On the other side of the state, Spokane’s tech scene capitalizes on Seattle squeeze

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View of Spokane from Sunset Hill. (Wikimedia Photo)

You’ve probably heard this story before: A booming technopolis drives up the cost of housing and office space so employees and companies start to trickle into a less expensive, more modest tech hub.

The movement of people and companies from Silicon Valley to Seattle has been going on for years. But now the same phenomenon is playing out between Seattle and another city across the state: Spokane.

It’s getting easier for Spokane tech companies to recruit talent from Seattle, according to a handful of CEOs in the Eastern Washington city. Meanwhile, out-of-town tech companies are setting up outposts there, just like more than 100 Bay Area companies have done in Seattle.

The result is a burgeoning tech industry in Spokane, a mid-sized city in a rural part of the state. It’s a case study worth examining as an example of the prosperity concentrated in coastal tech hubs spreading to other markets.

“A number of companies, all on their own, without any outbound marketing, are finding Spokane,” said Tom Simpson, a Spokane entrepreneur who sold his local startup, Etailz, for $75 million in 2016.

Take the “connected things” startup GoToTags, for example. A year ago, the company’s Seattle lease was about to expire, so CEO Craig Tadlock went looking for office space. They couldn’t afford anything workable in Seattle and employees were feeling the strain of city life.

Craig Tadlock. (GoToTags Photo)

“Once we broke that mental hurdle, then we started looking at all of the other factors like the quality of life and the cost of traffic and parking,” he said “We were having employees who couldn’t afford to live in Seattle anymore.”

GoToTags decided to pick up and head east. In Spokane, they found luxury office space for less than half of what they would have paid in Seattle. “We have an amazing office in the best neighborhood in Spokane,” Tadlock said.

Now Tadlock is recruiting talent from Seattle, pitching prospective workers on the same reasons he moved his company to Spokane.

“They’re experiencing what it’s like to live on the I-5 corridor … with the homelessness and the garbage and the crime,” he said. Tadlock later added, “I have every intention of trying to recruit from over there and it helps that their dollar goes a long way, a lot farther over here.”

He’s not the only one to discover a winning recruiting strategy. Spokane-based companies and economic development officials are using the same tools to lure Seattle tech workers and companies.

“They’re looking at the broader landscape of what Spokane has to offer in terms of the beauty, the much easier commute, getting back to a lifestyle that people thought they were buying into when they moved to Seattle in the first place,” said Megan Hulsey, the entrepreneurship program manager with StartUp Spokane, part of the region’s economic development organization.

2nd Watch is seeing that dynamic play out internally. The cloud company has offices in Seattle and the Spokane area. 2nd Watch EVP Jeff Aden said the cost of living west of the Cascade Mountains is a frequent topic of conversation among his employees.

Of course, moving to Spokane means entering a much smaller pool of tech talent and investors. The Spokane region has a population of about 500,000, compared with the Seattle metro area’s 3.9 million. But Tadlock says that hasn’t been a big challenge for his business.

“When we came to Spokane the first thing that happened was I got invited to the investment community here,” he said. “I’m not trying to say it’s as a big as Seattle at all. It’s not. It’s very nascent and very small. But it’s growing.”

The Stay Alfred team didn’t win in the Next Tech Titan category at the GeekWire Awards, but they were happy to take the stage afterward at Seattle’s Museum of Pop Culture for a photo op. (GeekWire Photo / Kevin Lisota)

While GoToTags is bootstrapping, other Spokane startups have raised significant rounds this year. Cybersecurity upstart RiskLens secured $20 million led by Paladin Capital Group. IoT firm Apana raised $11 million the same month for its water use software.

“As an angel investor I’ve probably invested in 20 or 25 up-and-coming, emerging companies in our region,” Simpson said.

Raising cash hasn’t been much of a challenge for Spokane’s fast-growing hospitality tech company, Stay Alfred, either. Since launching in 2011, the company has grown to 230 employees and raised $62 million for its short-term rental platform catering to business travelers. It became Spokane’s first company nominated for the Next Tech Titan category at the GeekWire Awards this year.

“We’re seeing a lot of companies from San Francisco and Seattle and other places where it’s just getting too expensive for office space and for software development,” Stay Alfred CEO Jordan Allen said. “They’re trying to figure out ways to reduce costs. They’re coming here and realizing we have amazing tech leadership.”

Rover, the Seattle-based pet-sitting company headquartered in Seattle that won the Next Tech Titan category at the GeekWire Awards, has a 70-person outpost in Spokane.

Jennifer Summers, Rover’s director of trust and safety, said they chose to open a Spokane office in 2017 because of its proximity to Seattle, along with the existing talent and culture. “It is also a community and market where we felt we could offer a positive impact, and it has a growth environment and thriving dog culture,” she said.

Another fixture in the Seattle tech scene also expanded to Spokane recently. The University of Washington’s CoMotion Labs launched an innovation hub in the area in 2017.

“The Spokane region is a growing innovation ecosystem with which we are excited to partner,” said CoMotion associate director Elizabeth Scallon at the time.

Greater Spokane’s economic development organization estimates that information technology represents 1.4 percent of the economy. The sector has seen 2 percent growth over the past three years, with tech workers making an average annual salary of $56,556. There are currently about 900 job openings in information technology and services in the Spokane region listed on LinkedIn.

The numbers point to a much more modest tech scene than coastal heavyweights such as Seattle and San Francisco. But Spokane represents the kind economic diversification of the tech industry that advocates for rural America have been working to achieve for years.

It’s the premise of the Rise of the Rest, an organization launched by AOL co-founder Steve Case and author J.D. Vance. The goal is to spread investment and entrepreneurship from coastal hubs to the rest of the country, much of which has been left out of the modern economy. Many hoped that Amazon’s HQ2 search would spearhead the effort by planting 50,000 high-paid tech jobs in a community like Pittsburgh or Columbus.

Seattle chalk artist John Rozich drew this map of the 238 original regions to respond to Amazon’s HQ2 RFP. The mural is located in Amazon’s Day 1 tower. (Amazon Photo / Jordan Stead)

The dream was short-lived; Amazon selected the Washington D.C. region and New York for the project, ultimately pulling out of New York amid backlash. But when Amazon HQ2 was still in play, Spokane, like hundreds of cities across America, threw its hat in the ring.

It was never likely that a white horse like Amazon would ride into a community like Spokane to single-handedly ignite a tech boom. But the city’s tech industry is still growing the old fashioned way — and it’s not an anomaly, according to research from Indeed chief economist Jed Kolko. His report shows that while top hubs continue to dominate the U.S. tech scene, smaller metros like Raleigh are starting to see growth, too. Plus, entrepreneurs who saw success in Silicon Valley are increasingly looking to smaller markets for their next endeavors.

“I’ve really been an advocate in Spokane that we ought to be seeking this opportunity because we’re not the only city of our size that sees that we can benefit from this trend,” Simpson said.

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