Forty Years of Transformation

The Washington Technology Industry Association (WTIA) is celebrating 40 years, and I am celebrating both my own 40-year anniversary of working in this industry and the end of my 11 year tenure as its CEO. While the public discourse in the last few years has often focused on the more nettlesome aspects of changes caused by the tech economy, most advancements and achievements in every sector of our economy have been enhanced positively by tech. It has been a privilege to be a part of this industry for my entire professional life. Leading the WTIA for the past decade is a major highlight in my career. As we celebrate our 40th anniversary, I took some time to think back about the many contributions of this great state to the creation of an industry that has transformed our region and the entire world.

 

Digital and Wireless Communication

It might seem strange to start here in a story about information tech in our region, but the Seattle area tech companies that pioneered desktop software, desktop publishing, online streaming, online retail, and cloud computing would not have had the same global economic success without mobile access to the internet that we almost take for granted today. And that began here, too.

In 1981 McCaw Communications (a Cable TV company in Redmond) started buying newly created cellular spectrum licenses from the FCC that had great potential for cellular communications. In 1982, AT&T agreed to break itself up to end an antitrust lawsuit filed by the US Department of Justice, creating “Baby Bells” in seven regions across the country and allowing other companies to compete for basic phone service. By 1986, McCaw was able to buy MCI’s cellular subsidiary and in 1987 launched McCaw Cellular.

In 1990 McCaw Cellular partnered with what remained of the parent company AT&T to create the first national cell phone carrier in the US. By 1994, that partnership was spun off to create AT&T Wireless, still one of the top three wireless carriers in the US today. Tom Alberg, General Counsel at McCaw, used some of his personal fortune from the launch of AT&T Wireless to launch Madrona Venture Capital, which is now the largest VC in the PNW, one of the earliest investors in Amazon, and one of the top Tech VC firms in the US.

As cell phones became more popular, the shift to digital transmission of phone calls led to innovations in new communication formats including text messages and VoIP. John Stanton (today the Seattle Mariners owner) had built his company Western Wireless while McCaw was shifting its focus from Cable TV to cellular. Western Wireless spun off its digital subsidiary VoiceStream in 1999 so it could grow more rapidly as a stand-alone company. The local telco talent pool and favorable business climate in Washington State made Bellevue the top choice for German firm Deutsche Telekom, which acquired Western Wireless in 2001 and rebranded as T-Mobile USA.

 

WTIA Launched as WSA to Help Software Companies

In 1984, software was still a tiny experiment in Washington state, compared to the state’s economic juggernauts of Telco, Aerospace, Advanced Manufacturing, Agriculture, and Maritime.

During all the structural and digital transformation taking place in telco, the Washington Software Association (WSA) was launched, although it went through many naming iterations before settling on that simple acronym. WSA was formed to make a case to legislators that our state had a shot at making software a key driver of economic growth but needed a coordinated public and private investment to compete globally.

In 1984, local software companies were still small, representing less than 1000 jobs in total. The top Seattle area software company was WRQ, with a few hundred employees. It had been founded a few years earlier to build software that allowed the newly available desktop PCs to connect to larger, more powerful mainframe computers. Desktop PCs were still mostly used to build spreadsheets, share files, or play games. The “real value” was being able to connect as remote terminals away from the office to access corporate mainframe computers where all the financial and business data were stored. The local software development talent pool was growing thanks largely to the UW, which had a small but high-quality computer science department competing with MIT and Stanford – and their much larger budgets.

Meanwhile, Boston was already a center of technology excellence with hundreds of very successful tech companies like Lotus which made spreadsheets for the new personal computers that had become popular. Thanks to MIT as its polytechnical university as a tech talent hub and Harvard as a business building engine, the Boston region mushroomed in tech companies and jobs. Silicon Valley was also a center of technology excellence with hundreds of successful tech companies, largely thanks to Stanford as a polytechnic hub and business building engine – and a massive surge in local, private capital seeking investment opportunities into those companies.

WSA was formed to help the nascent software industry in our region compete for capital and talent.

 

Software in Washington State

Almost as a precursor to the stunning growth to come in our region, Aldus launched in 1984 and invented what was then an experiment – desktop publishing to prepare documents for commercial printing. Their success inspired hundreds of other companies to develop applications that used the desktop PC as a business process control tool.

A few years earlier in 1979, Microsoft moved from Albuquerque, NM to its new home in Bellevue, WA. One reason for this relocation was the tech talent pool and the UW computer science program that graduated some of the best and brightest software developers in the world. Microsoft moved to Redmond and went public in 1986, with what then was considered a bizarre new idea. Every single employee, regardless of status or tenure in the company, was awarded options to purchase shares.

Microsoft successfully launched an operating system which allowed independent software developers around the world to build applications that ran on PCs. This open access was in stark contrast to the control that Apple used to restrict its PCs to its own software and a few limited partners. This launched a proliferation of PCs globally, running Microsoft software and inviting innovation from around the globe. Microsoft, as a result of providing its employees access to shares, produced nearly a dozen billionaires and 13,000 millionaires including hundreds of admin assistants, janitors, and groundskeepers. This equitable employee access to shares principle has inspired nearly every tech company since to offer stock options or restricted stock or both. Many senior employees at Microsoft and other local tech companies started leaving their jobs with their newfound wealth in the 1990s to start their own technology companies.

