Seattle is the cloud capital and an enterprise town — can consumer tech startups thrive, too?

OfferUp CEO Nick Huzar
OfferUp CEO Nick Huzar accepts the App of the Year award at the 2016 GeekWire Awards.

When Nick Huzar started OfferUp, it was almost a disadvantage to be based in the Seattle area.

“Investors didn’t really understand the consumer world as much,” Huzar said this week, recalling the early days of the Bellevue, Wash.-based used goods marketplace, now valued at more than $1 billion. “A lot of people wanted us to charge a dollar per post. In the early days, that would have been the wrong move, but if you’re in the enterprise business, you’re trying to understand the unit economics and those types of things.”

GEEKWIRE 200, November 2018: See the full update

Cloud computing and enterprise software run deep in Seattle’s DNA. The region is home to market leaders such as Microsoft Azure and Amazon Web Services, in addition to large publicly-traded companies such as Tableau, Avalara and Smartsheet.

The latest GeekWire 200 ranking of the region’s startups also reflects this trend, with business-to-business companies making up roughly 75 percent of the list.

However, it’s not just a cloud computing town. Consumer tech companies are alive and well in Seattle. Rover; Remitly; Porch; OfferUp; and RealSelf rank in the top 25 of the GeekWire 200 list.

“Seattle is obviously cloud city, but we have some sunshine, too,” said Rich Barton, co-founder consumer tech powerhouses Expedia and Zillow.

But even with that movement, one has to ask: How in the world does a city that birthed giant consumer companies such as Costco, Starbucks, Expedia, Zulily, Valve and the biggest consumer tech brand on the planet — Amazon — not have more consumer tech entrepreneurs parading around Pike Place Market or Pioneer Square?

That’s a question Greg Gottesman has asked. The co-founder of online pet sitting startup Rover (No. 5 on the GeekWire 200) and venture capital firm Pioneer Square Labs said Seattle’s consumer tech ecosystem is strong, but given the stalwarts in the region, it could be much stronger.

The numbers show this trend. Last year, venture capital investors poured $4.7 billion into business-to-business companies in Washington state, compared to $1.8 billion for consumer tech companies, according to data from Pitchbook.

“Investors here have been historically weighted toward enterprise and many remain committed to that strategy,” said Heather Redman, managing partner at Seattle venture capital firm Flying Fish. “A lot of this has been driven by the desire to avoid capital intensive business models.”

Andy Liu, left, and Heather Redman, right, speak at Geekwire Startup Day 2016. (GeekWire Photo)

Redman — who previously worked at Getty Images, Atom Entertainment and Indix — said the larger tech landscape is moving toward businesses that feature real-world consumer interactions. “We will need to turn this corner as funders to mature with the rest of the industry,” Redman said.

Maveron General Partner Jason Stoffer, whose Seattle and San Francisco-based venture firm focuses exclusively on consumer companies, said there is room for more consumer tech activity in Seattle. Maveron scored with Zulily and Trupanion, Seattle-based consumer companies that went public in 2013 and 2014, respectively.

But Stoffer thinks more could be done to build out these types of companies. He pointed to Apoorva Mehta, founder and CEO of Instacart. Mehta was in Seattle working at Amazon before he headed south to Silicon Valley and founded the grocery delivery giant now valued at almost $8 billion.

Jason Stoffer.

“We can’t let [Y Combinator] and the Valley pull founders of companies like Instacart from their Seattle homes to the Bay Area,” Stoffer said. “We need more of a mentorship culture, where execs from the big winners pass their learnings on to the next generation. We need more seed capital focused on consumer.”

In other words, there need to be more OfferUps and more entrepreneurs like Huzar who can act as role models and set examples.

“I think of it as sprouts and trees and forests,” Huzar said. “If you want to see more consumer companies, you have to plant more seeds.”

Unlock Venture Partners, a new venture firm co-led by longtime angel investor and BuddyTV co-founder Andy Liu, has already made multiple investments in Seattle-based consumer tech startups. Liu said he’s seeing more consumer talent in the region, partly due to the larger tech companies building more consumer-focused products.

“I’d argue that even the B2B companies focused on cloud/enterprise have to have more B2C DNA to be successful,” Liu said. “At the end of the day, it’s still end-users that have to use these products.” Liu added that “Seattle is a good a place as any in the world to build a consumer-tech company,” but even still he’d love to see more activity.

Yi-Jian Ngo, managing director at Alliance of Angels, said it’s not a zero-sum game.

“I tend to believe there’s plenty of room for all kinds of startups in Seattle, and there’s a vibrant ecosystem in town to support them all,” he said.

Added Huzar: “I would love to see a lot more consumer companies here in Seattle. It makes it a more balanced ecosystem and more exciting, in some cases. It’s definitely additive, for sure.”

GeekWire 200 monthly update

Three companies each jumped one spot near the top of the GeekWire 200 this month — PayScale to No. 3; Remitly to No. 6; and Porch to No. 9.

AI startup DefinedCrowd was this month’s biggest mover, leaping 24 spots to No. 119. The Seattle-area company, which helps customers improve their AI services, raised a $11.8 million round in July.

The current GeekWire 200 top 10. (See full ranking.)

Others that climbed up the list include:

  • Convoy (No. 23);
  • BitTitan (No. 47);
  • Highspot (No. 69);
  • Phytelligence (No. 87);
  • Mighty AI (No. 93);
  • Crowd Cow (No. 99);
  • Apptentive (No. 101);
  • Unikrn (No. 106);
  • Maana (No. 108);
  • Skilljar (No. 111);
  • Ossia (No. 114);
  • Seeq (No. 116);
  • AuctionEdge (No. 118);
  • RFPIO (No. 122);
  • balena (No. 123);
  • Qorus (No. 124);
  • Add3 (No. 130);
  • Algorithmia (No. 132);
  • HERO Sports (No. 133);
  • Phylos Bioscience (No. 135);
  • Karat (No. 138);
  • Volt Athletics (No. 142);
  • MediaAlpha (No. 145);
  • usermind (No. 150);
  • iClick (No. 152);
  • Brandlive (No. 157);
  • WyzeCam (No. 165);
  • Rigado (No. 167);
  • ModusBox (No. 171);
  • and HaptX (No. 188).

The GeekWire 200 — sponsored by EY — is derived from our broader list of more than 1,200 Pacific Northwest tech startups. The list is designed to provide a better understanding of the startup landscape in the Northwest. The rankings are generated from publicly available data, including social media followings, approximate employee counts (via LinkedIn) and inbound web links. As we mentioned, the most important factor is employee growth, since our goal is to track those companies who may be emerging as the next Microsoft, Amazon or Expedia.

To make sure your startup is eligible for inclusion in the GeekWire 200, first make sure it’s included in the broader Startup List. If so, there’s no need to submit it separately for the GeekWire 200. If your Pacific Northwest startup isn’t among the companies on that larger list, you can submit it for inclusion here, and our algorithm will crunch the numbers to see if your company makes next month’s GeekWire 200. (Please, no service providers, marketing agencies, etc.)

Thanks to everyone for checking out this month’s ranking. And, just a reminder, if you value resources like these, be sure to check out our list and map of out-of-town tech companies with Seattle engineering outposts as well as our list of startup incubators, co-working spaces and accelerators in the region, and our GeekWork job board.

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