The Talent Economy

An interesting and predictable thing is happening in the technology startup business these days.

From 1997 through the end of 2000, we had a situation where every company struggled to hire and retain its best employees. But we also had a huge number of people deciding they wanted to get into the high tech startup business so there was always a source of new talent. Developers and engineers were often the most difficult hires because there was a limited ability to go outside the tech industry to find them.

From 2001 through the end of 2003, we had a radically different situation. Jobs were hard to find in the technology startup business, and those who had good jobs in stable technology companies were not likely to leave them. Many of the people who flooded into the technology startup business in the 1999/2000 period left it just as quickly.

This year its starting to feel more like the 1997 to 2000 period again. We are seeing turnover of people in our portfolio companies again. Talented employees are leaving for new opportunities elsewhere.

But I don’t think this is entirely a bad thing. Sure a stable work force is critical for every company, but some new blood is also a good thing. I like to say that nobody is irreplaceable. If they are, you don’t have a company, you’ve got rock star.

The excitement of working for a young high growth company is back in vogue and we are recruiting new people into the tech industry again from more established industries and bigger companies. That is sometimes a good thing and sometimes a bad thing. This “new blood” brings skills, relationships, and new ways of looking at things. But they also bring bad habits like needing lots of resources to get anything done, big expense accounts, and bureaucracy. I think companies need to “tread carefully” when hiring out of bigger companies.

The other issue that is coming into play for many companies is the issue of hiring from within versus recruiting from outside. Many small high growth companies just don’t have a big enough work force to be able to hire from within as a matter of practice. But it’s always a good idea to look inside the company for someone who can fill a role before going outside. It creates a stronger culture and keeps talented people motivated and energized.

The CEOs who survived the downturn with their companies intact proved that they were tenacious, creative, hard nosed, and financially savvy. Now they are waking up to find out that the game has changed. They have to start focusing on the people side of the business a lot more. Hiring, managing, and retaining the talent is back at the top of the priority list.

Comments

[Amit D. Chaudhary]

Insightful!
I have seen the same phenomenon, more people trying out newer companies, but more staying at the same ones.

Few observations I had on this. The roller coaster of last few years made many very talented engineers and other employees increase focus on personal life, family and so on. It is a plus for most, but with it comes that it is easier to do in a big company than a startup.
Startups are and have been the 'we do not sleep' environments.

Another aspect is of the expectations, atleast in the silicon valley is that the developers, the day to day executors have become used to startup stock options and yet focused on numbers and money than making a difference. So, we can give you 75k... Ok.. and so on.
And that does make it difficult to recruit good employees even more.

The future will be interesting.

Thanks for the thoughts.
Amit

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