By Matt Cohen
In the midst of the current global market correction, there has been a litany of layoffs for big and growth-stage tech companies as they shore up balance sheets and cut costs. As a result, there has been an influx of high-grade experienced talent coming online and available to startups with the runways to hire.
This presents a massive opportunity for companies that just raised a round before the window shut, or startups who have taken the “always alive” mentality to their financials. Just six months ago, the amount of software developers, engineers, marketers and other highly talented professionals on the market was at all time lows.
Hiring was (and to some degree, still is) the biggest challenge for startups looking to grow their teams and hire experienced teams. That’s changing fast.
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For seasoned developers, there’s long been an important trade-off to make when considering their next job. The stability, safety and high salaries of big-tech companies present a compelling case. But startups offering lucrative equity and options packages present real home-run potential for people willing to take a bit more risk. In light of the recent layoffs, this calculus has changed.
That comfort and stability has been called into question, making the risk tolerance of moving into a startup role a bit less scary. I’m already seeing senior developers who have been inside the walled garden of big corporate tech seek out positions at young tech companies, offering deep exposure to the companies’ massive growth potential.
Salaries for developers remain high, even at startups, so the cost/benefit of taking a risk on a young company looks pretty good these days and at these valuations. For startups looking for technical leadership, there is currently a massive opportunity to hire people with experience growing and managing teams through scale moments.
For years, this talent pool has been extremely small and competitive, forcing startups to either grow internal (and possibly less-experienced) leaders into this role.
Now, with the influx of talent hitting the market, startups are experiencing a huge opportunity to set themselves up for efficient growth by picking up some of these recently laid-off developers.
But it doesn’t stop there. Given the amount of highly-capitalized startups, I suspect we’ll be seeing a massive uptick in the amount of acqui-hire deals. For companies with valuations of $50 million and below, the odds of closing an acqui-hire deal are moving up—and fast.
For startups looking to grow rapidly, it’s more possible today than it has been in nearly a decade to hire a senior technical leader and acqui-hire an engineer team. That strategy can take their product to the next level of scale without all the inefficiencies associated with piecing the team together one person at a time.
As always, these market corrections will starve the under-capitalized companies out of existence while giving well-positioned companies the chance to fill the void and blast off when the economy starts growing again. This is the same tail-of-two-cities story we’ve seen unfold again and again through volatile markets.
Even strong companies with great teams and great products might be in a position where an unexpected acqui-hire deal looks extremely attractive. Especially true if they aren’t able to close on the funding needed to take their company to the next level. To the capital-efficient victors will go the spoils.
Matt Cohenfounder and managing partner at Ripple Ventureswas founding investor of Turnstyle Solutionswhich was acquired by Yelp in 2017. He is a frequent contributor to Crunchbase News, having written about why more VCs are becoming startup founders and other topics.
Illustration: Dom Guzman
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