Aug 28, 2019

Amazon's HQ2 could drain D.C.'s tech talent

Erica Pandey, author of @Work

Illustration: Sarah Grillo/Axios

Amazon is only just starting to post job openings for its second headquarters in northern Virginia — and local startup founders are watching with apprehension.

The big picture: Amazon HQ2 has the potential to turn the D.C. region into a tech hotspot, but smaller companies are worried that the short-term impact of Amazon coming to town will be a brain drain.

Why it matters: Top-tier tech talent is already more difficult to find in the D.C. area than in tech hubs like San Francisco and New York. And "startups are worried that Amazon will lure away the talent because they can pay so much more," says Jonathan Aberman, dean of Marymount's School of Business and Technology. "They think Amazon is going to create a war for talent that the startup community is ultimately not going to be able to compete in."

The backdrop: The startup scene in D.C. is nascent compared to that in other metros, but it's growing.

  • "When we started, there was almost no one starting tech companies that weren't government-facing," says Reid Lewis, a local entrepreneur who started his first company in 1988.
  • Then AOL, which put down roots in D.C. 30 years ago, "put us on the map," he says. And while D.C. still lags behind, "the post-AOL era was a time when it really started to take off in terms of the number of tech companies" when AOL alumni launched their own venture-backed startups.

The impact: Now, "the fear is that, at first, Amazon is just going to hire our people ... and technical workers who are skilled will become more scarce and more expensive," Lewis says. "But most of us feel like, at some point in the future, they'll start to shed talent and wealth."

But, but, but: That shedding might not happen. Amazon's presence in Seattle hasn't spawned a startup wave, like Uber or Facebook have in Silicon Valley, notes Axios' Dan Primack.

  • That's because, through Amazon's stock compensation structure, employees' options vest all at once after a number of years instead of gradually, incentivizing talent to stay.

The other side: Some D.C. companies are welcoming the arrival of the behemoth.

  • Ethan McAfee is the founder of Amify, which consults for brands that sell on Amazon. Most of the retail consultancies that work for Amazon sellers are based in Seattle, but McAfee is in Crystal City, just steps from the site of HQ2.
  • "We want to hire more former Amazon employees," he says. "Now we'll have a lot more of those employees in Washington, D.C., and while Amazon is a great place to work, it's a very difficult place to work. And if there are 25,000, many will want to leave. Our goal is to be on that shortlist of the places they'll go."

The bottom line: Eventually, Amazon could be "a magnet for getting people in," says Aberman. "People who might not move to D.C. would move for a big tech employer."

  • But whether or not new workers move to the area also depends on the housing stock, says Jed Kolko, chief economist at Indeed. And Amazon is already tightening the market in the D.C. area.

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