The Big Reveal

When Amazon announced Northern Virginia as the location for its new headquarters (HQ2), it revealed more than the winning region. It revealed Virginia’s not-so-secret identity: Technology Talent Juggernaut. Get a behind-the-scenes look at how Virginia won HQ2, and see how its current and future tech talent sealed the deal.

Amazon ships more than 3 million packages a day: hard-to-find watch batteries slipped into cushioned white envelopes, bulky bed frames packed with care, and yes, even paperback books with pages you can physically turn — the product that got it all started.

These packages find their way home from more than 175 fulfillment centers dotted across the globe including six in Virginia, and often arriving the next (or even the same) day.

But in the days leading up to October 19, 2017, Amazon flipped the script. People were now sending packages to them.

They came postmarked from Boston, Austin, Denver, and Dallas. There were binders packed with colorful printouts featuring sleek infographics and bolded digits. These were the responses to Amazon’s ambitious RFP to build a second corporate headquarters (HQ2). When the ecommerce titan released that RFP, economic developers, elected officials, higher education leaders, and others rushed to package proposals positioning their cities and regions as the best possible suitors for up to 50,000 high-paying jobs and $5 billion in capital expenditures.

In all, 238 proposals landed at Amazon’s doorstep, including one each from Greater Richmond, Hampton Roads, and Northern Virginia (NOVA), which included the City of Alexandria, as well as Arlington, Loudoun, and Fairfax counties. All told, Virginia’s submissions weighed in at 27 pounds. According to bookmakers and major prognosticators with a platform, Virginia was a longshot, with none of its locations being picked to win.

Crystal City, Arlington

By January 2018, the HQ2 field was thinned to 20 communities, including NOVA and its four proposed sites. A second, 900-page response was prepared. And then in early November, after more site visits and interviews, Virginia got the news that had slowly leaked through the selection process vacuum: the Commonwealth’s National Landing location straddling Alexandria and Arlington was selected as the HQ2 location, with plans to deliver at least 25,000 jobs and $2.5 billion in capital investment.

This is the story of how Virginia, a dark horse and (later) frontrunner wrapped into one, took home HQ2. The game plan comprised a critical mass of collaboration, leveraging decades of favorable public policy decisions and shining a light on one of Virginia’s greatest assets: its thriving tech sector and talent.

Virginia's Talent Show

Amazon’s RFP laid out many preferences that one might expect from such a robust development project: proximity to an airport, a stable and business-friendly environment, as well as mentions of sound tax structures and incentives.

But for the Virginia Economic Development Partnership (VEDP), which was wrangling proposals, as well as local economic developers on the ground, something else stuck out: talent. It wasn’t shouted out in bolded, all-caps headers, but it was woven into the RFP subtly and strategically time and again.

“They signaled to us in their RFP that talent was going to be a huge piece,” said Stephanie Landrum, president and CEO of Alexandria Economic Development Partnership (AEDP). “It might be the underlying reason we needed to work together.”

Added Stephen Moret, VEDP president and CEO: “As far as we know, no other state made higher education the focus we did. It was the first time in Virginia we’ve done something of this scale with economic development and education.”

These were more than mere hunches; they were accurate assessments of Amazon’s motivation.

“The primary driver of this entire project was talent,” said Holly Sullivan, head of worldwide economic development at Amazon and chief negotiator. “Not just day one talent, but the opportunity to evaluate a talent pipeline.”

Make no mistake: tech talent was simultaneously one of Virginia’s greatest assets as well as the Commonwealth’s No. 1 opportunity for job growth, a dichotomy that also played out when you started stacking NOVA’s cities and counties and connecting the data points:

• With nearly 50 percent of the populace 25 and older holding at least a bachelor’s degree, the Greater Washington, D.C., area, including NOVA, is the most educated region in the nation. (Meanwhile, Seattle, the home of Amazon’s original HQ , comes in just shy of 40 percent).
• The region produces more computer science graduates than any other metropolitan area in the country.
• With the second-most tech workers in the United States, including the third-largest pool of software developers, NOVA possessed a ready base of talent.

