I’ve spent much of the past two years speaking to startup founders, drifting from coffee to coffee, 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 the 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 queuing 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 development experience on a $US250,000 first year salary.
In Australian dollar terms, based on today’s exchange rate, that’s $329,000. 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 $329,000 per 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 it 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. 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 developer 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 US 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 1 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 seven days before the cap is hit again.
Have we talked about the costs of all of this? You’re quickly looking at well north of $500,000 to, maybe, have someone start next year.
The local market
I’ve asked around and the general consensus is that someone with limited commercial experience would be very lucky to get $60,000/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 $160,000 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? That’d make Australia 90% cheaper in real terms than the Bay Area equivalent. Or maybe we should co-invest dollar-for-dollar in your business?
So you manage to invest $30,000 yourself into the business, and you get the accelerating commercialisation grant which dollar matches enough to let you employ that $60,000 person. And then the R&D grant gives you $27,000 back.
So in real terms you’re only out of pocket $3000 on that $60,000 salary.
Or it’ll 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 fundraising?
Sure. You’ll probably be able to raise 10 times 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.
This piece was first published on Glenn Gillen’s website.