The Startup Funding Boom, Big Pay-cheque Culture, and the Dipping Talent Pool
Why I believe that a sustainable recruitment strategy is better than panic hiring and firing.
By Mitesh Bulsara, CoffeeBeans Consulting
The technology startup world in India is ripe with unprecedented funding. A record number of unicorns have emerged at the beginning of this year, and that doesn’t seem to have slowed down. And forget about unicorns! New startups with fresh ideas and promising prospects are blooming at a rapid rate. And guess what, there is no shortage of capital.
Although, being an entrepreneur, I am all for this fast-paced development, kudos! But something kept pinging me with a warning tone. With the onset of the corona pandemic, every few posts on LinkedIn were about someone who lost their job. The hiring freeze was in effect.
But not too long after, it was as if the job market was possessed by mad energy. It was an avalanche effect such that there was a talent crunch, a sharp spike in salaries offered, and attrition charts were shooting through the roof. Interviewing candidates were negotiating super high pay packages based on the seven offer letters they already held. For the first time, the war room in CoffeeBeans was occupied not by the developers but by the recruitment team.
When I reached out to my counterparts in other startups — some early-stage, others funded — I heard a similar story. Their interpretation of the scenario, however, was varying. Some expressed concerns over the big pay-cheque culture. Others valued the speed of their product development over the cost it came at. They have an optimistic view of the value this investment will bring. As for me, I don’t see this whole situation as a simple yay/nay problem. There are so many tangents that can be drawn from the given situation, and these could lead a startup such as CoffeeBeans to interesting avenues. Let’s venture into some of these tangents.
Tragedy to Opportunity
The era of digital transformations
It quickly became clear that Covid has set in motion the wheels of new-age development, which is comparable to the dot-com boom. So many new businesses are going digital — Retail, logistics, tech, ed-tech, and health tech are the forerunners. But consumer products, fintech, and SaaS products are emerging as the new champions. Digital transformations are going to open up so many avenues for innovations, be it strategy, technology, or process. These innovations will be bridging the gap between supply and demand faster and with an added zing. Investors are betting their money big time.
But the aim of a startup is not to acquire capital and employ expensive resources. The aim is not even to make a consumer pay for your product. The aim should be to solve a contemporary problem. The aim should be to identify a sizeable market that needs your products or services.
Also to note here, many businesses started funding their digital initiatives with the onset of Covid. 2021 was of course the year for most of the companies to focus on this, maybe 2022 as well. But will the same budget continue for their IT and digital initiatives? This is a big question mark.
Who Cares?
Who’s gonna pay for this
Let’s pick the next tangent which is closely linked to this age of opportunities. Let’s consider the perceived value of the products/services being offered by startups. As a company, when we go all blitz scaling with recruitment, new product inceptions, and partnerships, we do this on the back of a certain “value-in-return” that we promise. That value should be perceivable in the eyes of all the stakeholders who are ultimately going to generate revenue for us: that new client, our investors, and last but certainly not least, our employees.
CoffeeBeans goes blitz scaling very often. What we learned from it is how easy it is to lose sight of what we want to achieve. The rush of signing that client, or hiring for that niche skill requires all the more due diligence to ensure company culture suffers no dent.
Having a framework and a checklist helps in reorienting us back to achievable, quantifiable goals and not getting carried away. An important question we ask ourselves here is “WHO CARES?” Whose problem are we trying to solve? What makes us apt in solving the problem? What factors empower us to do so? As long as we have clear answers for these questions and not just “because we have the money”, we find ourselves on a steady path to growth.
It’s Raining Unicorns
Are they really valued right?
I am very eager to talk about this. The rate at which startups are being formed in India, specifically in Bangalore, is exciting. And, adding the Global Capability Centers being put together in India to the equation shows that we have come a long way from being a hub for just call centres and maintenance projects. India is where all the R&Ds, inceptions, and PoCs are happening. Built-in India, for the world.
There are primarily three reasons why India is seeing this welcome surge in startups making their first billion:
- China’s regulatory impositions on the account of privacy and security have made young corporations look for more favorable grounds to conduct their business.
- Reduced interest rates and the west is printing money yet again.
- Entrepreneurship revolution in India.
Now, this could either be a cause for worry, or another occasion to be optimistic about the tech future of India.
Considering the trend of boom and bust cycles seen in the funding world, there is a good reason to say that this is a short-lived bubble, say 3 years. Nevertheless, the impression this upward cycle is going to leave on India as a destination for internet business is going to stay. And when the funding begins to slow down, it will not happen before turning important pathways towards India. The startup community should be geared with a plan B which is nothing but sustainable recruitment practices, talent nurturing, and an eye fixed on the question WHO CARES.
However, after talking to my counterparts in the industry, they were of the opinion that this boom cycle is here to stay and may even get more aggressive. Why? Well, look at the size of internet consumers in India. When a small roadside vendor in a city begins to use Paytm, and a farmer far away from urbanization uses low-cost smartphones to get consultation on his crops (Agri-Tech, a topic for another time), we know that things are changing for good.
My counterparts believe that this is the time for thought-leaders to take risks and innovate left and right. Well, what can I say? It’s a win-win situation.
Water water everywhere…
But no senior talent to hire…
A startup is not an entity in itself. It is made up of an idea that needs to be implemented and the people who implement that idea. The problem that we are facing is that every startup wants to make that key hire that is going to steer their way to a path-breaking solution. That key hire for which budgets are expanded, the key hire that brings in the VC money.
But it is also true that talent does not pop up just because opportunities occur. The rate at which technological challenges are presenting themselves outpaces the rate at which freshers and technologists turn into exceptional developers and solution architects. There is a dearth of good senior talent as many of them have either moved to project management or business development. A lot of them have not got the right exposure to the latest technologies as they have mostly been working on legacy frameworks which were a rage back when they started, only a handful have got the right experience on relevant technologies of the future.
This is where DevOps, automation, cloud computing, and SaaS find their biggest application. More and more SaaS-based startups are finding a boost in capital allotment.
Future vision
With so many businesses moving to digital platforms, there are numerous interesting problems to solve, and innumerable innovations are on the cards.
Software developers riding the wave of the funding boom should have some answers ready when the music stops: were you hired for your skills and talents, or were you hired as a result of panic hiring with no clear plan and goal to utilize your specific skill set for an aligned problem? The possibility is when the funds dry out it’s only your skillset that will justify the high pay package at which you were hired.
Speaking from the perspective of someone running a technology startup, I have come to see the distinction between the superficial problem and the actual one. The problem is not of competitors with heavy pockets, the problem is not about having to pay x-times the standard pay package.
The goal my partners and I are passionately working on is to create a charged environment that encourages curiosity and independent thinking. People who make up CoffeeBeans are the key to accomplishing this goal. We seldom look for “so and so” experience, rather potential, skills and traits while welcoming new team members.
We promote freedom to explore, make mistakes while doing so, but emerge out of it with something new discovered. Challenge the status quo now for a better future.
Continuous improvement — one of our core value systems that translates to:–Great work, Great people, Great pay, Great culture.
