Engineering Shortage Is Real. Former Digg Engineer Gets 7 Offers, Takes One for $150K

In recent months, venture capitalists have been complaining that a shortage of talented engineers is driving up engineering salaries at their portfolio companies.

Turns out all that complaining is warranted. Created in part by the explosive growth of companies like Facebook and Zynga, as well as the sheer numbers of Web companies to spring into existence and raise funding, top-notch software developers are a scarce resource these days, say recruiters. And the engineers are commanding — and receiving — at least 10 percent more pay than they were before the financial crisis.

The ramp up is “really aggressive,” says Morgan Masner, founder of 2-year-old recruiting firm HireUp in Mountain View, Calif. “It’s almost like a gold rush right now,” he says. “While companies are still very selective” —  they prefer candidates out of strong programs like M.I.T, Stanford, the University of Michigan, and U.C. Berkeley, for example — “they’re really competing over the same candidates.”

The problem is twofold, says Masner. In addition to the likes of Zynga “snatching up a lot of good guys, even out of Yahoo and Google,” there’s not exactly an influx of engineers coming into the market because of the market downturn.

“There was a misconception that the recession hit [Silicon] Valley hard, and it didn’t,” says Masner. In fact, rather than pay top-tier engineers the same amount they were paying two years ago — as many startups expected to do — most have been forced to sweeten the pot, sometimes substantially.

Last week, for example, Masner placed a former software engineer from Digg into a job with a $150,000 base salary. It’s an extraordinary rate, considering that most senior software engineers make between $100,000 and $125,000. Just as extraordinary: the engineer was made seven offers.

It’s not just Maser’s experience. “Right now, startups are either having to pay more, relocate people [to work for them], or go the [H-1B] visa route [allowing companies to temporarily employ foreign workers],” says Chuck McLoughlin, who heads up the tech practice at SVS Group, a 14-year-old recruitment firm based in Emeryville, Calif., that works with midsize companies. “As [our clients] see the responses they are getting, they’re all saying: ‘We have to do something.'”

It doesn’t help startups that large companies are paying exceedingly well right now to retain their staff. Masner says he’s seen “huge counteroffers” from VMWare to Cisco, not to mention Google, which “you don’t see many people leaving” because of the lengths it is willing to go.

As for Facebook, Masner characterizes efforts to cherry-pick its engineers as “pretty much impossible. Two to three years from now, people will probably be looking to leave, but not now.”

Worse for smaller startups are Facebook’s own hiring efforts.“You can make the pay the same, but it’s pretty great to have [Facebook] on your resume,” says McLoughlin.

A startup’s best hope of landing a hot engineer? Intangibles like free meals around the clock help, says McLoughlin. But “convincing [an engineer] that [the startup] could turn into the next Facebook — that’s the hook.”

32 Comments

  • This situation is actually creating an interesting opportunity for offshore/nearshore providers: http://www.tropicalgringo.com/english/latin-american-star-developers/

  • Yeah we heard all this worker shoratge stuff back in 1998 too and the response to that was to flood the labor market, which caused the recession. There is so much unemployed native talent in the U.S. Right now, it’s not even funny.

  • Newsflash: a TON of engineers in the valley make $150k or much, much more as a salary.

    You must be interviewing the worst senior engineers and cheapest companies in the valley if they’re only making $100-125k. I know numerous people who, out of college, were making $100k as engineers in the Bay Area. Terrible article.

  • That’s odd. In the Boston area, there are no jobs. Could it be that corporations are trying to spread the lie about a “shortage” in order to increase the H-1B quota at a time of +10% unemployment?

  • Surely the engineers arent complaining. Good for them, they face an ongoing onslaught from outsourcing efforts at every turn.

  • p henry, i can’t speak to boston area.

    mike rundle, you’re right — the recruiters told me that a lot of guys straight out of college are being offered $100K to $125K. evidently they’re seen as attractive, if not more so, than entrepreneurs who’ve, say, worked at oracle for 15 years. (they don’t have hard stops bc of families, they have higher risk profiles, etc.) as for their being a “ton” of engineers making much more than $150k, maybe you know more about it than recruiters who’ve worked in the bay area for 7 and 14 years, respectively. i really don’t know.

