Will Startups Get Squeezed by a Tech Hiring Binge?
gigaom.com
gigaom.com
Joining a pre-funding start-up is a huge decision which takes dedication, passion for and expertise in the company's focus. It's a lot closer to starting a company yourself than working for Google. Salary is not the deciding factor, engineers considering such a decision are very specific in what they're looking for. From the company's point of view, first non-founding engineer is an employee that can make or break a company and set the engineering culture. It's a mistake to take someone who's only there because he had nowhere else to go: the sort of people you want for that position are confident that they could get hired elsewhere, even in a recession.
On the other hand, funded early-on start-ups (i.e., post series A, but pre-revenue/follow-on funding) can afford to pay market salaries, unless they're hiring "warm bodies" which is again a mistake. The big way to save is by hiring less engineers, not by paying engineers less. The way to make do with less engineers is to go for quality instead of quantity: you're always going to be paying top dollar for top talent.
The big way to save is by hiring less business people. I've come to the realization that in today's startup climate, developers often add more value than business people, because a skilled developer, if interested and motivated, is able to eventually pick up the business side of things pretty well.
I'm finding this a wonderful economic climate for a single technical founder to bootstrap a startup (or two technical cofounders).
I think there's probably going to be some squeeze on startups, but the people willing to work for a startup are a subset of all developers out there, so the effect won't be as dramatic as this article seems to be implying. There are plenty of developers, who probably would do great at a startup, simply won't take the risk.
ADDED: And then there's the risk of staying where you are. Some people will realize that their job security isn't great to begin with, which changes the risk side of calculations for those not paralyzed by the situation.
The dramatically increased difficulty of getting money (clients or investors) is much greater than the discount (maybe 15 or 20%) at which you can now hire talented people. Also, real estate (which is disastrously expensive in New York) hasn't fallen fast enough, which is unfortunate but expected (real estate takes a long time to fall, even when money runs dry).
In general, awful times lead to conglomeration, not liberation and small-scale organic growth. People who have stable jobs are clinging to them, and those who don't have them are willing to take big-company jobs at a discount, but there isn't a huge rush of interest in pre-money startups. Many of the original European nobles (although, in practice, it was often possible to buy a title after the Renaissance) are the descendants of those who could offer protection (in exchange for slave labor) after the Fall of the Roman Empire.
Your point about awful times is well taken, but I don't think we're there yet, and it's not clear to me we'll get there anytime soon. E.g. Japan's two Lost Decades aren't necessarily quite "awful times".
E.g. before we get to the Fall of the Roman Empire, where from what I'd read serfdom started for the reason you describe as a means to escape the exactions of the falling Western Empire (e.g. impossible taxation, a law that required people to follow the career of their father (to prevent escaping the former), etc.), we could look at the Great Depression, where at the time the USDA estimated 1/4 of the US was malnourished, which was confirmed by WWII conscription.
We'll see.
Consider the rash of multiple liquidation preferences we've seen over the past 2 years. Are VCs hurting more now than in 2007? Not especially, since the money they're investing has been pledged years ago, mostly before the liquidity crisis. They're offering these awful terms because a lot of people are unemployed and desperate to get a paying job of any kind, so they have leverage. When the alternative to starting up is a $100k/year Google job, the "involuntary entrepreneurs" will vanish and terms like multiple liquidation preference and participating preferred will go back into the tarpit where they belong.