Three years ago, Arlington, Va., was pitching itself as the next Silicon Valley.
Victor Hoskins, the county's director of economic development, tried to lure entrepreneurs with cash prizes, free housing, office space and other incentives. Few showed up. Earlier this month, after a courtship lasting more than a year, Arlington landed the opposite of a startup: half of a second headquarters for Amazon.com Inc.
Amazon's arrival looks like a panacea for Arlington's economy, which has been hurt by the flight of defense industry jobs.
Amazon says it will hire more than 25,000 people and spend about $2.5 billion in the area. Hoskins also helped negotiate a bargain compared with Amazon's other pick. New York City agreed to pay almost double in tax incentives and infrastructure improvements per job. Amazon's target for the workforce in Arlington is an average wage of more than $150,000.
"It's transforming how businesses think about the county," Hoskins said.
What happens next is a matter of debate. Proponents of the deal say it will raise Arlington's profile, making it a more attractive place to start a tech company, and that Amazon will recruit people who will someday leave to start their own businesses in the area. The counterargument is that Amazon will hire up all the people who might otherwise start their own businesses.
Either way, Amazon is a big deal for Virginia. The last time the state was a major player in consumer tech, people were dialing up with AOL. The Internet pioneer, rooted in Fairfax County, decamped for New York at the height of the dot-com bubble in one of the most disastrous mergers in corporate history.
Amazon will provide more tech mojo again in the area, said Todd Stottlemyer, who serves on the board of the Northern Virginia Tech Council. "They don't just see Washington as this government-type town," he said. "People want to come to a region because there's a cool factor."
When Hoskins joined as director of Arlington Economic Development in 2015, the area was in a rough spot. The 26-square-mile county across the Potomac River from Washington was once a military center but has suffered in recent years from a move to consolidate the work elsewhere in the country. That led to thousands of federal employees and contractors leaving town.
"It had a devastating effect," said Tim Helmig, managing partner of Monday Properties, a real estate firm with multiple buildings throughout Arlington.
At the time, Arlington's office vacancy rate was 21 percent, double Washington's. Hoskins, a 61-year-old former deputy mayor of Washington, came in with a plan to turn things around. He pledged to reduce the vacancy rate to 10 percent over nine years. Doing so would require help from businesses of all sizes, he said. A favorite saying of Hoskins': "It's not impossible; it's improbable."
One of his first improbable goals: turning Arlington into a tech startup hub. First, he needed more startup-friendly office space. Hoskins convinced Andrew Chang, who runs an independent co-working space in Arlington's Crystal City community, to open a second location 4 miles upriver in the Rosslyn neighborhood.
Before talking to Hoskins, Chang had thought about going to Alexandria, Va., or Washington. "Two years ago, no one was considering Rosslyn," Chang said. "He knows how to get companies to go to areas that need to improve." The tax breaks didn't hurt, either.
A former Silicon Valley venture capitalist named Paul Singh also set up a co-working project in Crystal City. He ran the space, part of Disruption Corp., alongside a $50 million Crystal Tech Fund to invest in local startups. The entity underperformed, and Singh, whose LinkedIn profile lists his title as Chief Hustler, sold it in 2015.
Meanwhile, the entrepreneurial community was mourning the decline of perhaps Arlington's most promising startup, Opower. In the two years after a 2014 initial public offering, the energy management software company had lost more than two-thirds of its market value before selling to Oracle Corp.
To build excitement around startups, Hoskins's department came up with the Virginia equivalent of Shark Tank. The economic team organized a contest called Startup Arlington, where entrepreneurs could compete for living and office spaces, mentorship and cash prizes, in exchange for relocating to Arlington. So far, they have struck out. The winner of the first contest, Oppleo Security, is already out of business. The founder, Roderick Flores, said he couldn't afford to keep the company going. He moved to Portland, Ore., and plans to take a software-security job at Nike Inc.
At the same time Hoskins was going after startups, he was also hunting bigger companies. He helped persuade Nestle SA to move its U.S. headquarters last year to Rosslyn from Glendale, Calif., along with 750 jobs. The deal was celebrated in the local press. Nestle got an incentive package totaling $12 million and a promise from Hoskins that the city would relocate two bus stops crowding the entrance to the company's new building. It took some convincing of the city transportation department.
"Victor is very smart at pulling together partners and being creative in getting deals done," said Mary-Claire Burick, president of the Rosslyn Business Improvement District.
For Amazon, Hoskins said he sold his locale as a neighbor to the nation's capital and some of the country's top universities in Virginia, Maryland and the District of Columbia. There were lots of skeptics.
"Everyone said no, because-think about it-Arlington is just a little county," Hoskins said. "Stop thinking about it that way. We're part of a region."
As Hoskins toiled away on the Amazon proposal, he had a key advantage over other cities: Reagan National Airport, which sits in Arlington County. The airport, with a soaring terminal designed by architect Cesar Pelli and a nearby Metro rail system, compares favorably with LaGuardia, the closest one to Amazon's other new campus in Queens, N.Y.
In the waning months of summer, Arlington's office vacancy rate had slid to 18 percent. Winn invited Hoskins to a team lunch, where she handed out paper plates to members of her staff labeled with each one's accomplishment. She surprised Hoskins with his own plate celebrating the vacancy rate achievement, emblazoned with the words "Mission Impossible."
Hoskins, who still has the plate in his office, said Amazon should be good for another 4 percentage points. Ancillary businesses that come along because of Amazon will shave off another 2. That includes startups, he said, and Hoskins believes he'll hit his goal of 10 percent.
Now he can make a new pitch to startups: Arlington is the spot Amazon picked after a 14-month search.
SundayMonday Business on 11/25/2018