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Here’s the worst kept secret in Silicon Valley: Startups are hot. I recently read this article in the Wall Street Journal that said U.S. startups raised $69 billion from investors in the first quarter of 2021–an all-time record. This surge is creating a severe job demand challenge that stings startups most of all.
There's more money going in, deals are closing faster, and startups need to pull in high-caliber tech folks. Fast. And so they need to face off against the tech giants to bring in that talent, because without it, there's no product. (At least not a great one.)
While the big tech companies will always have more financial resources and a brand edge, startups that understand how the industry works and what drives their peers can get their own edge when it comes to recruiting away talent.
“Startups that understand how the industry works and what drives their peers can get their own edge when it comes to recruiting away talent.”
Know where you stand against the competition
Let's unpack the competition. If you are a startup founder or on the leadership team of a startup, and you're trying to hire engineers, your most potent competitors for that talent are going to be these very large publicly-traded tech giants.
In the Bay Area, that's Google, Facebook, Apple, Uber, and Twitter. The list includes companies that have market caps that are in the tens of billions, if not hundreds of billions plus. That's their leading advantage.
Instead of offering stock options like startups, which may or may not be worth something in seven to 10 years, these big tech companies can offer bountiful cash and restricted stock units (RSUs), which essentially are the equivalent of cash.
They also have brand value. Candidates can say that they’ve worked at the likes of Google, and that leads them to promising opportunities in the future.
Startups cannot compete with seemingly endless financial wells and brand reps. They cannot pay the high base salaries and bonuses that the Googles of the world can, they don't have RSUs, and their company name on a resume might not initially surface a candidate to the top of a pile.
“Instead of offering stock options, which may or may not be worth something in seven to 10 years, these big tech companies can offer bountiful cash and restricted stock units.”
And yet, startups are able to recruit engineers away from these monoliths. How do they do it? You have to dig into a couple of different things.
Stand out from the giants with culture fits and specifics
Everyone talks about product market fit, but you need to spend a bit more time talking about founder company fit and employee market fit—does the candidate we're thinking about bringing in match the market we're pursuing?
You can stand out from the giants and really resonate with a candidate with culture fits and specifics, focusing on the fact that you have a much better lock fit for them than a big company.
The greatest downside of these giant companies is, well, that they're giant. Odds are a lot higher that a candidate will become a cog in the machine, cutting down their ability to have day-to-day impact with the exception of a very few isolated cases. They’re going to get swept into the machinery, and most talented and curious people do not want to be an insignificant piece of a larger puzzle.
“The biggest downside of these giant companies is that they're GIANT COMPANIES.”
High-caliber talent want to enable impact and change. They want to know that if they're going to work that hard, that their efforts are going to make a difference to the company, the market and the customer. Those things matter to a lot of curious people. That propensity is a huge advantage for a startup, one that the big companies really cannot offer to the masses, no matter their lip service suggesting otherwise.
Startups are a very focused, narrow pursuit of something that's purposeful and meaningful to the founders. There is a very specific problem and founders need to rally curious talent to come tackle that problem together.
The big guys, in contrast, are typically a one-size-fits-all for everyone. They are mass market offerings and that's why they amass so much money, but they're not deep specialists in any particular thing.
Think of it like a Budweiser vs. a craft brew from Russia River Valley
Budweiser is a hugely financially-successful institution. It blows past any craft brewery in terms of revenues and profits, but it tastes just okay, and I’m being generous.
The experiences at a startup are much more like a really well done craft brew. And there's a lot of passion and a lot of originality and a lot of depth that go into a craft situation that you don’t usually find in a mass market brewery type environment, like an Anheuser-Busch.
If the conversation is all about money run, don't walk, away
You want to make sure that when you're talking to candidates, they are genuinely interested in those differentiated offerings that a startup can uniquely offer.
If a bulk of the conversation is about the economics of the position, you should leave that conversation as politely and quickly as possible, because you're probably not going to be able to make that person happy. Because if salary is a priority for the candidate (a completely respectable priority), you cannot compete with the big companies, and you're effectively wasting both of your time. You want to focus on candidates that are interested in what you can genuinely deliver.
“You need to quickly move to the next candidate that is interested in what you can genuinely deliver.”
Recap: Remember your edge and don’t dwell on candidates who aren’t flexible with compensation
The big tech companies will always have a financial edge and a brand edge, but the good news is that startups can recruit away talent from the big guys.
And the main reasons this is possible are…
- An understanding of the competition: In a big company, no matter what they would like you to believe, you are going to have a very small impact on the overall trajectory of that giant spaceship. And that can be very, very frustrating to curious and ambitious people. They want to make a difference in the company. They don't want to know that if they go there and then don’t show up for 90 days, it really wouldn't make a difference to the trajectory of the company. And that difference is definitely possible, at a startup. At a startup, believe me, if you don't show up for two hours, people notice, and startups offer a really focused look at a particular problem. Startups can pursue projects in a much more intimate and exploratory way, as opposed to the giants who are beholden to a wealth of stakeholders with contradicting priorities. For the eager types, the latter can be a drag.
- The craft beer versus mass market beer: Most curious people want to work deeply and passionately on a product that is differentiated and delivers a great experience to customers, not an okay product that has mass market appeal. Focus on the fact that you have a much better lock fit for them than if they were to go into a big company.
- Money aside, what matters most to the candidate? Make sure that the candidate you're talking to cares about the things you have to offer. If you notice that none of those things are really resonating with the candidate and the conversation keeps coming back to compensation, you have to politely move on to the next conversation. Because you're not really going to be able to offer this person what's important to them. The good news is, there are plenty of curious and ambitious people who want to tackle the very challenge your startup has set out to solve.
