SAN FRANCISCO — Stretched for talent, big tech firms are looking outside of Silicon Valley to expand, and increasingly one of the beneficiaries has been the D.C. area.
The region has long been home to information technology contractors specializing in federal government work. But more recently, the District has become an outpost for name-brand new economy giants. It has the third-largest office of Uber and the second-largest presence of WeWork, the co-working office start-up. Yelp plans to add more than 500 jobs in the city over the next five years.
And the Washington area is in the hunt for the biggest prize yet: Amazon.com, which is considering the region as a location for its second headquarters, with as many as 50,000 employees. (Amazon founder Jeffrey P. Bezos owns The Washington Post.)
When D.C. Mayor Muriel E. Bowser (D) journeyed to the Bay Area this month, she sought to keep the momentum going. During a three-day visit, she met with the chief executives of Yelp and Netflix, toured a next-generation Apple store, and rode in one of Uber’s new autonomous vehicles.
She sat across the table beaming as Yelp chief executive Jeremy Stoppelman said his $3.2 billion company increasingly looks to Washington when it expands outside of the Bay Area.
“We’ve tried to pick places where people want to be,” Stoppelman said, sitting in the company’s boardroom at its headquarters here. “If you ask someone if they’d be interested in living in D.C., a lot of people say, ‘Oh, that’s an interesting place.’ ”
That interest is not without its challenges, as Washington and other big cities wrestle with how best to address the problems of residents who are far less likely to be hired for many of the six-figure engineering jobs the tech companies are eager to fill.
Bowser’s administration, for instance, has a goal of creating 5,000 tech jobs for women and minorities and helping that cohort start 500 companies.
“We’ve been focused on how we can be more intentional about attracting tech companies, growing technologists in our city and investing in what we think is our niche — and that’s being an inclusive tech capital, encouraging women and people of color to start businesses,” she said.
At the same time, she said, tech growth can be a springboard to broader economic opportunities. Yelp, for instance, is quickly hiring sales staff. Amazon, should it come, needs engineers but also legal, accounting and administrative staff. Tech firms require health-care and custodial services; their workers drive business to stores and restaurants.
“So when you produce more activity, all of those things are being produced in your economy,” she said. “We need to direct [residents] to how they can get in a pathway, to how they can get employed, even if they decide not to get a college degree.”
to make some changes'
Perhaps not since the glory days of AOL and telecom giants such as MCI has the Washington area been in such a bright spotlight for tech jobs. Last year, the region ranked fourth nationally for tech talent, behind the Bay Area, Seattle and New York, according to the advisory firm CBRE.
Such influxes typically fuel a boom well beyond the coders making six figures. In Seattle, Amazon estimates it contributed $30 billion to the local economy and as much as $55 billion more in spinoff benefits for construction firms, restaurants, dry cleaners and dog walkers.
But there is emerging evidence that a rapid growth in tech hiring does not always provide the same lift for low-income and minority residents. There remains a diversity gap. Among the top 23 technology companies by revenue — among them Apple, Google and Facebook — black and Latino employees represent only 3 to 5 percent of all employees nationally, according to the Kapor Center for Social Impact, an Oakland, Calif., advocacy group that focuses on expanding diversity and inclusivity in tech. By contrast, Washington is 47.7 percent black and 10.9 percent Hispanic or Latino. At a time when tech workers are flocking to the District, inequality has increased to the point that black D.C. residents are now eight times as likely to be unemployed as white ones.
How much of the negative effects are attributable to tech firms is a matter of debate, but mayors — particularly those in areas in the running for the second Amazon headquarters — are thinking more acutely about how an expansion of tech jobs might close yawning inequality gaps.
In San Francisco, Bowser got a front-row view of the challenge. In meetings, she was often one of the few women and black people present. And though she traveled with a hard-bound copy of “Chocolate City,” a recently published treatise on the tumultuous racial history of her home town, and her staffers carried brochures touting the city’s diversity goals, she rarely pressed the issue with executives.
“I think they know that they need to make some changes,” she said.
Bowser is hardly the only mayor of a city with an emerging digital economy thinking about how tech can improve conditions in disadvantaged neighborhoods, particularly among the Amazon headquarters finalists. Like the District, Pittsburgh is branding itself as a home for “inclusive innovation.” Newark Mayor Ras Baraka (D) is pitching Amazon on the social impact it could have in his city, where nearly one-third of residents live in poverty.
Washington is looking to build its own bridges. Last year, the city launched In3, an incubator offering training programs in tandem with historically black Howard University. D.C. officials regularly tout the city’s ranking as the No. 1 place in the country for women in technology.
Aaron Saunders, a programmer and entrepreneur who heads the incubator, is also chief executive of Clearly Innovative, the firm that produced mobile apps for the National Museum of African American History and Culture. In3 has about 35 members, and Saunders said officials from Amazon Web Services, based in Herndon, Va., have already come to the incubator to make presentations.
Saunders said the challenge for black entrepreneurs in tech is more than getting their foot in the door. It’s also important to provide new hires with mentors and other support staff they can relate to.
“If you’re a person of color or a woman, and you look up and you don’t see someone above you who looks like you, it makes you question where you’re headed,” Saunders said.
Saunders said benefits can flow both ways. If Amazon chose a city such as Washington, the area could become “a gateway for a more diverse Amazon” and, because of Amazon’s reach, tech in general.
“Running a company in a diverse community like this would force them to address some issues that they don’t have to deal with in Seattle,” he added.
The Washington area still has a way to go before it is an undisputed tech capital. For every few steps forward, there have been setbacks. Then another lurch forward.
AOL, for instance, has largely decamped to New York from Northern Virginia, but veteran executives Steve Case and Ted Leonsis have stayed in Washington to launch an investment firm backing start-ups and young companies primed for growth. The daily deals company LivingSocial is a shell of what it promised, but former employees have founded upstarts including the custom framing site Framebridge.
MCI Communications once played a huge role in shaking up the telecommunications industry, but it has since been gobbled up by Verizon. Its legacy, though, helped establish the Washington area as a major destination for data centers.
The city-backed incubator 1776 has merged with a Philadelphia counterpart, but Bay Area executives know its name. “It created an ecosystem in D.C. that didn’t exist,” said Brian Kenner, D.C. deputy mayor for economic development.
If Washington has a competitive advantage, it is that companies typically locate in the area for access to the federal government, or to recruit workers with public-sector expertise.
“People in D.C. have world-scale ambition — they come here to make change,” said Eric Gundersen, chief executive of the mapping start-up Mapbox, which has about 145 employees in San Francisco and 85 in Washington. “The overheard conversations in the office are epic — climate change, arms proliferation, disease eradication, democracy promotion.”
Bowser, who is running for reelection in November and faces questions on issues such as the conduct of her top education officials, is eager to keep the city at the forefront of innovation. On her last day in San Francisco, the mayor rode shotgun as one of Uber’s new self-driving cars took her on a 45-minute loop through the city, sometimes guided by an Uber employee in the driver’s seat. The District is launching a pilot program that could allow autonomous vehicles, such as the silver Volvo SUV the mayor rode in, to carry visitors to its Southwest Waterfront development.
Afterward, Bowser opined on how the technology might be used to reduce congestion, accentuate the Metro system and provide services to seniors.
“I told them that we want to be one of the first cities to have this technology,” she said. “We want to learn as fast as possible what benefit it could have for us and what effect it could have on us.”