average salary ($111,885) for software engineers of any U.S. city. The Seattle area was second at $103,196 per year.

In San Francisco and Silicon Valley, that much money doesn’t get you much in the way of housing. The National Association of Realtors says the median cost of a home in San Jose/Santa Clara/Sunnyvale was $855,000 in the fourth quarter of 2014. In San Francisco/Oakland/Fremont, it was $742,900.

The housing outlook is grim for renters as well. A new Forbes magazine survey finds that the Bay Area and Silicon Valley have arguably the nation’s worst housing shortage, allowing landlords to constantly push up rents. The average monthly rent in the greater San Francisco area is now $2,802.

CA pols stick with same affordable-housing approach

A $100,000 salary buys a lot more creature comforts in the Seattle area.  The median cost of a single-family home in Seattle-Tacoma-Bellvue was $352,000 over the last three months of 2014. The average apartment rent in March was $1,615 in all locations within 10 miles of Seattle city limits.

In New York City, housing costs are also sky-high, and Mayor Bill de Blasio is heeding economists who say the best way to make homes and apartments more affordable is to increase housing stock. De Blasio wants to add 240,000 housing units.

In California, however, the politician who has focused most on the affordable-housing issue — Assembly Speaker Toni Atkins, D-San Diego — instead wants to ramp up the traditional California affordable-housing policy of having the government subsidize some homes. Atkins’ proposals haven’t focused on the regulatory reforms that developers say are the easiest way to spur more housing construction in the Golden State.

Corporations have been known to up and leave California for many reasons. Being able to retain your engineers and coders by guaranteeing them they will live in an area where they can afford the American dream of a single-family home would appear to be a powerful incentive for a company to move to Seattle, especially now that there is such a huge concentration of tech firms in the Seattle region.