When weighed against the other cities who sat above Amazon’s Top 20 cut line, the D.C. MSA’s concentration of tech talent sat alone atop the list.

The synergy didn’t end there. When looking at the demographics of NOVA’s workforce, it checked another of Amazon’s big boxes: diversity.

• Greater D.C. is among the most diverse regions in the country, with non-whites making up 45 percent of the population and 28 percent of residents born abroad.
• Focusing on the tech workforce, 29 percent are non-native workers. Likewise, 29 percent are women, numbers that are much higher than the national benchmarks.
• Greater D.C. and NOVA’s communities are ranked among the most LGBTQ-friendly in the country.

Source: National Center for Education Statistics

As Amazon has stated, day one talent is a boon for NOVA — and a key driver that led to their selection for HQ2. But what about day two? Or day 3,650?

There was a plan, an innovative and ambitious one. Similar to many components of the HQ2 solution, it wasn’t the Amazon RFP that started the work. It just accelerated it.

“Amazon allowed us to do this quicker than planned,” VEDP’s Moret said of bridging the tech talent gap. “We reached out to higher education leaders across the Commonwealth to see how much they would be willing to grow their tech-talent programs. It was a jump ball, an opportunity to play.”

VEDP invited all public colleges and universities as well as community colleges across Virginia to help craft a bold vision for a historic tech-talent pipeline initiative. Virginia Tech, the University of Virginia, George Mason University, and other institutions came to the table to make commitments and refine the details.

In broad strokes, the plan and promise is to double Virginia’s tech graduates statewide, investing up to $1.1 billion in new state support to expand the talent base by more than 1,700 degrees annually in computer science and related fields.

In addition to that objective, Virginia has also committed to launching a tech campus to spur additional tech talent, Virginia Tech’s Innovation Campus, as well as expanding George Mason’s Arlington campus, and extending the pipeline by investing more in K-12 computer science education.

The investment was a three-pronged approach, providing performance-based assessments for bachelor’s degrees and master’s degrees, investing $50 million over 20 years in K-12 education, and creating internship programming to connect higher education students to tech jobs.

For Virginia Tech and Theresa Mayer, the school’s vice president for research and innovation, the Innovation Campus fit in with a marked shift in the way higher education and industry partner up: fewer but more holistic engagements.

“I think the strategy VEDP and Stephen [Moret] took, as he really explored making higher education a very integral part of the package, was an incredibly strategic move,” Mayer said. “It was a really amazing process where we went through many steps — reviews, site visits, and final negotiations with the company. We took input from Amazon and in real time adapted the plan to be more responsive to their needs.”

Added Amazon’s Sullivan: “We met with several leaders with higher education from the entire region that all have specialties and curriculum that support the needs of the entire region.”

Virginia Tech

These discussions included ramping up the involvement of demographics that are underrepresented in Virginia’s tech talent pipeline.

“As we look at the talent pipeline, we’re asking what can we do at a K-12 level for women and underrepresented minorities,” Mayer said.

It’s an area where Virginia is already performing in the top tier, ranking fourth nationwide for the percentage of students who have passed an AP STEM exam, in addition to recently expanding access for K-12 students to STEM and computer science education.

The Innovation Campus, a $1 billion graduate studies project that will be located in Alexandria a mere jaunt from HQ2, is a massive stake in the ground for this new way of thinking.

“It’s not just thinking about being a degree mill,” Mayer said of Virginia’s higher education partners’ role in supporting this evolved approach to creating industry partnerships. “It’s about thinking and delivering where you see the leading tech companies going.”

Odds & Ends

With four of Virginia’s 10 initially proposed sites spanning NOVA — from Loudoun to Fairfax and Arlington counties in addition to the City of Alexandria — there was a looming concern, a counterbalance to the region’s upside.