For example, Mike Slade, a former Microsoft executive and Microsoft co-founder Paul Allen launched Starwave in 1993 to build a successful digital entertainment company that went on to build ESPN.com among many other media projects with the likes of ABC News, Peter Gabriel, and Sting. Starwave was acquired by Disney in 1998 and if you like your ESPN+ service like me, you now know it was created here in our region. Meanwhile another ex-Microsoft executive, Rob Glaser, launched Progressive Networks in 1994 to provide a distribution channel for politically progressive content. He renamed it Real Networks and went on to pioneer audio and video streaming media on the internet. Spotify and YouTube were inspired by those brilliant inventors. RealNetworks has also produced dozens of entrepreneurs who went on to launch companies. This was not unique to Real by any means. There are hundreds of similar stories about local tech companies launched by former employees of local tech companies.

By the mid 1990s, software in our region was still small compared with Silicon Valley. WSA was part of a team of organizations that successfully lobbied state legislators in Olympia to approve an R&D tax credit to attract private capital, tech talent, and founders to the region. This 1993 tax incentive helped Washington become competitive in the U.S. and was successful for 20 years in helping to accelerate private investment, job growth, and economic prosperity for the entire state.

In 1994, Jeff Bezos quit his job at a New York quantitative hedge fund and drove to Seattle to build his online retail startup, Amazon. He came here to leverage close ties to major national book publishers on the west coast, to poach tech talent from Microsoft and other software companies on the west coast, and take advantage of the favorable tax treatment and cost of living in our state, relative to New York.

During this wild boom era of tech in Seattle, startups were formed by the hundreds every year, often in Pioneer Square, expanding software applications into every aspect of our society and economy. Pioneer Square was a magnet for Seattle startups because of cheap, vacant commercial real estate. It was also then a very hip part of the city filled with bars, nightlife, and restaurants, and at that time a vibrant music and film industry.

While all this growth in software was happening, there were already many tech hardware companies in the region formed with talent from Boeing in Washington and Intel in Oregon. They were members of the much older and more established national American Electronics Association (AeA). WSA merged with the Washington state chapter of AeA in 2009 and became WTIA to serve all of tech, not just software companies.

Given the explosive growth of new tech startups in our region, and given the role of UW in producing software and management talent, and given the volume of professional talent recruited by a few very successful local companies that were then launching those startups, WTIA produced its first cluster map showing the origin of founders. This map (updated in 2015) has become a touchstone for cities and regions around the world who wish to mimic the success of Seattle. This map also helped convince top tier VC firms in the Valley to begin partnering with local Seattle VC firms. Today, Silicon Valley invests $2 for every $1 invested by local Seattle VCs and we have become deeply linked to private capital from all over the world.

In 2004, Google built an office in Kirkland as part of a strategy to branch out of search into office applications. Their CEO Eric Schmidt shared with me at the time that Kirkland allowed Google to more easily poach talent from Microsoft as well as compete locally for inbound talent attracted to the booming tech sector in the region. In 2006, Google formally established itself as a viable competitor to Microsoft in the office application space. Google took the approach of online apps versus Microsoft’s software installed on a PC, which was part of a wider transformation to the now nearly ubiquitous Software as a Service. Today, Google’s local success has attracted more than 150 tech companies from around the U.S. that have engineering offices in the Seattle area.

By this time, the region had grown much in need of professional journalism dedicated to our industry. A small tech blog team, at the now defunct local newspaper Seattle Post Intelligencer, explored launching a new media company with WTIA in 2005. WTIA didn’t have the capital to help launch that effort. The blog team moved to PSBJ for a short time, but Jonathan Sposato – who had made his fortune building two tech startups that he sold to Google – provided the blog team of John Cook and Todd Bishop the capital to launch GeekWire. Their excellent journalism has attracted readership from all over the world.

By 2006 Seattle was abuzz with startups, venture capital from the valley, founders and techies arriving from around the world, all racing to build the next best thing. The mood was vibrant and full of excited energy. Around that time, Amazon came up with a clever idea. They had become a massive retailer selling much more than just books but were still barely squeaking out enough cash to keep the company running. To handle the enormous demand during the holiday retail season, Amazon had built a spectacular infrastructure that sat idle for 9 months of the year. Amazon decided to rent out the idle computing power to other companies.

The sophisticated and robust Amazon system was now available to rent by companies and entrepreneurs who could never afford to build anything like it. This new, highly profitable, and transformative “cloud computing” to serve online merchants and entrepreneurs improved Amazon financials, which allowed it to invest billions of dollars into becoming one of the largest and most successful companies in the world. That contribution to tech in our region cannot be overstated. We are still a global hub for cloud computing today, with Microsoft, Oracle, Google, Salesforce and many other companies all dominating this segment from our region. Combined with the success of machine learning tools to suss out value from the terabytes of data stored in the cloud, we are also now a global hub for artificial intelligence.

