Financial crisis, startup opportunity. NYC developers, join a startup!
October 2nd, 2008 | By DaveDave Whittemore, co-founder of MyOffice (and another startup soon to be featured on Enter Venture), has been kind enough to pick up where Enter Venture left off in NYC. The blog will certainly be better for it. Just check out his first post…
If any good comes from the financial crisis, I’m hoping that it helps developers on Wall Street realize that there are paths they can take other than the supposedly “stable” employment that large banks provide. Scratch that — I’m biased. I’m hoping they realize there’s one specific path they should be taking: working at NYC-based startups.
After talking to a few of my friends who work in IT for various large financial institutions, it doesn’t seem like the crisis has had the effect I’d hoped for, yet. Instead of it giving them cause to seek out greener pastures, they seem to be happy that they still have jobs. Rather than adjusting their appetite for risk (or exposing the real risk associated with Wall Street), some developers seem more attached to their jobs than ever.
Now, this isn’t universal, but the fact is, a lot of blood has been shed on Wall Street. Lots of folks are looking for jobs and plenty more will be at risk. The risk/reward of working in IT on Wall Street will surely change even if that’s not obvious now. The alternative — working in a startup — needs to be better publicized.
Josh Kopelman is doing a great job leveraging the financial crisis to tackle this issue head-on with his new website, Leave Wall Street, Join A Startup. That’s the kind of awareness I’m looking for. He lists out plenty of reasons for joining a startup that are dead-on, from the work environment, to creative control, to the potential equity upside.
I love his approach. The startup community in NYC needs to jump at the opportunity, build sustainable solutions, and attract technical talent. It might be easy to hire talent in the short-term, but long-term solutions are needed to ensure success when the crisis ends (and they always do). With companies like Lehman and Bear Stearns tanking, there aren’t many left to complain about startups’ lack of credibility or brand equity. What other objections are there?
A long-term solution begins with creating a better funnel between the various local educational institutions and the startups that reside here (shameless plug: this is one of the goals of Columbia Venture Community). We need more insitutions like CVC, NextNY, and the NY Tech Meetup that can provide continuity of awareness and thought leadership and broadcast success stories throughout the rapid turnover of the startup lifecycle.
The long term solution also requires more awareness and a bit of a reality check. There’s as much risk in your Wall Street job as there is with a startup. Bail yourself out.
October 2nd, 2008 at 2:21 pm
Great post Dave! I think there’s a section of employees that you missed: analysts. Of the 150,000+ positions that will be cut as a result of the crisis, I’d estimate that 20,000 of them are analysts and associates. Most people in those positions fit the profile of young entrepreneur: young, hungry, driven, analytical, and able to think outside the box. I wouldn’t be surprised if, as a group, they’re feeling burned by the financial sector that promised them the moon 2 years ago, but ultimately left them with nothing. What better remedies for Wall Street burnout are there than the creativity and collaboration that characterize the NYC start-up community? Hope to see some of you Dealbreaker types on this side of the market — minus the Ferragamo loafers, of course.
October 2nd, 2008 at 5:58 pm
So- Is this going to make it ridiculously tough for those who want to get into a startup job but aren’t coming from the NYC finance world? Do we think that the startup positions will be flooded with financial crisis “left-overs”?
Time will tell. Kopelman’s site is awesome by the way. I love well timed/positions sites like that.
Great post!
October 3rd, 2008 at 2:04 am
@Lauren
Shamwow? No mayo way.
October 3rd, 2008 at 4:19 pm
Good thoughts, Dave. A couple of points though on switching from banks to startups…
1.) Banks offer a transparent career path with great salary and potentially lucrative bonus. To make serious dough at a bank, you don’t have to be #1, you just have to keep your head down, do your job, and hope the bank makes a good profit.
2.) Start-ups don’t offer the same kind of high salaries that banks do, and could potentially fail at any moment (though these days, banks aren’t very reassuring either).
3.) Therefore, the risk/reward curve to motivate someone to work at a start-up needs to be steeper. In other words, the management at start-up needs to aggressively court tech talent with creative upside packages.
One example of such a package could be an “adjusting” equity stake depending on the sale price or ascertained value of the company. So instead of just getting a static equity stake, you start out with a large chunk that is worth at least something, if not much. As the company increases in value, your equity stake gets smaller and smaller, thus leaving you with a stake that is more in-line with your position, but still worth more that what you started with.
Another possibility is a guaranteed bonus based on company performance that is 50% to 150% of the salary of the employee.
Basically, entrepreneurs that want to secure the best talent need to be willing to give employees the most value at the early stages of a company and only take their reward once the company has become established and successful. This not only removes risk from the employees perspective, but also assures them that the entrepreneur will always act in the best interests of the company.
October 6th, 2008 at 2:45 pm
@Rod — another possibility for innovative compensation: pre-IPO opportunities to exercise options. starting nov. 1, facebook is doing just that (wsj article is at http://tiny.cc/zLagm, although hidden behind a firewall, unfortunately — damn you, murdoch). with the dearth of IPO activity in the last couple years, seems like there’s a strong need for an alternative exit, esp. if you’re using equity stakes to attract top developer talent.
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