It is exciting to see so many of our portfolio companies growing, raising capital and hiring talent.
Across industries and roles there has been a spike in the cost of adding this new talent. As I keep hearing that the asking “price” for top talent s skyrocketing I noticed two additional trends.
The first is that the uneven balance across geographies seems to remain. While talent costs have risen in CA, NY/BOS and in Israel, they all still seem to stay relatively priced. Meaning, if the overall cost of talent has risen 30% then it has done so evenly across geographies such that a programmer in Silicon Valley is still proportionately more expensive than their peers in Boston or NY and Israel.
The second trend seems to be the coming-of-age of HR startups. As these companies join the unicorn club I would like to believe that it is due to their commercial success. These new tech driven HR services are delivering value to their customers. The hiring companies and the candidates.
I have yet to see anyone try to link these two trends. But could it be that these new efficiencies in the HR market are being translated to higher salaries?
If so, then this would come as no surprise considering the information-revolution we have been living through over the past 30 years. But there is a potential downside. The divide between the “haves” and “have-nots” could become even fiercer.
Candidates with the right key-words on their profile will be ranked higher. These will most assuredly include top ranked schools, degrees and previous employers. Candidates with better peer reviews and greater social reach will naturally be perceived as better fits rather than giving a chance to someone who has yet to find the right place for her to shine.
I am not minimizing the power of these matching algorithms and I do not have any inside information on how these companies operate. But based on recent revelations about Facebook, it seems clear that there is still significant room for improvement before we can fully rely on algorithms for our hiring. This imperfection may include over-inflated salaries that may be reduced if/when the bull market ends and tech companies need to reshuffle their budgets to carry them further while they refocus on generating revenue with better margins.
In such a situation, it will be the big names that prevail. The smaller companies who pulled talent from the larger players and were forced to match salaries paid there will be in a tight spot. And while equity option grants are supposed to subsidize these differences, the perceived value of these options will be dependent on the state of the market and expected time to realizing their value.
As we enjoy the years of plenty, it probably makes sense to keep an eye towards the future and potential of leaner years. So enjoy the higher salaries but be sure to save for a rainy day.