“Exercise Your Options in Washington”

I was chatting with a startup lawyer here in Seattle the other day about California’s recent income tax changes and their potential impact — both real and psychological — on how high-performing startup founders think about where to build their next company.

I’m mostly a tax policy skeptic when it comes to entrepreneurial decision-making; in my experience, success-oriented founders build their companies wherever they think they’ll be most likely to win, and the local tax burden is considered not at all in their decision-making process.

But the recent level of angst among California entrepreneurs — and the growing trickle of income tax refugees I’ve met who have relocated their families to Seattle in the past year — has me questioning my assumptions this time.

I don’t think Seattle needs to get all Texas about it, but we should be proud of how founder-friendly our local culture and policy environment really is — and we shouldn’t be shy about sharing the facts with our entrepreneurial friends down south.

My lawyer friend suggested a tagline for this non-existent founder recruiting campaign: “Exercise your options in Washington”

OK, so it may not be pure marketing genius, but it gets the point across.

If you hate the tagline but like the idea, feel free to weigh in below — or shoot me an email — with your suggestions. I’m at least half-serious about this, and if the broader community gets behind it I can think of a half-a-dozen ways to turn up the volume.

Creative commons image at top by: manleyaudio


  1. Hakon Verespej

    I agree that we should all be educated about the differences between Seattle and other entrepreneurial hubs. I also think we should be proud of our community and eager to hold knowledgeable discussions with our counterparts about the advantages and disadvantages of founding in different locations. However, I don’t think we should turn up the volume with a collective focus on Silicon Valley, since that would quickly become a conversation about us vs. them. My opinion is that we should forget about comparisons to Silicon Valley (but be prepared when others bring it up) and get everyone focused on how much of Seattle’s own unique potential we can capture; making sure everyone is celebrating what we’re doing right and not what others are doing wrong. Comparison is a view that keeps our eyes on the competition rather than where they should be – on the horizon. Let’s turn up the volume for the *whole world* to hear!

    1. Chris DeVore

      I agree this shouldn’t be about comparisons, just a little more focused communications effort so great founders anywhere know what Seattle has to offer them.

  2. Joe Wallin

    Chris, I think we owe it to ourselves to keep reminding others, including our elected officials, of what we are doing right here, and what we can do better.

    Clearly, no income tax, no capital gains tax–those are good things. We need to keep doing those things right. And by the way, every year in Olympia someone proposes a cap gains bill. That happened this year. I blogged about it here: http://www.startuplawblog.com/2013/02/13/a-washington-state-capital-gains-tax/

    In some ways our laws aren’t as good as California’s or other states. We need to pound on those points–to try to make our laws as competitive as possible.

    I gave three examples here: http://joewallin.com/2013/04/10/41/

    Re Washington vs. Other States–at least two other states already have state leve crowdfunding bills. Kansas and Georgia. Other states are working on them. See statecrowdfundinglaw.com. We need a crowdfunding law in our state. We need to stay on the cutting edge, and our laws ought to be as founder favorable as possible.

    1. Chris DeVore

      Thanks for diving in here, Joe — you know more about this topic than I ever will so appreciate your additional commentary and links. Let’s make this happen!

  3. Ben Straley

    This is an issue I’ve become very familiar with over the last 6 months since my seattle-based company was acquired by a California-based company. The effective tax rate when you combine federal, state, and local taxes can approach 50% (not including capital gains). Adding to that the crazy-high cost of living in the Bay Area and LA, it’s easy to see why entrepreneurs and investors are weighing their options including putting down roots here in Seattle. Come one, come all.

    That being said, it’s important to acknowledge the constructive role that government can play by investing in infrastructure, education and basic research. A tax policy that directs revenue into large investments in these areas is necessary to provide the platform, financial incentives, and economic stability necessary to maintain and grow a world class center for innovation and commercial opportunities. Targeted, public investment of tax dollars is a necessary condition for a competitive, dynamic, and diverse start-up ecosystem.

  4. Adam Lieb

    Couldn’t agree more. I ran my last company in California and the tax hits were painful. One of the top 3 reasons we chose to move to Seattle was the favorable tax laws (both business/personal). It is painful to think about the cap gains hit you take living in California. We always called it the sun tax.

    Glad to be a Seattle entrepreneur for a variety of reasons, the least of which is the ability to have a better personal outcome on an exit.

  5. Keith

    Sounds like a problem for the already successful founders looking to start their next business. If I could afford a team of legal and financial advisors, I would. We are too busy trying to make our product a success at all with limited resources, to worry about our tax burden.

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