“We were worried almost the whole way about cost,” VEDP’s Moret said, not knowing how Amazon would weigh cost of living vs. talent and other advantages NOVA touted.

“One really insightful moment for me occurred while interviewing tech execs in NOVA, when we asked, ‘Excluding Silicon Valley, how do we compare to other tech hubs?’”

The answer, in most cases, was that the comparison was quite favorable to NOVA.

There is also a flip side to the thinking that in-demand urban areas are cost-prohibitive.

It’s the belief that the clustering of talent stokes productivity exponentially, and that bright minds illuminate an area by more than the sum of their combined lumens.

“We saw clustering in Seattle,” Amazon’s Sullivan said. “That takes time; that does not happen overnight.”

It’s a concept that rings true with Moret, who hoped that Amazon would borrow a page or two from The New Geography of Jobs by Enrico Moretti, an economist and professor at the University of California, Berkley.

“Companies appear to locate in absolutely the worst places: they pick very expensive areas — the Bostons, San Franciscos, and New Yorks of the world. With sky-high wages and office rents, these are among the costliest places in America to operate a business. We would expect these cities to be unattractive for firms, especially those that compete globally,” Moretti wrote. “… As it turns out, in the world of innovation, productivity and creativity can outweigh labor and real estate costs.”

But to test that clustering theory in NOVA, it would require a win. The world was following the Amazon HQ2 derby with great intrigue, and NOVA was climbing the rankings.

According to the odds crunched by entities including Paddy Power and Bovada, NOVA wasn’t in the top 20 of potential sites likely to be selected for HQ2 back in November of 2017. Instead, Atlanta, Austin, and Philadelphia led the way, while Washington, D.C., checked in at No. 11. Two months later in January 2018, NOVA cracked the field, picked as the 19th most likely HQ2 site, while Boston grabbed the lead. By March, and all the way through August, NOVA emerged as a favorite.

So, was Amazon watching the armchair prognostication from home?

“In short, no,” Amazon’s Sullivan said. “Our team was very focused on decision-making around the analytics and the primary drivers of this project.”

A 'Tech-Tonic' Shift

It wasn’t quite speed dating. But it was close.

With just six weeks to put together sweeping initial proposals for HQ2, NOVA’s counties and cities — which traditionally pitched from within their own borders — got together, and got to work.

But they didn’t need icebreakers. That’s because Alexandria, Arlington, Loudoun, and Fairfax weren’t starting from scratch. Over the past few years, they had been partnering up, from a joint showing at annual innovation showcase South by Southwest (SXSW) to a shared courting of Nestlé and a handful of other collaborations.

“These collaborations were extraordinarily helpful to all of us,” said Victor Hoskins, director of Arlington Economic Development (AED). “These were the moments when it occurred to us that we needed to collaborate more. And when Amazon came along, it just made sense.”

His counterpart in Alexandria shared the sentiment. “That had been a marked change from what we had been doing in decades past,” Landrum said. “In retrospect, that work that we had done ended up being a foundation for our collaboration.”

It was a significant pivot for NOVA’s disparate parts. Not only had they worked independently previously, even competing against each other for business, but they also only approached opportunities with data that fit neatly within their borders. Now, with the help of VEDP, they were able to access and leverage regionally defined data points, which turned a good story into an irresistible one.

“They never had a full regional perspective before,” VEDP’s Stephen Moret said.

Nor did they have a regional organization to foster collaboration. “This marked a whole new shift in thinking,” Moret added.

As a result, four NOVA localities — with VEDP at their side — contemplated joining up for an Amazon pitch. “We all very quickly agreed to have an exploratory meeting to discuss how and if we could submit jointly,” Landrum said.

At first, with multiple regions within the Commonwealth all vying for HQ2, the collaboration was careful and controlled, by design. But that changed when Amazon thinned the herd of potential HQ2 destinations down to 20 in January of 2018, making NOVA the sole remaining Commonwealth contender.

