Your talent isn't expensive
Apr 30, 2016
I've spent much of the past two years speaking to startup founders. Drifting from
coffee to coffee, mostly speaking to people in Melbourne. Talking about what they're doing,
how they're doing it, what's working, what's not, and what they wish was different.
I offer help where I can, but the truth is people already know what they need to do. They
just need to start doing it. And sometimes a coffee with a stranger, publicly admitting
they need to change their actions to match their priorities, and the threat of someone
calling them a month later to hold them accountable is enough to get things moving.
The greatest disparity I see between what people "know" and reality continues to be two primary
areas: hiring and money. It's often intertwined with the difficulty of running a startup in
Melbourne versus somewhere like San Francisco. We don't have the same talent pool. People here
are expensive. The lack of a mature VC industry means we don't have the capital required
to grow at the same speed.
The grass isn't actually greener
Every single one of the conversations I've had has exposed a massive gulf between
the perception of a gold rush of the worlds-best developers queueing up for employment in the Bay Area
and the utter dearth of employable people, and the feeding frenzy of employers trying to hire them.
I'll start with a single example that got a lot of coverage recently: [a talented person with no
commercial dev experience on a USD$250K first year salary](http://haseebq.com/farewell-app-academy-hello-airbnb-part-ii/).
In Australian dollar terms, based on today's exchange rate, that's $329K. It's important
to note here that this isn't some outrageous outlier. Yes, this is someone who negotiated well. But
it's also within the upper bounds of what could be considered "normal" in the Bay Area right now.
So before we dig into the market dynamics that have made this possible, let's get honest with ourselves:
- There is unlikely to be a single developer with no commercial dev experience in all of Australia
that is earning $329K/year.
- There will be very, very, very few full-time employed developers of any skill level anywhere in
the country commanding that kind of salary.
- If companies are willing to fight like this over someone with no experience, what do you honestly
think the market is like there for experienced people?
When you're dreaming of a San Francisco-inspired startup ecosystem, be careful what you wish for.
High demand is demanding
So how did it come to this? If you read Haseeb's story above then you'll know it all escalated
once Google got involved. Which is the natural progression with most candidates. Or Facebook. Or
Uber. Or AirBnb. Or some other startup that is better funded than you, more exciting than you, can offer
more financial inducements than you, has better organic yoghurt in the fridge than you,
looks better on the resumé than you.
And that's the reality. That unless you're fortunate enough to be one of the unicorn club hiring
has become an almost impossible endeavor. If you are one of those companies, it wouldn't matter
what city you were based in anyway. For everyone else you're left to try and exert influence via
personal networks to convince someone to forego the riches you can't realistically promise
in return for something smaller and hopefully more personally meaningful.
I know numerous companies that have been unable to fill single senior dev positions for over
a year now.
And the reason companies will fight like this over juniors is precisely because hiring senior
people can be even more difficult. In my time at my previous employer we ultimately had to
relocate people internationally to San Francisco (myself included). Which means completing
a Labor Condition Application with the U.S. Citizenship and Immigration Service to prove
that you've been unable to fill the role with someone already based within the USA. Then there's
H1B visa petition to grant your prospective employee right to travel to and work for you within
the USA. Assuming the visa cap hasn't been met (it has), in which case you need to wait until
April 1st next year when the new allocation is dished out on a first-come-first-served basis.
And hope that you're prospective employee is one of the lucky few processed in the 7 days
before the cap is hit again.
Have we talked about the costs of all of this? The fact that you're probably making a > AUD$260K
base offer because this has to be a "senior" person to meet the H1B requirements. Plus the signing
bonuses, stock, etc., so another AUD$240K using the same relative amounts from the earlier
example. AUD$9K in immigration fees, anything from another AUD$2K to infinity in attorney
fees to process it. AUD$30K in relocation expenses. And up to 51 weeks of waiting and opportunity
costs associated with hoping your person actually gets in.
And we haven't even covered all of the flights, hotels, and other reimbursements for all
of the candidates you ultimately had to fly in to interview and not even offer a job to.
You're quickly looking at well north of AUD$500K to, maybe, have someone start next year.
The local market
I've asked around, the general consensus is that someone with limited commercial experience
would be very lucky to get $60K/year here. So 80% less than that AirBnb offer. Indeed, in
my own looking around and wondering if I should get my hands back on the tools it seems the top
end of the market for experienced people is somewhere around $160K right now.
Expensive little old Melbourne. Where someone with
over 20 years experience get paid 50% of what someone with no experience can earn in San Francisco.
Tough times to be doing business. We should do something to make us competitive. Maybe [give employers up to 45% of their
staff expenditure back to re-invest](/thoughts/abcs-of-startup-financing#rd-tax-grant)?
That'd make Australia 90% cheaper in real terms than the Bay Area equivalent. Or maybe we
So you manage to invest $30K yourself into the business, and you get the accelerating commercialisation
grant which dollar matches enough to let you employ that $60K person. And then the R&D grant
gives you $27K back. So in real terms you're only out of pocket $3K on that $60K salary.
Or it's cost you 99% less to hire someone in Australia, even at the top end of the realistic
salary range for a role, than it would to employ that same person in San Francisco.
Okay hiring isn't so bad here. What about fund-raising?
Sure. You'll probably be able to raise 10X more there. Where do you think it's all going to get spent?
Just get the job done here, and you don't need to set fire to money.
I've had a couple of people contact me about this post with "yeah, it's not just the money.
Just finding people is hard". Those that know me will know I've never recommended a recruiter
to them before. And I've written in the past on how [I'd rather
spend 3 weeks of my own time vs engage a recruiter](/thoughts/on-hiring) to find a candidate.
If you're in Melbourne or Sydney I'd say just hit up Matt Allen
and Lookahead Search. Having actual developers finding candidates for you, and people that
are actively involved in startups day-to-day, apparently makes a world of difference.
Otherwise treat it like finding customers. You need to hustle. Get to meetups, all of them.
Get to conferences. Get everywhere would-be employees might be. And talk to them.