(Editor’s note: We asked Amy Vernetti, an executive recruiter in Silicon Valley, to report what the high-tech executive job market is like these days, now that the economy is humming and unemployment rate is down.)
It’s time to put the fatigues back on…the War for Talent is escalating. We’ve all watched as valuations for venture capital backed start up companies have risen over the past year.
We are now seeing the inevitable return of rising cash compensation packages, candidates with multiple offers and yes…the signing bonus is back!!! The bonus was popular during the silly period of the late 1999, but universally hated by employers and investors. It’s surprising to see it come back, but the good news is, we haven’t seen too many of them • yet.
Here at Taylor Winfield where all we do is recruit executives for investor led technology companies, we’ve seen some very 1999-like behavior from candidates and companies. For obvious reasons, Taylor Winfield is not at liberty to discuss company names or candidate names while describing these incidents. We think the scenarios are instructive without jeopardizing the confidentiality of either party.
Lessons Learned
• Savvy investors who understand the competitive landscape for talent are winning.
• It’s critical to move candidates quickly and efficiently through the process.
• Dangling a liquidity event in front of a candidate is no longer an effecting recruiting tool.
• Candidates are far savvier this time around about equity compensation but cash is now equally important.
• Candidates know the market for talent is heating up and the best ones aren’t in the mood to negotiate,
• Reference checking must be done discreetly and quickly
Anecdotal Evidence
This past week, a private, profitable consumer internet company on an IPO track extended its fourth offer to a candidate for an executive position.
After receiving a very respectable offer of $300K base, 50% bonus opportunity, $50K signing bonus and more than 500,000 stock options, the first candidate turned the offer down for a better offer of $400K base salary, 50% bonus, restricted stock worth approximately $1M on day one and a complete relocation package.
This is the crazy part: The winning offer came from a company that had been contacted during a reference check on him, and that company decided to make an offer themselves • stealing the him away from the original client.
Another candidate turned the client down to remain in his current position because 500,000 stock options in a private company with strong prospects for a liquidity event was not enough to mitigate the risk of him leaving a $2B publicly traded company.
But candidates be warned…the competitive landscape cuts both ways. A sub $10M telecom software company extended an offer to a Chief Financial Officer last month. This CFO candidate had taken two companies through Initial Public Offerings, an important qualification for CFOs.
The start-up offered the CFO a $200K base, 30% bonus opportunity and 1.5 percent of the company. This is a healthy compensation package from a company with $8M in revs.
Twenty-four hours after receiving the offer, the candidate was wavering about joining the company. The hiring CEO got wind of his wavering and promptly pulled the offer and went with another candidate. The first CFO candidate came back a day later to accept the position but it was too late. The CEO said, “If he was wavering on this opportunity, this is not the guy I want in the foxhole with me.”
During another CFO search for a private company on the path to a liquidity event, a candidate received an offer of $300K base, 50% bonus and the highest number of stock options in the company, next to the CEO. During the 72 hours it took to negotiate this compensation package, this CFO received another offer to work with a CEO he had worked with previously. The cash package was comparable but two things sealed the deal: the equity compensation and the expediency of the recruiting process.
This CFO was granted restricted stock that by conservative estimates was worth $3M on day one. The higher value of the restricted stock, the favorable tax treatment on restricted shares and the fact that as restricted stock vests it is owned by the individual (versus stock options that typically must be exercised or forfeited within a tight timeframe) made this a no-brainer for the CFO.
“In addition to the more attractive compensation package, the management team at this company jumped through hoops to get me in front of all the decision makers over a four day period,” said the candidate.
Yet another Silicon Valley start-up recently made an offer to a Vice President of Sales. The base salary part of the compensation package was $10k less than this candidate was making in his current position, which the company thought would be more than compensated by the stock package. But to their surprise, the candidate was not willing to make that tradeoff. The candidate said, “The market being what it is, why would I accept a $10K pay cut?”
21 Comments
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You Mon Tsang said:
Ah, shit.
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Jane Adamo said:
Excellent article. The only thing that I disagreed with was the CEO who yanked the offer when the CFO candidate wanted to ponder the offer for a day. Unfortunately I worked for a similiar boss who viewed any “pondering” as an “attitude problem”. Such bosses are too inflexible and are never there when you (the employee) need them in the foxhole. Loyalty goes 2 ways…. I wish the “rejected” CFO candidate the best.
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Amy Vernetti said:
Jane, don’t worry about the CFO. He was a very high quality candidate and quickly moved on to a great job with another start up.
