Seattle Mayor Katie Wilson signed an executive order Tuesday directing the city's Office of Economic Development to propose a new Seattle Strategic Initiatives Fund, an attempt to stop mid-sized firms from leaving town once they outgrow local startup incubators. The order lands alongside a newly published business climate study that describes Seattle's economy in blunt terms: sluggish, increasingly dependent on a handful of large companies, and losing ground to rival cities.
The report, titled “Seawall: Building a Resilient Seattle Economy,” was commissioned by Seattle's Office of Economic Development in 2025 and written by the economic strategy firm Formation under principal Ryan Donahue, according to the city's own account. It was actually instigated under former Mayor Bruce Harrell's administration, as reported by KUOW, though Harrell conceded the November 2025 election to Wilson, who took office in January, a transition Hoodline detailed in May. Wilson's Tuesday order, Executive Order 2026-06, directly addresses concerns raised in that report, per KUOW's reporting, and asks the economic development office to design a fund that could invest directly in startups so they stick around after reaching mid-sized status.
A City Betting on a Few Big Names
The Seawall report found Seattle is becoming fiscally and economically dependent on a small number of large firms, per the report cited by KUOW. Four large companies alone account for roughly a quarter of all of Seattle's software engineering jobs, the study found, leaving the city vulnerable to any shift in those employers' hiring patterns. That concentration stands in contrast to San Francisco, where large firms make up software engineering jobs across 39 companies, and San Jose, where 18 companies share that role, according to the same report.
Layered on top of that concentration risk is a broader technology disruption story. The report found the United States has seen a 20% decline in jobs for young software developers, with workers aged 22 to 25 experiencing an 18% decline in AI-exposed positions. Seattle, per the report, is exposed to 42% more AI disruption than the national average, a statistic that helps explain why City Hall is treating the mid-sized firm exodus as urgent rather than cyclical.
Why Companies Keep Leaving After They Grow Up
Seattle has a healthy startup culture, according to the report, but mid-sized firms tend to leave the city once they outgrow it, with San Francisco, Austin, and Denver cited as likely destinations. Jon Scholes, CEO of the Downtown Seattle Association, said Seattle's current economic performance can best be described as sluggish, and argued the city should become more competitive in attracting jobs and investment rather than adding new taxes. Scholes said Seattle does not need more business taxes, per KUOW's reporting, a position that echoes his organization's own June report finding downtown Seattle lost roughly 30,000 jobs, saw office vacancy climb to 32%, and suffered more than $10 billion in lost commercial property value since the JumpStart payroll tax took effect in 2021 — a period during which neighboring Bellevue saw concurrent job growth.
The Seawall report identified high cost of living, difficulty retaining startups, and cumbersome business taxes as challenges dragging on the city's competitiveness, with business taxes specifically discouraging tech hiring, per the report. Venture capital, meanwhile, continues to flow toward San Francisco Bay Area companies rather than Seattle AI startups, the report found, even as Seattle's home prices decline while San Francisco's keep growing. Compounding the tax debate, Washington lawmakers introduced a 9.9% tax on high incomes alongside the state capital gains tax in early 2026, a move that has heightened concerns among regional tech executives about cumulative tax burdens, as detailed by GeekWire.
Clean Tech and Childcare Round Out the Response
Seattle relies heavily on the JumpStart tax and the business and occupation tax to fund city operations, according to KUOW's reporting, even as more than $200 million a year from JumpStart has been diverted into the General Fund rather than the housing and climate programs it was designated for — a shift Hoodline reported was tied to the city's climate plan rewrite this summer. That diversion reflects the scale of the fiscal hole facing City Hall: a projected three-year budget shortfall of $488 million through 2028, which expanded by roughly $100 million beyond the projections Wilson's administration inherited, according to FOX 13 Seattle. Seattle's General Fund spending has also nearly doubled over the past decade, growing from about $1.1 billion in 2016 to nearly $2.0 billion in 2026, per MyNorthwest.
Wilson's mayoral staff have emphasized clean tech as a priority sector for expansion, according to KUOW, an area the Seawall report identified as having significant growth potential. That focus builds on existing infrastructure: in late 2025, the Office of Economic Development partnered with UW CoMotion Labs, 9Zero, and VertueLab to launch the Seattle Climate Innovation Hub downtown, aimed at nurturing clean tech and transportation decarbonization startups, according to Challenge Seattle's 2025 annual report. Wilson also plans to reduce the cost of childcare in Seattle, per KUOW, part of a broader push that has already included an August executive order streamlining housing permit reviews and creating a Housing Production Task Force, as reported by KIRO 7.
A Regulatory Backdrop That Slows Everything Down
Underlying much of the friction is regulatory complexity: the Puget Sound region ranks as the fourth most regulated metropolitan area in the country for land use and permitting, according to the Wharton Residential Land Use Regulatory Index cited by RM Donahue Consulting. That kind of friction adds time and cost for expanding mid-sized firms, the same research notes, reinforcing why Wilson's executive orders have repeatedly targeted permitting bottlenecks alongside the new business retention fund. Other cities offer a different template — Chicago and New York City both maintain public-resource models for growing parts of their economies, according to KUOW, an approach Seattle's new Strategic Initiatives Fund appears designed to emulate on a smaller scale.
Whether the fund will be enough to keep the next generation of Seattle startups from decamping to Austin, Denver, or San Francisco remains to be seen, but the Seawall report's diagnosis was unambiguous: Seattle is losing jobs while other cities post double-digit employment growth, and the city's fortunes are increasingly tied to just a few large employers. Wilson's order tasks her economic development office with turning that diagnosis into a concrete investment vehicle, setting up a test of whether public money can do what tax policy so far has not.
