Michelle Cheng, Head of Talent at Notion Capital explores…
VC has an aphorism that rings true every time: talented people make or break a growing company. At every level — from junior developers to CEOs — the right team is the ultimate indicator of future business success.
Nowhere is this more accurate than in software development. I work at Notion Capital, a VC firm that backs software (SaaS and cloud) companies. These companies commonly hold low physical inventory, with limited overheads, and instead target the majority of investment toward their team.
Consequently, the huge shift in the talent market that has occurred in the last year has had a significant impact on how software companies make new hires and retain top talent.
- From 2020-2021, the minimum base rate salary for a Junior Software Engineer leapt up by 41%; 19% for Product Managers; 66% for Vice Presidents of Sales
- The cost of employing a team of three Junior Software Engineers two years ago, around €85k, rose to at least €120k in one year
- A sector wide ‘levelling up’: talented individuals who know their worth in the current market are less likely to settle, instead levelling up to more senior positions. This is witnessed by the lack of change to top ends of salary ranges
This rise in the cost of talent makes it more difficult to access the best people. 2021 was a landmark year for European startup investment, which forces startups into competition with one another to secure the same talent.
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Coupled with demographic pressures and the ‘Great Resignation’, founders would benefit from applying the same strategy they apply to fundraising or new business, to the competition for talent. High salaries will always attract the best people, but what else can founders do to secure top talent?
Offer the roles that people want, and provide a clear path to follow
The best candidates take ownership of their careers, looking for roles that fulfil their wider career and personal goals. Founders who communicate a clear employer brand and articulate the routes for development within their company will appeal to top talent, who desire ownership and opportunities in their work.
Examine the overall package, beyond pizza Fridays and yoga!
After discussing base salaries and benefits, bonus and equity schemes are fantastic talent magnets. Prospective talent that understands the full potential of their holdings and have the intricacies and mechanics of such schemes explained to them in full and in terms they can comprehend, will better appreciate the full picture of accepting a job offer and are more likely to sign.
Look closer to home
It’s not always about looking outward, but instead towards the team you already have. In a competitive labour market with increasing salaries and costs to hire, founders need to consider how many customers a person already in-job can find, how they can expand the product suite, and in turn, attract new talent.
In difficult times, talent retention is key and ‘building’ rather than ‘buying’ could save founders from engaging with unnecessary competition.