Washington state has rapidly emerged as one of the country’s foremost technology hubs over the last 20 years, hosting industry heavyweights like Amazon and Microsoft while also fostering thousands of disruptive startups. Though it still trails behemoths like Silicon Valley in total dollars, Washington state’s technology sector stands out for its economic concentration of influential firms along with an entrepreneurial climate that optimizes growth potential on a per capita basis.
Powered by globally dominant companies as well as an enviably deep talent pool, supportive business climate, accessible startup infrastructure, and abundant capital, the Evergreen State seems poised for many years of continued technology momentum across subsectors.
The Makings of an Elite Tech Ecosystem
Several pivotal factors have coalesced in Washington state to enable rapid ascension into a top-five U.S. technology hub over the past decade:
Dense Talent Pool – Thanks to prime universities like the University of Washington (#8 CS program nationally) along with migrated workers from category leaders, the Seattle metro area contains over 140,000 skilled technology workers – the 7th highest concentration among American metros on a per capita basis.
Thriving Startup Infrastructure – A comprehensive network of co-working spaces like WeWork Labs, seasoned mentors, incubator programs at UW and Microsoft, active meet-up groups, and shared services provide critical early-stage resources for fledgling startups trying to get off the ground before big funding hits.
Large Customer Base – Positioned between the thundering tech epicenters of Seattle and rural communities in central/eastern Washington, startups have an engaged regional base of customers and partners to deploy local pilots with before expanding nationally. Companies also tap into the intense productivity demands of Amazon/Microsoft engineering teams to refine products.
Venture Capital Interest – The success sequence shown by local stars like Amazon, Costco, Microsoft, Zillow, Tableau, and F5 Networks help convince investors to keep placing bets on Washington’s next standout. 2021 saw over $5 billion invested in WA startups – 9th highest level nationally.
Category captains: Amazon and Microsoft Dominate
The crown jewels of Washington’s technology sphere remain Seattle natives Amazon and Microsoft – two globally dominant forces driving massive economic impacts locally:
Amazon
- Founded: Jeff Bezos founded Amazon in 1994 as an online book marketplace in Seattle, WA
- Employees in WA: Amazon employs over 75,000 workers in Washington today, owning over 19% of prime office space in Seattle
- Revenue: Booked sales of $386 billion in 2020, up 38% over 2019 tallies
- Key Business Segments: Market-leading positions worldwide in ecommerce, cloud computing, streaming video & music, artificial intelligence
- Current Initiatives: Just opened two massive new spherical headquarters buildings in downtown Seattle as its local employee footprint keeps expanding. Amazon continually launches new disruption plays like Amazon Go cashierless technology and Amazon Care virtual health services.
Microsoft
- Founded: Bill Gates and Paul Allen founded Microsoft in 1975 in Albuquerque before relocating to Redmond in 1979
- Employees in WA: Over 50,000 staff work at the 530-acre Redmond headquarters campus alone comprising 700 buildings and 60 soccer fields worth of space.
- Revenue: Microsoft generated $143 billion in its latest fiscal year as traditional productivity software remains a cash cow, augmented by growing cloud services
- Key Business Segments: Dominant worldwide provider of productivity software (Office 365), computer operating systems (Windows), cloud platform (Azure), video game consoles (Xbox)
- Current Initiatives: After the failed bid for TikTok last year, Microsoft seems reenergized under CEO Satya Nadella’s cloud-first vision – acquiring companies like Nuance Communications and releasing collaborative products like Microsoft Teams that became essential remote work tools.
Beyond occupying major office parks across Seattle suburbs, Amazon and Microsoft also provide an inspiration blueprint, playbook, and exit path for the next crop of young founders hoping to replicate such breakout success. Their insatiable demand for talent also gives reassuring job safety for the thousands of computer science graduates regional educational institutions mass produce each year.
