Billion-dollar startups define the tech world, but there are none here

Last month, venture funding database CB Insights released a list of every privately held company worth a billion dollars or more. The list of 133 (at press time) so-called “unicorns” is populated by Silicon Valley royalty: Uber ($51 billion), Airbnb ($25.5 billion), Palantir Technologies ($20 billion), and Snapchat ($16 billion) join Chinese phonemaker Xiaomi ($46 billion) in the top five.

Pore through the list, and it’s clear consumer companies are the heavy-hitters, and Seattle-area companies are lagging behind.

Those two traits aren’t mutually exclusive. Seattle’s startup scene is more conservative than the one in Silicon Valley. Some bemoan this, others embrace it, but pretty much all folks in the area accept it. One reason is an undeniable volume differential. From a nominal standpoint, there are far more entrepreneurs and venture capital firms in Silicon Valley, giving it better odds than the Puget Sound area at producing unicorns. But Valley companies have another volume advantage: Entrepreneurs there are louder and brasher, thus ginning up media attention and hype Seattle can’t match.

“It’s more like software built by adults, for adults (here), and down there it’s built by kids, for kids,” Smartsheet cofounder and CMO Brent Frei said. “It’s young people that jump here and there (to) whatever’s the hottest thing.”

Area entrepreneurs such as Rajeev Singh, formerly of Concur, and Sunny Gupta of Apptio — reportedly a near-unicorn — have said Seattle could use a bit of Silicon Valley’s swagger, but it’s not just the entrepreneurs and the VCs here keeping unicorns at bay. The types of companies founded in Seattle aren’t as likely to balloon to billion-dollar status. E-commerce is the best-represented industry on the unicorn list; 28 companies join Airbnb in that realm. On top of that, most of the biggest unicorns are in the consumer market. Of the dozen companies worth at least $10 billion, just two are exclusively enterprise firms — the sector that encompasses Puget Sound’s cloud- and big-data-heavy startup scene.

“The big thing that’s happened over the last decade is that technology has been taken forward by consumer Internet companies,” said Cameron Myhrvold, a founder of Bellevue venture capital firm Ignition Partners. “You look at what Google has done, and Facebook, and LinkedIn, and Yahoo, and those are the companies that are making dramatic innovation … and we see a gap in the market where those new technologies have impacted the consumer, but they haven’t really touched the enterprise.”

You’re seeing the trickle-down in Seattle. Much of the gambling on fickle consumer products and services happens outside the Puget Sound area, while companies here have a more infrastructural role
in startupland.

Privately held all-stars in the Puget Sound area are companies like Apptio, Inrix, and Smartsheet. They aren’t names consumers outside the area would know because they don’t produce consumer products. Instead, other, larger companies utilize their software.

There’s not a unicorn mindset here, but that doesn’t mean there never will be. Transplants from regions with a greater density of billion-dollar startups are flooding the Puget Sound area. Google, SpaceX, and other Silicon Valley companies are setting up shop on the Eastside, and a slew of workers from those companies and others are coming here. According to Seattle real-estate analytics firm Redfin, the Seattle metro area is the No. 1 destination among its users looking to leave Silicon Valley.

The Puget Sound still has little-brother status in the startup world. The big companies and the big money reside elsewhere — Silicon Valley, Los Angeles, Boston, and New York companies all received more venture capital than did Puget Sound firms in 2014, according to the National Venture Capital Association. So as Walla Walla is to Napa, the Seattle area is to Silicon Valley. Most top-flight wines — and startups — remain in California.