The influx of financial resources across the startup world is intensifying tensions in the talent market, explains Nicolas Forcade, Pangea’s General Manager for Vertical Strategies.
Author: Nicolas Forcade
The original French version of this text was published in La Tribune
According to a recent CBInsights report, there are more than 980 unicorns worldwide with a global valuation of more than 3 trillion dollars. Each company is looking to go-to-market globally and all face the huge challenge of acquiring top talent. A quick glance at social media and you see brands singing the same tune: “We are actively recruiting, do not hesitate to contact us!”, “Would you like to join a dynamic team to sell a technology that will change the face of the world? Call us!” The noise is deafening.
While unicorns take center stage, they are not the only ones to raise funds or have high growth ambitions. Other startups, and scaleups, with lower valuations are displaying similar energy. They too have benefited from the current fundraising momentum – a direct consequence of the negative interest rate policy of the major central banks – and intend to make the most of their new financial positions.
Enterprise, mid-market, SMBs, unicorns, and scaleups are in a talent war
Traditionally viewed as the root of the issue money is not currently a problem and it is no longer enough to attract the best profiles. Competition is tough with enterprise companies constantly flexing their hiring muscles in recruiting from the best schools or universities. And let’s not forget the mid-sized companies that also have a structural need for new talent. There is a pan-European movement in enticing graduates in lecture halls of major educational institutions.
Large organizations armed with their onboarding and hiring processes can take a gamble with young engineers or novice salespeople, but companies financed by one or more fund-raisers do not have that luxury. They must move fast, very fast, and follow hypergrowth trends by recruiting the best profiles. This is not an easy task because the hunting ground is limited. Of course, recruiting people from Amazon, Salesforce, Google, Facebook, or other large tech companies is not impossible. However, recruiting the best from these companies is not an easy feat.
Where to start? Offer a good financial package with an equity stake? No doubt, but we know that other criteria come into play, including work-life balance, the quality of the teams formed, a sense of belonging, and the allure of the company’s mission.
How to avoid the pitfalls of growth
Peace of mind: this is a crucial point, often poorly understood by fast-growing startups, who have not had the time to learn the various social laws in force in different countries where they operate. This lack of knowledge coupled with a lack of communication is a dangerous pitfall that can derail a growth strategy.
There are many examples of failure. For example, a Californian scaleup that wanted to launch in the Nordics managed to convince an IBM executive to manage the local sales force. Based in Stockholm, the man demonstrated during his first four weeks that he was the right person to kick off sales in that market. However, he realized that his pension contributions were not included in his employment contract. Hence his legitimate astonishment and questions to the company’s HR department: “What about my pension?” “Dear friend,” came the reply, “Don’t you have your stock options to finance your pension?” A mutual misunderstanding resulted in a separation of the two parties…and a loss in terms of both money and time for the scaleup.
Salaries, stock options, pension contributions, health insurance, taxes, and vacations are all points that must be mastered to recruit top talent. Offering peace of mind is a prerequisite for performance not to be affected by material contingencies. In fact, this is nothing new. In the 1990s, Californian venture capitalists were able to take big financing bets to recruit the best in the industry and put them in charge of startups. Logic dictates that, for example, a Lucent Vice President would not jeopardize his or her salary, total compensation, and social status to run the operations of a future Cisco competitor. Therefore, hiring packages had to surpass that of the previous job. Juniper Networks, a great Silicon Valley story, was founded in 1996 on this principle.
Focus on the core business
The above is an American company’s experience, and it is safe to assume that the various US laws have been mastered by the operational teams. On the other hand, geographic expansion, to Europe or Asia, involves real plunge into legal and social complexity. Worse, it can become a largely time-consuming activity for teams hired locally. The best way to zap the passion and motivation of a country General Manager is to ask him, or her, to manage not only the day-to-day administrative tasks but also the recruitment of support functions as well as the sales force.
A possible route is to outsource Recruiting and HR support tasks, leaving sales to focus on developing revenue, which is the real guarantee of future success. Solutions exist that allow scaleups to postpone creating country entities until they are ready with the necessary intel, time, and resources to do so efficiently. It is possible to partner with a service provider who will use its own pan-European infrastructure to house its client’s employment contracts in complete transparency. This new service makes it possible to accelerate a business expansion plan while respecting all laws, practices, and customs of the countries concerned while limiting the burden of administrative tasks.