MitchelLake Group Q2 Market Snapshot Posted at 0:00, Wed, 18 September 2013 in Company Updates
We see market conditions in the US improving outside of tech, resulting in driving customer adoption and growth for talent across a broader skill set range. The recent report from Silicon Valley Bank on US market conditions for Q2 has some great data.
Many folks talked about a bubble 12 months ago with what can only be described as an investment frenzy in early stage consumer web companies. I’ve not heard that term mentioned again for some time as we see a market dominated by acquisitions, acqui-hiring, VC firms angel investing and an economy rebounding from what can only be called a once-in-a-generation market correction.
We saw an increase in tech venture investing:
Venture capitalists invested $1.9 billion into 270 Internet-specific companies during the second quarter of 2013. This investment level is 39 percent higher in dollars and 12 percent higher in deals than the first quarter of 2013 when $1.3 billion went into 241 deals and is the first time in five quarters that the sector has experienced an increase in investing levels. Five of the largest 10 rounds for the quarter were in the Internet-specific category. ‘Internet-Specific’ is a discrete classification assigned to a company with a business model that is fundamentally dependent on the Internet, regardless of the company’s primary industry category.
TechCrunch VC Investments Doubled Q2
We are seeing a number of tech firms who completed seed/series A rounds pre-financial crisis, specifically within the enterprise sphere. These firms are now raising large international expansion rounds or planning to list on the NASDEQ. This, combined with a continual flow of early stage tech firms raising capital rounds, has resulted in a very strong job market. What was focused purely around engineering demand 18 months ago has broadened into customer acquisition roles and much more demand within enterprise focused companies. We are finding key sales hires tricky based upon very specific needs as enterprise companies become more and more targeted. Visas under the E3 structure for Australians are still available to get year around, as long as you have a degree.
Digital transformation continues to be a strong flavour across Australia and NZ and existing monopolies leverage traditional revenue streams to build consumer and enterprise online marketplaces, increasing profits. The early stage tech market continues to see strong growth as do highly attractive targets or US venture and private equity firms. Why you ask? It seems like a lack of early stage funding in AUS creates lean, profitable and undiluted companies who are ready to access much bigger markets with capital injections. Australia tech firms that are able to build profitable localised markets and models that can scale globally, have a very unique opportunity. The fact they can take large capital rounds during a retained capital holding now seems to be a benefit rather than a curse. Are Australia based, early stage ventures some of the best in the world? The ones that are able to grow a customer base seem to be. It’s going to be very exciting to see how the next 12 months treat companies such as Atlassian, Aconex, andOZforex, to name just a couple.
As we continue to see tech companies in the valley expand based upon improving US market conditions and strong interest from venture and PE investing, demand for very specific/experienced talent continues to drive up broader pressure on salaries and cost of living in the bay area. Atherton, next to Palo Alto, is now rated as one of the top 5 most expensive districts in North America. Difficulties in obtaining Visas to work in the US and demand for localised experience reduce the level of incumbents coming to the market – except for Australians who still don’t consume the total number of E3 Visas provided.
Whilst the bay area is without a doubt one of the most multicultural environments I have ever experienced, it is extremely difficult to import talent. Part of this is due to the fact it’s difficult to get visas, but primarily it is due to the need for experienced Silicon Valley scar tissue. With deep capital pockets, the bay area attracts a lot of international founders looking to complete funding rounds. Founders coming into the market are seeking to hire localize talent, not import. The most significant trend we see moving forward is a willingness to keep or build development teams outside of the valley. This trend will only increase as Visa difficulties restrict importation. I would expect demand upon South American, Eastern European and Southeast Asian engineering/development centers to expand rapidly. What needs to dramatically improve is conferencing facilities and the collaboration of people across long distances.
Concluding, we see no foreseeable decline in demand for talent in the bay area, only a continued increase. Growth in VC investments will drive SME ventures, which on a % basis employ significantly more numbers than enterprise companies. This demand for talent has now scaled beyond engineering/product based skills into Sales, Account Management, Business Development, Consulting and Customer Acquisition based marketing roles. Demand from B2B tech ventures now exceeds consumer.
On how people hire, we continue to see a lot of investment into recruitment related tech. Much of this innovation continues to be centered around acquisition of talent, specifically, identification. This is in my belief a rabbit warren with little value add. Unfortunately, the number of engineers you see don’t help you build a great team. They key is selection and highly targeted identification, with purposed based reasoning. Understanding candidate behavioral trends is critical to knowing when to approach and what type of engagement will be attractive. Leveraging innovation from big data can assist us with helping understand how employee and employer fit. Helping candidates understand what type of employers are attractive based upon their profession and personal circumstances will reduce turn over, increase longevity, output, and enable better skills development. Until there is further investment into such areas, demand for recruiting firms who have deep understanding of specific market dynamics and invest in R&D will be able to charge a premium. Others will continue to act as commodities. Not all recruitment companies are the same……..it’s not about sourcing……it’s about selection.