An inside look into Seattle's AI startup scene

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There's an invisible startup boom happening in Seattle right now.

I'd say, gun to my head. How many startups are operating today in Seattle with AI at the core of their technology? A thousand, at least.

Tons of artificial intelligence companies have cropped up in the area, and they're rivaling sectors like health, tech, and computer software. But the AI startup scene looks a little different than other industries. From KUOW in Seattle, I'm Joshua McNichols.

I'm Monica Nickelsberg. And this is Booming. A podcast about the economic forces shaping our lives here in the Pacific Northwest today.

Seattle's secret AI startup boom could transform our economy. But are we in a bubble, or is it here to stay? I sat down with an insider to find out.

Do you want to know how I work?

Yeah, actually. How do you work?

Well, basically, I have intuition. I mean, the DNA of who I am is based on the millions of personalities of all the programmers who wrote me. But what makes me me is my ability to grow through my experiences. So basically, in every moment, I'm evolving, just like you.

Okay, Joshua, who is this insider you talk to?

Well, his name is Kirby Winfield, and he's a venture capitalist for this company called Ascend. I started out by asking him to explain to me exactly what he does.

So I take money from investors, and I give that money to startup founders to help them build the future. I think the best analogy I've been able to make for folks who don't know about venture capital is we're sort of like bettors at a racetrack, and there are lots of horses and lots of jockeys, and there are lots of ways to try to handicap the race. And you might look at the horse's training speeds, or you might look at the horse's provenance. But in venture capital, it's much more about the jockey than the horse. So my job is to find the right jockey, the right startup founder, and then they take that technology horse and ride it to victory. That's the idea.

And when you're looking at jockeys, you're focusing on AI?

Yeah. Our fund is entirely focused on artificial intelligence applied to Enterprise problems. So basically businesses selling to businesses, technology solutions using AI.

So you're just the guy to talk to.

I hope so.

Okay, so can you rank Seattle's place in the AI world? I mean, where does it sit in relation to other cities?

So we typically say that Seattle is HQ2 or the second headquarters of the US for AI. Obviously, Silicon Valley is HQ1. There's just such a density of technology there. But we are by any measure the second most important city in the United States for AI. We have one in four of the AI software engineers in the US living in Seattle. We have the second largest population of software engineers in the US period. And about 65% of AI computer usage runs through the cloud. The three largest providers, which are based.

In Seattle, but the cloud can be anywhere.

But the talent that runs the cloud and builds the software that allows the cloud to work for AI lives in Seattle.

OpenAI has opened an office here. We've got the Allen Institute for Artificial Intelligence. We've got Microsoft. These are companies I've heard of. But I've also heard that there's a hidden startup scene here.

Here.

Can you give a couple examples of AI startups rooted in and around Seattle that could really change people's lives?

Yeah, absolutely. Probably the most popular one is Read AI, as in read a book. And this is just like a comprehensive AI assistant that sits in your email inbox and in your Word documents and on your zoom calls and coordinates information for you so that you're always aware of the context of what you're doing and why you're doing it, what may have been related to it before. And this can work for personal situations as well. Keeps track of conversations and historical data that's associated with a given relationship. So this can be useful for, let's say you're like me and you have a child with a disability and you're coordinating across, you know, dozens of service providers and caregivers and schools and doctors that can be challenging to manage on your own. And Read AI has software that puts that all at your fingertips. That can be really life changing for people.

That one speaks to me because it's so complicated even to do a search in my email inbox for the right correspondence. If I had like a little personal assistant, tying all those threads together and bringing together other parts of my life outside of email, that could be useful.

Yeah, it really is like having almost a precognition of what the needs of a certain conversation or experience are going to be. And then populating your dashboard, if you will, with all the information you will need before you even know you need it. It's pretty magical.

I've heard that there's not a lot of investor money flowing to startups in Seattle. So is AI an exception to that?

I mean, I'd say AI is an exception to that in almost every market in the world right now, because there really is this kind of Cambrian explosion happening. And so there's been a lot of money coming into AI. You know, it helps that we have Microsoft, Amazon, Google Cloud, Apple's HQ2 for technology. You know, we have, I think, 200 now technical headquarters for large tech companies based here. What happens when you have that kind of technical talent base is that those people want to leave those big companies and start their own little companies. And that does attract investment capital, not only from people like me and other firms in Seattle, but we did some research and 90% of the investment money in technology companies in Seattle comes from outside of Seattle.

So why is Seattle a good incubator for AI? Are there reasons besides the labor pool?