Amazon’s site selection team visited all four potential NOVA locations in late February 2018, but when they paid a follow-up visit in July, they only made one stop: the National Landing location spanning Arlington and Alexandria.

“At first, it seemed to be a cast of thousands, said Matt Kelly, CEO of JBG SMITH, as 238 regions vied for HQ2. “It was at that point (in July) that we really became one team.”

JBG SMITH, a publicly-traded real estate investment trust headquartered in Chevy Chase, MD, was the final piece of NOVA’s HQ2 puzzle.

Those tackling the tech-talent pipeline for Virginia’s HQ2 team weren’t the only ones reading between the lines of the RFP and engaging in follow-up conversations with the ecommerce and innovation giant. Kelly also saw just how uniquely National Landing, a recently rebranded area comprising Crystal City, Pentagon City, and Potomac Yard, fit the bill for Amazon.

The RFP requested a location within a 45-minute drive of a major airport. You can walk from Reagan National Airport to National Landing. The RFP also stated the need for 5 million sq. ft. to begin, with as much as 8 million required to accommodate the planned build-out and growth. National Landing had 17 million sq. ft. of commercial space to spare. Then there was the issue of affordable housing.

The Washington, D.C., region’s 7 percent rent growth rate from 2012 to 2017 made it only one of three cities in Amazon’s HQ2 Top 20 to experience single-digit rent growth over the past five years.

The totality of this lead-up work cannot be overestimated. And it’s not all today’s news. Some of the heavy lifting on the public policy front goes back several decades, tracing back to Virginia’s General Assembly decisions to create a vibrant, pro-business climate throughout the Commonwealth. It’s evident in everything from accolades — a No. 2 U.S. News ranking for governance and a No. 4 slotting by CNBC for best state for business — to the bankrolling of key transportation projects including a Metro funding solution and a regional transportation financing solution. Add a Triple-A bond rating, stable business tax structure, and a model education system, from public K-12 schools to one of the most heralded higher education systems in the nation. Dig a little deeper and it becomes crystal clear that Virginia’s Major Employment and Investment (MEI) Commission, which allows for confidential discussions with elected leaders during review of financing for incentive packages, is an attractive and effective tool when working through the math of such complex, competitive financial packages.

Moret emphasized how the Amazon project builds on these past efforts, saying, “With HQ2, Amazon and Virginia share a historic opportunity to build on our complementary strengths while further cementing our respective leadership positions — Amazon as one of the most important private-sector innovators in the world and Virginia as America’s premier state for talent, innovation, and business investment. Through our collaborative efforts, we also have crafted a unique partnership that will establish a new, higher standard for economic development in America.”

The cumulative upshot was more than helping Virginia win HQ2; it allowed the Commonwealth to do so without entering a bidding war with other states and to invest in infrastructure that would benefit the entirety of Virginia as opposed to simply buffering Amazon’s bottom line.

A prime example of these infrastructure investments is transportation, for which the Commonwealth has committed up to $295 million for robust, multimodal connections between National Landing and the regional transportation system. Additionally, Arlington and Alexandria have committed $570 million. Capital improvements range from increasing access to Metro with new station entrances to constructing a pedestrian bridge connecting Crystal City and Reagan National Airport. These improvements build on approximately $15 billion in multimodal improvements already planned and funded over the next six years, including investments in highways, transit, rail, and airports.

Delivering HQ2

Elevated collaboration. A focus on talent, both leveraging Virginia’s existing tech base and fueling future growth. And a foundation of good governance.

It’s a winning plan that the Commonwealth has already started delivering to Amazon’s new front door.

So, what can it bring Virginia?

State officials predict that the Amazon HQ2 collaboration will provide the Commonwealth a net return of more than $3 billion over 20 years — and that’s just the windfall from new state tax revenues. Clearly, growing the tech workforce is the most fertile opportunity for Virginia’s economy.

“It’s a major validation,” VEDP’s Moret said. “We very well could be the East Coast IT leader now.”

That may just be the competition for Amazon’s HQ2’s biggest reveal of all.