Hadi Partovi to Michael Arrington: Valuations are ‘out of control’ and Seattle is a ‘viable’ startup hub

We’ve been talking a lot about the startup ecosystem in Seattle and what needs to happen to make the region an even better place for entrepreneurs.

Given that discussion on GeekWire, I was particularly interested in some comments that Seattle entrepreneur-turned-angel investor Hadi Partovi made at the TechCrunch Disrupt conference in San Francisco this week.

The former iLike, TellMe and Microsoft executive, compared and contrasted Seattle and San Francisco in an interview with TechCrunch founder Michael Arrington.

Before getting into the Seattle commentary — which starts in about minute 18 of the video below — Partovi addressed the overheated environment for early-stage startup companies. Given the rising valuations, the former MySpace exec and consultant to Facebook said that he was putting the brakes on when it comes to new investments.

“I am slowing down, but not to zero.  But I think valuations are out of control, and they are especially out of control in the very small seed companies… Both the valuations are out of control and because there are so many companies, even if you invest in one, competitors often pop up quickly.”

The comments about Seattle followed those remarks with Arrington asking Partovi:

“You live in Seattle, and so do I. I see some great companies up there. It is actually the one place — I think Austin maybe as well — it is not Silicon Valley, but it is a self sustaining ecosystem that is feeding itself. Do you invest much up there, though? Are you mostly focused down here?”

Partovi noted that most of his investments are in the Bay Area, but he went on to offer a detailed analysis of the Seattle tech community and why it remains a significant player.

“I think Seattle is a very viable ecosystem…. I don’t think anywhere has a place like the Bay Area, but one of the challenges in the past has been is that all of the potential acquirers are in the Bay Area. Whereas, actually, Seattle now between Amazon, Google, Facebook, Microsoft Salesforce, Zynga, even — all of those companies have now established Seattle offices which means you have potential acquisitions there — as well as outcomes like PopCap. There’s actually a large enough base of big companies, so even if you don’t go public you can get acquired by either one of the local big companies or by the satellite office of a local big company.”

Arrington then asked Partovi how he would respond if an entrepreneur asked whether to start the company in Seattle or the Bay Area.

Partovi said it depends, noting that if the company needs business-centric entrepreneurs they may be better off in the Bay Area. But he quickly added that Seattle is an easier place to hire engineers.

“Seattle is actually an easier place to hire engineers because, over here, you swing a cat and you hit a startup. Every coffee house is full of startups, and the thirst for engineers is crazy in Silicon Valley. And there aren’t as many startups in Seattle, and a wealth of engineers at all of the great companies. It is easier to hire engineers in Seattle, but it is harder to find entrepreneurs in Seattle.”

Full discussion here:

Video streaming by Ustream


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