I think there are. I mean, you mentioned earlier we have probably the greatest independent center for excellence for AI in the United States, if not the world, with Paul Allen's Institute for Artificial Intelligence. That is a one, two punch when combined with the Allen School for Computer Science at the University of Washington. So I think we've backed a number of PhDs out of the UW to start their own companies. And those people have huge influence on hundreds and hundreds and hundreds of very talented PhDs and master's students and computer scientists who then go on and leave this market and go to do their master's at Stanford or go to start a company in Silicon Valley. And when their mentors start a company here, they come back. And so all of these centers for excellence become magnets for talent. So I think that's one really important aspect. Certainly the hyperscalers, which is kind of tech slang for Amazon and Microsoft and Google, the big cloud providers here, also, you know, create a real bed of support. And I think the thing that it's not just about the talent pool, it's also, if you're a software engineer who's an expert in AI, you want to apply that talent to big problems. And some of the biggest problems are ones that are experienced by these big companies that are located in Seattle. And so the problem space, if you're experimenting with AI technology, is really rich and, and dense in Seattle in a way that it's not really anywhere else in the country, maybe outside of Silicon Valley.

We've Seen here in Seattle in the past, when an industry is booming, the benefits extend far beyond that particular industry. What kind of impact could AI have on the economy in Seattle beyond just the companies themselves and making somebody like you money?

You know, I think AI is poised to have impact that maybe we don't understand on Seattle. You know, an example that I always use is, again, my daughter has down syndrome. She's 15, she will not be able to drive a car. Seattle is notoriously not a great place for public transit. For her to be able to take an autonomous vehicle where I don't have to worry about her safety with regards to a driver, that's life changing for her and will be life changing for a lot of other people. In this market in particular, you think about drug discovery, you think about energy, you think about the impact on maritime, autonomous maritime vehicles. We've been talking about ferries here for 25 years and the lack of skilled labor and the aging of the ferry workforce and the lack of persistently serviceable vessels. There's no reason we shouldn't have autonomous ferries in the next 10 to 15 years. So, you know, I think a lot of what's going to change in Seattle is going to change a lot of other places too. But there are those areas where I think we're probably going to see a little bit more impact just because of how our geography is positioned.

Quick side note, I know for public transit nerds, they probably would take issue with the idea that public transit is bad here. We got light rail opening all over the place, all that kind of stuff. But I take your point. It's a car oriented city. That's its legacy that it's trying to overcome.

We don't have the time to debate this here. The ridership numbers might suggest otherwise.

A topic for another time.

Yeah. Yeah.

Okay. So China rattled the markets recently with news that it's developing new cheaper AI models. Deepseek, for example. How could competition from China and other places affect our startup scene here in Seattle?

My perspective on China and Deepseek in particular, which is a new large language model, and it was very disruptive because it actually outperforms some of the big closed source models like open AI in anthropic. So when it comes to that, I think the first thing is I actually get excited because if these state of the art, open source, low cost to free models become ubiquitous, that actually means that there will be a Cambrian explosion of AI applications and agents developed by companies that could not otherwise have existed because it's cost prohibitive to conduct the training of these models for an individual company, there's actually this paradox, and it has a name, Jivon's paradox, where when the resource becomes freely available, there's an initial decrease in the volume of use, but then it should exponentially explode just because it's so broadly available.

So deep Seq and other cheaper large language models could actually result in a startup explosion here. Whether or not this is good or bad for Microsoft or other big AI companies here, you see this as being good for startups.

Absolutely.

One thing AI is making it easier to do is to start companies with very few employees because you can use generative AI to do a lot of your engineering. So what does the low number of employees needed to start a company today mean for jobs in this region? Could we have an AI startup boom in Seattle that we don't really feel?

Yeah, I think that's entirely possible. You know, we're already seeing companies that we're backing hiring fewer people to do the same work. You've got to remember WhatsApp, when was bought by Facebook, had I believe, 13 employees and it was bought for $4 billion.

Wow.

And that was before generative AI. So I absolutely think it's not a matter of if, but when. There's a billion dollar company built by one person.

Wow.

That said, I do think one of the only things that not going to be replaced, there are functions within a company that are inherently human. I was talking with someone today about the radical increase in AI generated inbound sales emails. And there are all these startups that have raised hundreds of millions of dollars to build an AI sales representative. And what happens is as a potential buyer, you realize it's all AI generated and you delete everything. Before, if I got a cold sales email, I had to in the back of my mind at least think, well, someone took the time to write this email and to notice something about my company or me that made them think that maybe I would buy their product because they wouldn't do it if they didn't think I would because their job is to sell their product. So there was this qualification that you could tell it happened by a human and it made you lean in a little bit and say, well, maybe not today, but if they email me again in six months or whatever, or maybe I'll reply and say no thank you because I'm a nice person and if I had their job, which I have, I would want someone to reply. And that has been wiped off the face of the earth now. So actually what becomes valuable is warm human introductions and personal network, which is then begs the question of the return to office in this virtual world we live in and relationship building. And I think human relationships become the capital that's probably the most valuable in the next five years at least. And I do worry a little bit about what that means for folks who are in the first decade of their career and may not have accumulated that, may not know how to.

