Don’t Go It Alone, Get Out of Your Bubble

Since I’ve moved to Austin and joined BlackLocus roughly 6 weeks ago, I’ve probably had 30+ meetings with individuals outside the company.  Why?  Because without exception I learn something from every one of these meetings that will help me be a better leader and reduce risk of failure during this critical phase of the company’s development when there are foundational decisions we are making every day.  You may be thinking, “Geez Taylor, why don’t you just put your head down and get to work instead of networking your way out of business”.  There’s clearly a balance here and I’m not suggesting that you should network for networking’s sake, but rather identify folks that have specific and relevant experience dealing with the issues most pressing right now in your business.  And by the way, it need not be successful experience, there is a ton to be learned from other people’s mistakes.  Wouldn’t you rather learn from someone else’s setback than your own?  Whether its the need to raise money, or perhaps figure out a go-to-market strategy, or even how to tackle a tough engineering problem, there are likely people in your extended network that are ahead of where you are today and have navigated, either successfully or unsuccessfully, the urgent problem you have to solve.  In either case, that perspective is valuable as input into your decision.

Now there is a consequence to seeking multiple points of view and getting so much data as input.  Ultimately you have to formulate a point of view, have conviction and make the tough decision.  And doing so with so much external data can be more difficult and confusing particularly if there are a lot of disparate viewpoints on the same issue or problem.  But that’s what leadership is!  Putting your ego aside, realizing you aren’t the master of everything, seeking external viewpoints and data, then distilling it all and having the courage to make a decision and execute against it.

I Rest My Case, This is War

6/16 UPDATE:  Here’s a really informative graphic as to what’s happening in the U.S. related to skilled workforce requirements.  The most compelling points?  1) By 2015, 60% of the new jobs will require skills possessed by only 20% of the population, and 2) In 1991, by contrast, less than half of the jobs in the U.S. required skilled workers.

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One of my recent posts discussed the war for engineering/developer talent, particularly in the Bay Area.  It’s getting worse and I just don’t see how it is sustainable.  Here are some recent additional data points related to the overwhelming demand for engineering talent:

  • A recent Techcrunch article discussed some analysis by TopProspect, an emerging online recruiting destination, that shows analytically who is winning among the top technology companies – Facebook, Google, Twitter, Zynga and others.
  • Check out this blog post by Gordon Hempton on “What It’s Like to Be Recruited“.  It details Gordon’s experience of posting his resume and subsequently receiving 266 emails and 96 voice mails from companies and recruiters, most of whom ignored his very specific job request for mobile development and instead were recruiting him for a broad range of development positions and platforms.

What is clear from this and other analysis is that we are in a zero sum game right now.  Meaning, there are simply not enough quality engineers entering the market to come close to the demand, there’s a nearly fixed pool of talent trying to supply both incredible existing company growth and the startup ecosystem.  The result is an all out war, including underhanded PR stunts, espionage and poaching that results in some companies winning (Facebook, Zynga, LinkedIn and Groupon) and others losing (Google, Microsoft, EBay and Yahoo) in talent acquisition.

I’ll refrain from calling this a talent bubble, as I hate the term bubble for what’s happening in tech right now – it brings back too many bad memories from 1999/2000 when this term was coined and was far more appropriate.  Because I went through the original bubble, I know what is happening now is vastly different.  We are investing in real companies now.  Sure, valuations are high, but newly funded businesses for the most part have real products and customer traction which was not the case a decade ago.

However, much of the talent population, engineers in particular, are too young to have been through the 1999 bubble, so I worry about soaring egos, mercenary behavior and lack of perspective which defined attitudes in 1999.  Engineers were hiring their own agents back then.  Put yourself in their shoes.  Young guns getting constant calls from recruiters, offers to leave their current positions for 25+% compensation and perk increases, which they can repeat from employer to employer.  Tempting, right?

I gotta believe that the demand/supply equation will balance itself, it always does.  But how long will it take?  To the engineers I say good for you, take advantage of the opportunity while it exists, but be careful.  Things have a way of coming back to center.  Put value in building great product, team loyalty and product ownership in addition to your career path and compensation.  See your work through.

Fortunately, this is exactly what I’m seeing at least in the engineers I’ve had the pleasure of working with.  Motivations seem much broader today than they were 10 years ago and attitudes and perspectives towards what is happening in the talent marketplace seem much more balanced, which is refreshing.

