The Facts About Tech & COVID

If you are a tech worker in Washington, will you stand up to ensure our legislators get the facts about tech & COVID?

Like anyone, tech workers may have suffered adverse financial or health impacts from the pandemic. Some tech companies may have been negatively impacted, too. But as the Washington legislature consider passing SB 5096, a tax on extra extraordinary profits from selling stock and  other highly lucrative assets, the facts about this crisis and tech are that it has:

1. caused the largest surge in technology investment in history; 
2. convinced companies in every industry they must spend more on technology in order to compete and grow; and
3. increased opportunities for technology entrepreneurs to raise capital and profit from bigger, faster exits than anyone expected prior to it.

1 Sign on to the letter below (also available as a public Google doc).
Google Form to sign on.

2 Contact your state senator to share your personal reason for supporting progressive taxation as a tech worker. Please consider bcc’ing or forwarding emails to contact [at] tech4recovery [dot] org. (Your personal information will be deleted. This is for the purpose of tracking themes and issues.)

3 If you’d like to stay involved and in contact, sign up to our email list here. (You can also do this through the letter sign on form; you don’t need to do it twice.)

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To Our Washington State Legislators:

As tech workers, we would like to share some facts about the impact of COVID on our industry. 

Like anyone, tech workers may have suffered adverse financial or health impacts from the pandemic. Some tech companies may have been negatively impacted, too. 

But as you consider passing SB 5096, a tax on extra extraordinary profits from selling stock and  other highly lucrative assets, you should know the facts about this crisis and tech. It has:

1. caused the largest surge in technology investment in history; 
2. convinced companies in every industry they must spend more on technology in order to compete and grow; and
3. increased opportunities for technology entrepreneurs to raise capital and profit from bigger, faster exits than anyone expected prior to it.

We will share some details on each of these facts in turn.

It caused the largest surge in technology investment in history.

Companies spent around US$15B extra a week on technology to enable safe and secure home working during COVID-19. That flurry of activity has moderated, but despite the economic  impact of the pandemic, 43 percent of IT leaders expect a budget increase in the next 12 months. This represents a net increase in budgets and is almost twice as high as IT spend in the wake of the 2008 Global Financial Crisis. Technology spending as a percent of corporate revenue in 2022 is forecast to reach a record high that is 40 percent above its pre-COVID (2019) level.

It convinced companies in every industry they must spend more on technology in order to compete and grow.

Companies have accelerated the digitization of customer and supply-chain interactions and of their internal operations by three to four years. The share of digital or digitally enabled products in their portfolios has accelerated by seven years. More than half of corporate executives say they are “investing in technology for competitive advantage or refocusing their entire business around digital technologies.”

It increased opportunities for technology entrepreneurs to raise capital and profit from bigger, faster exits than anyone expected prior to it.

These two big shifts have created an environment supercharged to financially reward technology innovation. While venture capital funding slowed during the early days of the crisis, it came roaring back. Last year U.S. startups ended up setting all-time highs for total funding raised, and there were also records set last year for capital raised by VC funds, along with a near-record for VC-backed exit value with a strong IPO market.

One reporter describes it as “the hottest tech IPO market since the dot-com bubble in 2000.” 

Some use even  more colorful language:

[Heather Redman, general partner at Flying Fish Partners] said investors are licking their chops at the behavioral changes caused by the pandemic and how startups can provide solutions. “It couldn’t be a better time to be an investor with all the disruption we’ve got,” she said.

Anyone regularly speaking to investors knows this first-hand. For the benefit of others we highlight some of their perspectives here:

 “The capital markets have been hugely rewarding of technology companies. If you have a good company, a good product-market fit, and good growth, you can raise money in this environment.”  (Bill Trenchard,  partner at First Round Capital)

“We have an unbelievably fluid economy right now where more people are starting companies than ever and valuations are higher than ever. And frankly, there’s more innovation than ever.” (Ben Gilbert, co-founder at Pioneer Square Labs)

“Tragic as the pandemic has been, it has created a global need to re-think and re-set many practices and behaviors.  T has spurred significant demand for new innovative solutions and a digital acceleration, fueling the pace of venture capital investment.”  (Joe Horowitz, managing general partner at Icon Ventures)

The facts are that it is smart economics and morally urgent to tax supercharged wealth.

The same crisis that has devastated small businesses and arts and cultural organizations and had a disparate health impact on the poor and people of color has powered an increase in tech wealth, from Amazon and Microsoft to Series A start-ups. And there is plenty of evidence that taxing a small portion of it for the public good will not reduce the pace and scope of innovation in Washington state.

The three states widely cited as technology leaders –California, New York, and Massachusetts–are states with capital gains taxes. Austin’s traction as  an up-and-coming tech hub is sometimes attributed by some to Texas’ lack of a capital gains tax, that is an outlier. Utah and Pennsylvania, for example,  both admired as up-coming tech hubs as well, both have capital gains taxes.

The fact is that even among tech workers, capital gains above $250,000 in any given year accrue to the richest among us. A small tax on extraordinary capital gains to support small businesses and families during this crisis, putting more money into the pockets of people across this state will boost our economy, kickstart economic growth and create tens of thousands of jobs.

That’s not just the right thing to do, it’s the smart thing to do to continue a virtuous cycle of our quality of life and human capital attracting talent and fueling future innovation and growth.

We urge your support of  SB 5096.

Signed,

(The signatories above, current as of 7:00 AM Seattle time February 3, 2021, include employees of tech companies ranging in size from some of the largest public companies to start-ups still in stealth mode. No endorsement by any company is implied.)

(Update: This list of signatories was updated June 6, 2021 with names submitted after its initial submittal to legislators on February 3.)

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Sources:

COVID-19 forces one of the biggest surges in tech investment in history, finds world’s largest tech leadership survey September 22, 2020; Maximizing the impact of technology investments in the new normal, February 3, 2021; How COVID-19 has pushed companies over the technology tipping point—and transformed business forever, October 5, 2020; Seattle investors talk SPACs; pandemic impact on startups; advice for founders , February 25, 2021; U.S. startups raise record investment in 2020; here are the top Pacific Northwest deals in Q4 ;, January 13, 2021; As the rest of the economy sinks under Covid-19, most startups are doing just fine, September 22, 2020; Where seed and early-stage funding is growing, contracting or holding steady, January 26, 2019;  Tech Cities in Motion, February 4, 2019;  The Global Startup Ecosystem Report GSER 2020,