By 2010, tech was a massive economic engine for the state and the world. Politics in Olympia had been drifting toward a more progressive agenda. Politics in Seattle even more so. State and local governments began to see all of tech as having attained an unfair share of wealth while causing traffic congestion and housing shortages. In truth, most of the jobs in the region come from the thousands of startups and small, modestly financed companies that employ less than 100 people each. The real reason why traffic congestion and housing shortages appeared is that our political leaders in the 1980s failed to invest in road expansions, public transportation, and zoning changes. Political leaders thought only of Boeing, Weyerhaeuser, Fred Hutch and Costco as “real” companies. They didn’t need massive public investment in infrastructure. In those early years, few believed tech would succeed in our region. They assumed Boston and Silicon Valley were where the growth would happen. And when our local tech hub did succeed overwhelmingly — it was too late to invest into needed roads, transportation, or housing to rapidly catch up with demand.

Since our modest start in 1984, tech in our state has created about 3.5 million jobs in total, and is now about 21 percent of the state’s GDP, and represents over 50 percent of all state exports. The past 40 years have been a wild ride. We have contributed enormously in jobs, innovations, and taxes paid to state and local governments.

 

WTIA in the Last Decade

By 2013, WTIA was focused mostly on a few dozen tech topic events with declining funding and value to members. Regional politics had started to grow more hostile toward business in general and tech specifically. WTIA positions on tax policies fell on deaf ears.

WTIA interviewed more than 100 tech companies of all sizes and types of tech to establish a new focus. This led to two core efforts. Accelerate workforce development and accelerate startup success in the region. Having Microsoft and Amazon as powerful anchor partners, WTIA was able to recruit hundreds of leaders and volunteers focused on fostering a robust, inclusive, and equity-centered technology-driven economy that empowers thriving communities. Our membership grew 5x in a few years.

I am very proud of what our team has accomplished in the last decade. We retooled a traditional trade association into a mission driven organization, focused on improving access to capital, access to talent, access to jobs, and helping the communities in which we operate.

We helped shift our industry public policy efforts to workforce and education priorities, built programs to serve the startup community, launched the US Blockchain Coalition, assumed operation of the outsourced 501(c)9 WTIA Association Health Plan to better serve member companies, launched a for-profit subsidiary Portalus to provide employee healthcare and retirement plans for startups and small tech companies, and launched the 501(c)3 WTIA Workforce Institute, better known today as Apprenti. Recently, Apprenti was spun out as an independent company, and the remaining consortium comprises nearly 200 volunteers, contractors, a small team of employees, plus dozens of partners that make the services and programs possible.

Here is a small sample of noteworthy WTIA outcomes over the last decade:

• Provided affordable healthcare and retirement benefits to more than 100,000 employees and dependents of early-stage Washington-based tech companies
• Mentored more than 150 US, Korean, and Canadian startups to raise over $300M and successfully launch their products in Washington state
• Established WTIA as the voice for the technology sector among government officials, leading on many policy topics such as gender pay equity, digital privacy, the gig economy, autonomous vehicles, blockchain, and AI guardrails
• Helped raise over $50M for computer science education in Washington public schools
• Trained and placed nearly 4000 women, people of color, and military vets out of low wage jobs into tech careers, with more than $4 billion of generational wealth improvement

 

Looking Ahead

There is still so much more work to do in our region. WTIA is focused on its mission, but we cannot do the work alone. We must partner well with community-based organizations, trade associations, industry leaders, education leaders, and our elected officials. If we all collaborate well, we can solve thorny issues like housing affordability, equitable access to capital, adult workforce reskilling, and navigating the hurricane of change as AI becomes integrated into more of our society and economy.

Our region has benefited enormously from an influx of talent and capital from all over the country plus some brilliant immigrants who helped build half the tech companies launched here. We have advocated for immigration reform for many years. In this new political era, we must continue to welcome the best and brightest in the world to bring their expertise or start their companies here. We can and must continue to invest in local education and workforce development if we are to continue growing, especially since more than half the established tech companies in our country view hybrid workplaces as key to recruiting and retaining the best talent. Relocation isn’t as essential as it once was to building a team.

Similarly, entrepreneurs came here for decades to build their companies because we had a strong talent pool and we had a business friendly environment. We have rested on our laurels as a region for decades, and now must sharpen our focus to remain competitive. The overall tax burden is becoming less attractive, but the anti-business and anti-tech populist rhetoric is even more problematic. Again, relocation isn’t essential to building most tech companies or working in most tech jobs. If we want jobs to remain and grow here, our region must not only offer an attractive cost of doing business, but we must also have our cities deliver on being an enjoyable, safe, affordable place to live and work for everyone.

While these challenges are personally motivating and even inspiring, it is time for me to move on from serving as CEO. I have had a good run in this industry and have enjoyed my time at WTIA. While I will remain an active investor, advisor, and champion for entrepreneurs, my priorities will include music, endurance paddleboard races, and my family.

I could not be prouder and more excited to have Kelly Fukai step forward to lead this team of employees and volunteers into its next decade of impact. She will be working closely with education and government partners and an industry that continues to contribute wealth, improved production, and meaningful change for the world. I can’t wait to see what happens next!