Why is this?  I think its because the role of the engineer has changed from pure coding and taking orders from business folks to now having a deeper role in product development and far more empowerment around solving technical problems.  With the proliferation of technology platforms and languages, there are many ways to solve complex technical challenges and the engineers are leading these efforts, they are closest to the product and thus enjoy increasing levels of autonomy in their work.

It’s a great time to be an engineer!  And a frustrating time being a company trying to find the best ones.

Engineer = Rock Star

It’s good to be a developer in this job market.  Really good.  And not just in Silicon Valley, although SV really is the center of the universe for mobile and web technology.

At TrueCar, we’ve been really aggressive with hiring for both our LA and SF offices, including offering relocation packages from anywhere in the U.S., even for junior engineers.  We’re selling our story hard.  Here’s what we’ve been up against over the past year:

  • Google recently gave every employee across-the-board 10% raises – up from already strong compensation.
  • Large Silicon Valley companies like Google and Facebook are actually acquiring small startups, in some cases only a few months old, to gain access to the development team.
  • Poaching talent from competitors has become a fine art, escalating signing bonuses to extreme amounts for top talent.  As incredulous as a $500K retention bonus sounds, the economics of that decision for a company like Google makes perfect sense based on the shareholder value that lead engineer will create.  Oh, and 15% of Facebook’s employees have previously worked for Google.
  • In Boulder, a consortium of companies are pooling money to fly in engineers from around the country to attend Boulder Startup Week beginning in a few weeks on May 18.

Compounding the challenge is the fact that its probably the best time in tech history to be an entrepreneur and start your own company.  There’s efficient access to capital and mentoring through firms like AngelList, YCombinator and TechStars and valuations are soaring, encouraging top technical talent to do their own thing, which is exactly what is happening, effectively removing top engineering talent from the labor pool.  How crazy is it that top engineers leave Google, start their own company, get acquired within a year and end up back at Google as an employee?

It’s a downright war for talent right now.

Tech Bubble, Blubble or Rubble?

I kid you not.  Over the past week, all three of these words have been used to describe what is happening in the tech investment space right now.  Much of the discussion has centered around a comparison of 2011 to the infamous tech bubble of 2000 in which many of us participated, failed and hopefully learned from.  The general consensus is that what is happening right now is quite different, in a good way, than the disaster bubble burst of 2000.  And I agree.  Here are some key messages pulled from a few sources that I think sum up what happened in 2000, what is happening now, and why the optimism and high tech valuations now are justified.

From “We’re in the Middle of a Terrible Blubble!“, Michael Arrington hits the nail on the head when he says,

“A perfectly reasonable 2000 tech startup business decision – spend $10 million on a massive advertising campaign that may bring in $500k in revenue. The “branding” value makes up the difference, and those few new customers will continue to spend money and tell their friends!  Grab territory while it’s there to be grabbed, the thinking went. We’ll figure out the business later. Money was so easy to come by, it made sense to some.”

This is EXACTLY what my company did back in 1999.  We raised $55M in an IPO with an underdeveloped website, zero revenue and a plan – detailed in our prospectus – to spend $15M+ on advertising and branding campaigns.  Insane right?  Didn’t seem so back then when money was being thrown at us.  We blew that money on advertising, didn’t sufficiently monetize the traffic, then had to shrink the team and hunker down to survive the storm of 2000.

Michael’s main point in the article is that back in 2000 the objective was to raise way more money than you need, tens of millions, and spend it all as fast as you can, not to build product but to build brand and awareness.  Now, companies are raising less money, but at valuations that are potentially too high (because of “blubbering” angel investors), in order to hire as many engineers as possible to build a valuable property, then raise a follow-on round after proof of concept to scale and at much higher valuations.

Mark Cuban, owner of the Dallas Mavericks and tech billionaire, makes another interesting point in response to the article above,

“Its a bubble when you are on the elevator and people outside the industry are telling people to buy things they don’t understand. In this market, its about VCs and Angels wanting to be part of the “next big stock”.  Its as if VCs and Brokerage houses think they need to have pretty portfolio companies, so they take on huge risk with enormous valuations for Twitter, FB, Groupon, etc.  Not that they aren’t great companies, but there is so much market , as well as performance risk, the risk profile is through the roof.  This isn’t a bubble, its a Rubble.”

Finally, there’s a well written piece that’s worth reading called “Bubble, What Bubble?” that takes an analytical approach to comparing 2000 with 2011, concluding that certain “bubble criteria” are not being met in today’s market.

All of these perspectives and my own experience leads me to believe that we are not remotely in a bubble similar to 2000.

What do you think?

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