Scouting Washington’s Next Tech Giant
In the shadows of 24/7 construction by Seattle megacaps, an array of emerging startups also standout as attractive long-term bets to potentially join the industry elite over the next decade by delivering outsized value:
Highspot
- Founded: 2012
- Total Funding: $325M
- Key Investors: Shasta Ventures, Salesforce
- Category: Sales Enablement Software
- Overview: Leverages data and AI to enhance sales team productivity. Their conversations software saw 50% increased usage among customers in 2021.
Auth0
- Founded: 2012 as identity verification provider
- Total Funding: $314M before 2021 $6.5B acquisition by rival Okta
- Category: Identity Access Management
- Overview: Enables passwordless logins for enterprise websites/apps. Used by NASA, Siemens, AMC Theaters.
*Outreach
- Founded: 2014
- Total Funding: $289M
- Category: Sales Engagement
- Overview: Outreach‘s platform helps salespeople optimize workflows and communications with prospects, enhancing close rates. Their 2021 growth and increased Fortune 100 customers solidified dominant niche positioning over smaller engagement rivals.
Convoy
- Founded: 2015
- Total Funding: $668M
- Key Investors: Greylock, Jeff Bezos, Bill Gates
- Category: Digital Freight Services
- Overview: Convoy aims to transform freight brokerages into transparent real-time marketplaces using algorithms and automation tools. Their app connects truckers with nearby shipping routes, streamlining logistics. After doubling revenue in 2020, Convoy is aggressively expanding across America.
Spanning business productivity enhancements, security, logistics matching, healthcare APIs, and retail analytics, Washington’s crop of future tech giants cover a wide range – many serving businesses and partners worldwide from their Seattle offices.
Economic Impacts and Incentives Propelling Tech Dominance
The aggregate impacts from the thousands of software engineers and product managers occupying the Seattle metro area manifest into substantial economic ripples benefitting the whole state:
- Over 950,000 technology jobs exist statewide as of 2022 – 15% of WA’s workforce
- Technology sector drove an estimated $219 billion economic output – about 40% of the state’s GDP
- Average tech salary in WA is $108,000 versus $90,000 national median pay
Washington offers appealing tax advantages compared to competing California that incentivize local scaling:
| Tax / Incentive | Washington State | California |
|---|---|---|
| Corporate Income Tax | None | 8.84% |
| Individual Income Tax | None | Up to 13.30% |
| R&D Tax Credits | ~10% credit | 10-25% partial credit |
| Property Tax Burden | 0.95% | 4.19% |
Beyond favorable tax treatment, the state also grants sales/use tax deferrals for select advanced computing, manufacturing, and research investments.
Major expansions underway from Amazon and Microsoft are creating net economic lift for their exurban communities. However, growth presents infrastructure and housing affordability challenges near these employment centers in coming years also.
Decentralization Trends Emerge
While great for corporate bottom lines, the concentration of so many skilled workers into Amazon, Microsoft, and sepsis does raise valid towns on whether it’s healthy regarding innovation dynamics and cost of living.
Many technology workers priced out of King County are migrating south towards Tacoma and Olympia as satellite hubs with 60-80% cheaper home prices emerge. Major companies like Google, Facebook, Apple, and various Bay Area startups have all recently opened secondary engineering offices in Seattle – creating morechoices.
It will be interesting to see how the technology landscape evolves as remote trends enable more commercial decentralization – perhaps spurring future household name startups outside the Seattle nucleus.
Final Thoughts
The torrid growth of Amazon and Microsoft built the foundation, but Washington’s emergence as America’s #2 tech hub behind only California also derives from deliberate strategy tailoring a fertile climate for young innovative companies through targeted incentives and development of a risk-taking investor pool willing to fund ambitious local founders.
The next wave of enterprise standouts like Highspot, Auth0, Convoy, and Outreach already boast billions in valuations and seem destined to rank among globally elite technology firms over the long-term. Exciting times lie ahead as the Pacific Northwest’s reputation for unmatched natural beauty melds with rapid digital progress – showcasing the future face of technology advancement worldwide looks surprisingly green, economically robust, and darn competitive.
