The Tech Bubble’s People Problem

Proliferation of startups leads to recruiting shortage

It's almost too predictable. Technology, a cyclical industry, heats up, and hysterical warnings of a tech bubble follow like clockwork. Whether the bubble is early stage, about to pop, dangerous, natural, or even real, is a source of constant debate. But one aspect is undebatable: technology is driving the job market, especially in Northern California. The state's unemployment rate for March was 12%, higher than the national average of 8.8%. Yet hiring in information technology jumped 5.3%, led by companies like LinkedIn, which added 800 employees over the last year.

An unfortunate side effect of this? Recruiting tech talent is very competitive. 

That much was clear during several panels at today's Silicon Alley Insider Startup 2011 conference in New York.  

Esther Dyson of EDventure  said the bubble has negatively affected hiring and recruiting at promising startups because there are "way too many redundant companies." Since the cost of starting an Internet company today is low and raising seed capital is easy, every promising startup has at least five competitors that spring up overnight. "They're all going after the same engineers and management and money," she said. Not to mention, they all want to start their own companies.

On a panel dedicated to the recruiting process, Alex Rainert, chief product officer at Foursquare, said the company has seen problems tearing engineers away from their pet projects. "But as we see how those things play out, we think maybe we'll see them again in six months," he said.

Rainert said the New York-based company recently opened an office in the Bay Area to benefit from the pool of engineering talent there. He added that recruiting in San Francisco isn't any easier than in New York.

Dwight Merriman, co-founder of 10gen (and previously, Doubleclick) argued that New York has enough talent to support a $1 billion tech company, citing Doubleclick and Gilt Group, which this week raised $138 million in new capital at a $1 billion valuation, as examples.