Searching For Beasts In Silicon Valley’s “War For Talent”

Editor’s note: Glenn Kelman is the CEO of Redfin, a technology-powered real estate broker backed by Madrona Venture Group and Greylock Partners. Follow him on Twitter @glennkelman.

At a recent wedding in San Francisco, a friend who runs engineering for a successful, pre-IPO company started talking about a member of the latest generation of newly minted millionaires. This acquaintance of ours had started one company and then, before that company had ever made money, sold a big stake to a venture investor, only to start another company in the same area.

“Has he even done anything yet?” my friend said and then, looking around, “When did that stop being a requirement?”

This wasn’t jealousy. Silicon Valley has always showered so much money on the deserving and undeserving that it would be hard for any one of us to say which group we ourselves belonged to. But one crucial difference between this boom and the last is that the folks in the last boom had to ship or starve.

Today, not shipping pays pretty well. Five years after Peter Thiel said the simplest predictor of a startup’s success is whether a founding CEO pays herself less than $100,000 – $125,000 per year, the typical founder of a company that hasn’t yet released its first product earns, according to private salary surveys, nearly $200,000 per year.

And that’s just the beginning. Until the advent of secondary sales a few years ago at companies like Groupon and Zynga, where key employees get cashed out early by venture capitalists, you had to wait till your company got bought or went public, because the investors wanted to make sure you didn’t make money before they did.

Now, of course, you can cash out as soon as the startup has made any significant progress. The rationale has been that this relieves pressure on the company to sell out prematurely, giving the early folks enough money to live well while they build their company for long-term greatness. But many just quit. How many startups would be doing better now if all their early people still had to work there for a big payday?

The broader trend of generally increasing pay, at least for young engineers, has had even more profound consequences on Silicon Valley’s culture. Before most computer science graduates ever walk across a stage to get their diplomas, they’re set for life. This is especially true in 2013, which will be the first year in which most companies pay top engineering graduates in Silicon Valley $100,000 or more per year in salary.

young engineers earning that much become well-fed farm animals at the very moment in their lives when they should be running like wild horses.

For the companies, for Redfin, the engineers are worth every penny. And for the engineers, the money is nice to have. But how many engineers hired from Stanford or Berkeley in the past year will ever feel the savage need to make something happen, to bust out of the matrix, to push the limits of their abilities?

The problem is that the young engineers earning that much become well-fed farm animals at the very moment in their lives when they should be running like wild horses. Many now remind me of middle-aged men, collecting expensive Scotch or taking up John-Kerry hobbies like kite-surfing and racecar-driving at the age of 24.

What changes these folks isn’t just the money. It’s the cosseting, which can permeate the most minute interactions between engineers and their mentors. If you as a manager have spent all day wooing new hires, you aren’t likely to turn around and tell a young engineer on your team how much more she is capable of, even if this is just what she needs to hear.

This is why Silicon Valley’s War for Talent hasn’t always been good for the talent. After all, the only way to get much better at your craft is to be challenged in ways that make you uncomfortable. Yet not many people in high technology are uncomfortable these days.

The result for many engineers and product managers is often a case of arrested development, as they drift from one startup to the next, dabbling in several side-projects, without the ballast of having solved some really hard problems or contributed to a lasting business. In the recent laments against the proliferation of amateur-engineers, Ph.D. programs are often cited as the solution, but the true training ground for software’s elite has always been a high-performance startup.

When I came to Silicon Valley, I came for the boot camp, I longed to be broken and built back up bigger, better and faster. I earned $32,000 per year in my first job at a San Francisco startup; adjusting for inflation, this is still less than $50,000.

Almost every day, our head of products gave me the best advice a young person can get: “Just go figure it out.” If I’d told him terrorists had taken over the men’s bathroom, he’d have said the same thing. I took on the challenges he gave me for many reasons, but the inescapable one was that I needed a raise.

Our CEO at the time liked to swing by my desk and say “A chain is only as strong as its weakest link. God help you if you’re that link.” Whenever I wanted to show him one of my projects, he liked to stop me at the threshold of his office to ask, “Wait… Is it sweet?” And then, because it often wasn’t quite sweet enough, I usually turned around right there.

My first year at that startup was the most harrowing of my life. But it also made me resourceful and tough, which is probably the most underrated quality of an entrepreneur. After a life of all A’s for often-mediocre work, it gave me high standards. It was just what I needed when I later co-founded my own company.

None of that would have happened if my startup had been like lotus land. But now many startups are.The perks offered by profitable, public technology companies such as Google are well-known; what’s new in the past few years is the emergence of the private, venture-funded company that offers yoga classes, on-site haircuts, a chiropractor, massages, laundry and dry-cleaning, as well as “an executive chef who prepares local, organic meals, available for dining at the office or to go.”

I’ve been asked about the same perks at Redfin. We want the absolute best talent, so of course our pay is competitive; we cater lunches, and our offices are pretty nice. But the problem I have with perks isn’t just the money; it’s the symbolism. After all, when evaluating a Redfin job applicant one of the big questions I’m trying to answer is “when did she do something hard?”

It could be something you put yourself through for fun like running a marathon or far more serious like fighting in a war. It could be the grinding repetition of preparing for a piano recital or the grit required to dig ditches or paint houses for a living. It could be raising a child all by yourself.

Maybe some of these examples sound preposterous to you, but they’re what the rest of America does every day. Looking for candidates who have visited that hard place in themselves at one point in their life isn’t some Marxist fantasy of mine. It’s how capitalism works best.

Startups, like professional football, are best done by the most desperate people on the planet. Products don’t just walk out the door on their own. Sooner or later, to ship something amazing, you have to dig deep and bring out your beast. A horse running wild is a rare sight, but it takes your breath away every time.

[Image: The Hungry Lion Throws Itself on the Antelope (detail) by Henri Rousseau]