Will Startups Get Squeezed by a Tech Hiring Binge?

Were start-ups squeezed by hiring in 2004-2007?<p>Joining a pre-funding start-up is a <i>huge</i> 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.<p>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 <i>big</i> 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.

Anecdote: I'm a software developer writing trading systems at the moment at a large bank, and I've known three people at my workplace who have interviewed at NYC area startups in the past year or two. All of them received offers from at least one of the startups they interviewed with, but only one of them took it, and this was during the period of the recession when morale at the bank was at its lowest.<p>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.

At least in silicon valley, I don't think the tech sector was ever in a slump... companies left and right have been trying to hire people here.

There are some of us out there that are actively looking for start-ups to jump to, I think a lot of top caliber guys look for start-ups to get involved with. But I have to agree the market is pretty hot right now, which is a good thing.

I thought this was conventional wisdom. Just a couple of months ago, we all kept hearing stories about how a recession/depression was great for finding cheap workers for a startup.

No. A hiring binge will be good for startups.<p>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.