I've often thought that as AI progresses and becomes indistinguishable from humans, we will just move the bar, redefine what it means to be human, or, you know, we'll just keep moving the goalposts and cherish those things or even fetishize those things that are sort of unique to human, even if that means being chaotic.

I totally agree. I totally agree.

We seem to go through these waves where everyone is investing in something and then there's too much of it and then the bubble pops. Could we just be in another one of those cycles?

Oh, we without a doubt are. There's nothing new under the sun, as Shakespeare said. So I lived through the commercial Internet boom and bust and operated startups through it, the dot com era, the dot com era. I lived through the mobile era of boom and bust the cloud era. And now we're in the AI era, just like those others. What you get is a very big rush of capital and excitement at the very beginning when the technology is new and the challenge is that that capital is chasing ideas that are not very well formed about what the future is going to look like. The future gets clearer. As it gets clearer, the costs for the technology tend to come down, which combining that future being clearer and the cost coming down results in a completely different landscape than existed when the wave started to build. So that wave crests and then the next wave comes. And I think we are just now at the cresting of the first wave and the beginning of the next wave. And the next wave, I think, resembles the wave that came after the Internet bust, where 80% plus of the commercial value on the Internet today was created. And so that's what's exciting about investing in AI at this moment in time, is I do think we're at the beginning of the real. The real growth.

All right, this has been great. Thank you so much, Kirby, for talking to us today.

Thank you for having me. I had a blast, Joshua. I really appreciate it.

On the latest sound politics, we talk certainty. Seattle voters got some certainty this week on who will be the city's next mayor. Federal employees can be more certain about getting paid now. That the longest government shutdown in history is over, but much about the future of local and federal government remains uncertain. We're going to talk about it on Sound Politics, wherever you get your podcasts.

Okay, Monica, you've been reporting on tech startups and the tech industry for a long time, too. What really stood out to you in this interview with Kirby Winfield?

One of the things that really stood out to me was when he was talking about how the AI companies that he's investing in are hiring a lot fewer people. It feels like it's part of this broader trend of just kind of pain in the tech workforce. There have been a lot of layoffs lately, and we've reported in the past on how that doesn't necessarily lead these employees to start new companies because they're feeling kind of unlucky and they maybe don't have the capital. And then it's also getting harder for them to find new jobs and bounce back. I think with the advent of artificial intelligence, we're at this real inflection point where it's possible to create so many more types of companies and do so many more things, and there could be a lot of promise there. But I also think that we have to decide as a society how we're going to deal with some of the fallout, especially here in Seattle, where the economy is so based on technology. We need to be thinking about the workers who could be displaced and who are going to need to find new jobs. We're going to need to think about how we can embrace this new technology in a way that's inclusive of the whole economy and doesn't leave large swaths of people behind.

You're basically saying that just because we have an AI startup boom doesn't mean we'll necessarily have an employment boom, and that those employees could actually end up with less power.

Yeah, and I'm seeing this broadly in the tech industry. It's very different than when I first started reporting on this, when companies would bend over backwards to hire employees and make them feel valuable. There were tons of perks that have been clawed back. There were all these efforts to diversify the workforce. It just felt like there was such a shortage of tech workers and they had all the power. And that has really shifted in the past couple of years. And so as this new technology comes along, that has the potential to be really, really disruptive. I think as sort of regulators and labor organizers and stakeholders are thinking about this, it's going to be important to be proactive.

Quick check on that, though. AI is an area where people are still being hired, right?

It is in the bigger companies. It's not an area where they're seeing as many layoffs. But that being said, like Kirby mentioned in this interview, you can get away with a lot fewer employees because of AI. I think what we could see right now for the first time is a growth in technology that isn't tied to a growth in technology jobs.

Well, thanks, Monica, for your thoughts on that.

Thanks for bringing this reporting. That's it for Booming. Thank you so much for listening.

If you have a question about the economy that you want us to answer, email us@boominguow.org Also, special thanks to those.

Of you who are donating to the show. We couldn't do it without you. And if you want to donate, go to kuow.org thanks.

Our producer is Lucy Suchek. Our editor is Carol smith. I'm Joshua McNichols.

I'm Monica Nicholsburg.

And we'll see you next time.

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A patch of grass?

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