However, the CEO in this story also happens to be an absolute star. She made the tough but correct decision for her company. Thanks for reading. -
Judy Redeker said:
Hi You Mon!
It has been awhile since we worked with you at Biz360.
Happy New Year.
Judy Redeker, Co-founder,Taylor Winfield -
Steve Leung said:
If this trickles down to the rank and file, people waiting for a precipitous drop in the Silicon Valley housing market are going to be really disappointed. The only reason why we can support housing prices like they are is because your neighbors and your cube-mates all earn so much. A rise in talent demand, and thus wages, will affect downstream housing prices.
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fez said:
Amy,
Yes, I’m curious too how the rank and file are doing. How about Lead Developers & things of that nature?
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Michael Kreizenbeck said:
I like attutude of the CEO in the “foxhole.” It was a lavish offer and with such terms the wavering seemed like a sign of weakness since it must have had something to do with sentimental attachments. The part that strikes me as a little crazy is that those generous terms were not driven, at least in this anecdotal case, by a weak talent supply. If this is typical, it is inflationary. Are these, the first signs of the return of the signing bonus, driven by anxious pre-IPO companies (again); or, across-the-board demand for talent? Either way your message is an important heads-up to executive talent and those seeking it.
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Mitch Williams said:
Amy,
I think you are correct that demand has picked up dramatically over the last couple of years…as a current VP Sales candidate, I find myself considering six different opportunities that have passively surfaced over the last sixty days. However, I do remain sceptical about the wisdom and necessity of venture backed, early stage companies paying signing bonuses. I’d prefer to see realistic operating plans that are achieveable and Boards that are realistic in their growth objectives and willing to pay for performance. The next thing you know we’ll have sales reps looking for signing bonuses again…please.
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jennifer jones said:
Amy, great perspsective. Glad to hear the market is up for candidates. It makes everyone’s life much better when there are more jobs. Also glad to see you are blogging.
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VIABUZZ said:
Great article! I’m going to make sure none of my partners and employees see this:)
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Donald Kingsborough said:
Amy, You article is very helpful to me. As CEO of a big start up, I sometimes forget how competitive it is for the “right talent”. Your article helps me keep my perspective. Talent is my limiting factor and getting the right talent is my best chance to build a great company. Thanks again for the perspective and the examples.
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Noel said:
Great article and good point about cash. A recent candidate with multiple offers chose the package weighted towards cash versus the offers weighted toward stock. In the end, it was the cash that drove the deal.
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courtney benson said:
This is great news for all of us in the technology industry and especially for those that are great executors. Hopefully, we will learn from the past and not let compensation get out of hand.
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Salvatore Sole said:
Amy - Thanks for pointing out the the employee market is really starting to pick up again. We are seeing this on Wall St as well!
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Yohay said:
All these stories sound very bubblish. Except the solid stock markets, everything else is steam hot. The job market described here and the big money raised by start ups, are, at least for me, signs of a bubble.
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Richard Smalls said:
Bring on the bubble!!
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Michael said:
Bubble. are you kidding.
it takes $140K+ to own a house and run it in the silicon valley
get real. thats with $0 savings.
tech people are just sick of being underpaid and a bit angry to be frank.
they are asking for part of the bottom line that the execs and stockholders get.
reality
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Ted Malone said:
Nice writeup Amy.
Good news for executives, but not so good news for early-stage companies.
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Michael 2 said:
I agree with Michael. Theese execs are building wealth on the backs of the people that do the hard work of implementation.
Share the wealth. Techs are tired of this BS attitude from some kid out of Oxford that couldn’t read a line of code if they had to.
Techs are smarter now. The fact that you call lead developers the “rank and file” shows how misplaced the market is when it comes to recognizing the people that make the company a success. Remember, in the end you still have to have a product.
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Amy Vernetti said:
Michael,
Thanks for your comments. I actually agree with you and I apologize for referring to “rank and file”. That’s an outdated phrase that does not properly reflect the critical role of tech employees in the Silicon Valley ecosystem. However, it’s probably important to point out that developers in Silicon Valley are VERY highly respected and pretty well compensated also. It seems that most of them are content to build great products and stay away from the management BS that the executives have to deal with. But, I’m not justifying inordinately high compensation with tolerance for BS. Remember, I agree with you and your point is well taken.
Thanks for the comments. -
David said:
Interesting article. I wonder if this is still the case one year later!?