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  • [...] note at PE Hub confirms this vision. Among other nuggets it tells us about a former Digg software engineer who got [...]

  • What articles like this all like to say is that there is a shortage of engineers willing to work/move for the relatively low salaries they are being offered. We all know engineers create incredible value for companies, but they are getting them on the cheap. They have already usually paid for their education elsewhere, and they tend to skew younger and so have massively reduced health and pension costs. Valley companies have just got spoiled by being able to pay H1-Bs peanuts, so they think that’s how everyone should work. That’s just wrong.

  • You know what else theres a shortage of? Engineering jobs for startups that dont suck.

    Sure, I want to work on a shitty scrum project to do a busting my ass to do a half assed job and then ship it to china to halfway fix all the bugs, so some product manager can collect a bonus for delivering garbage.

  • [...] there seems to be a talent crunch: most startups, venture capitalists, and big company executives say it is very hard it is to hire the right talent; they claim that wages are [...]

  • [...] there seems to be a talent crunch: most startups, venture capitalists, and big company executives say it is very hard it is to hire the right talent; they claim that wages are [...]

  • [...] there seems to be a talent crunch: most startups, venture capitalists, and big company executives say it is very hard it is to hire the right talent; they claim that wages are [...]

  • [...] there seems to be a talent crunch: most startups, venture capitalists, and big company executives say it is very hard it is to hire the right talent; they claim that wages are [...]

  • [...] there seems to be a talent crunch: most startups, venture capitalists, and big company executives say it is very hard it is to hire the right talent; they claim that wages are [...]

  • [...] there seems to be a talent crunch: most startups, venture capitalists, and big company executives say it is very hard it is to hire the right talent; they claim that wages are [...]

  • [...] there seems to be a talent crunch: most startups, venture capitalists, and big company executives say it is very hard it is to hire the right talent; they claim that wages are rising. But national [...]

  • [...] there seems to be a talent crunch: most startups, venture capitalists, and big company executives say it is very hard it is to hire the right talent; they claim that wages are [...]

  • Hah. Only $150K. No wonder he had seven offers.

  • [...] there seems to be a talent crunch: most startups, venture capitalists, and big company executives say it is very hard it is to hire the right talent; they claim that wages are rising. But national [...]

  • [...] there seems to be a talent crunch: most startups, venture capitalists, and big company executives say it is very hard it is to hire the right talent; they claim that wages are rising. But national [...]

  • [...] there seems to be a talent crunch: most startups, venture capitalists, and big company executives say it is very hard it is to hire the right talent; they claim that wages are rising. But national [...]

  • 1st thing, you are not talking about engineers you are talking about Computer Scientist. The degrees and training is quite different. Most of the jobs you speak of are very very focused and a degree is not going to get you a job in this field. Writing code in a specific language on a specific platfom is a real unique requirement. So someone with 10 years of terrific C language writing skills making $100K at a company will be just another resume in the pile if the next employer wants a Fortran developer.

    Plus, this isn’t a field that uses any manufacturing skills. So things like Mechanical Engineering, stress strain calculations and specifics to Mechanical Engineers are not used in computer science. Not even Electrical engineers that design circuits and hardware are useful to internet companies. You talk about Engineers like they were a service commodity. But, engineers are just the opposite of that. So many of these jobs you speak of for every 1000 engineers maybe 3 of them will have that particular skill. It is obvious the author is not an engineer.

  • [...] there seems to be a talent crunch: most startups, venture capitalists, and big company executives say it is very hard it is to hire the right talent; they claim that wages are rising. But national [...]

  • [...] there seems to be a talent crunch: most startups, venture capitalists, and big company executives say it is very hard it is to hire the right talent; they claim that wages are rising. But national [...]

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  • [...] there seems to be a talent crunch: most startups, venture capitalists, and big company executives say it is very hard it is to hire the right talent; they claim that wages are rising. But national [...]

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