Sure, the next-generation web is cheap. It is about cheaper bandwidth, cheaper hardware, free software, and better tools. In other words, you get much more done with much less than in years past. I have written about this in a prior post, Web as Platform. Anyway, has anyone noticed the arms race for talent out there? Sure it is cheap to get a product up and running but to scale any business you need talented employees in engineering and product. I have heard numerous stories over the last few months about smaller, innovative startups having a hard time bringing on qualified engineers as Google and Yahoo are offering 3 year packages of a $1mm or more in salary, restricted stock, and signing bonus. I must admit, this is a pretty tough environment to compete against. In fact, as you look at the landscape, everything that Google and Yahoo is doing is about stockpiling talent. Let’s not forget that all of those tiny acquisitions of small startups is about bringing on the best talent possible.
So then the next question you may have, is how do I compete for this talent? It goes back to selling the vision of your company, the ability to make a huge impact in a small and thriving organization, and outlining the equity opportunity. Those seeking the comfort of a nice paycheck at an established company need not apply. All that being said, despite the next generation web about being cheap, the costs are rising quickly as the big dogs with hordes of cash are not afraid to spend it to stockpile their talent. As you look at the bulk of your costs over the next couple of years, it is clear that your budget will reflect a huge percentage of cost in bringing the right people on board. No matter how you slice it, despite this mantra of cheap, it is not as cheap as we all want because personnel costs are rising, not decreasing. This next phase of ramping up companies is not about how much you spend on marketing as most services today are spread word-of-mouth. It is not about technology spend as it is way cheaper than years past. It is about finding and hiring the key people who know how to scale a back end infrastructure, who can create and deliver innovative product, and who know how to leverage word-of-mouth to create a huge opportunity. And you must do this when Google and Yahoo are not afraid to be the George Steinbrenners of the web. The good news is that just because you spend the most on your payroll, you don’t always win. Just remember Billy Beane and his Oakland A’s.