Entrepreneurs: Struggling to Recruit Software Engineers

Startups vie with bigger rivals as demand for programmers returns

At FounderDating events, designed to match aspiring entrepreneurs with business partners, the organizers try to keep the crowds split evenly between those with technical skills and those with management expertise. That's not easy in Silicon Valley these days. If 200 people apply to attend the invitation-only programs, 125 are businesspeople, not engineers, says Jessica Alter, who started FounderDating a year ago in San Francisco with venture capitalist Saar Gur. "It's really important to have people with complementary skill sets," Alter says.

In many industries, high unemployment means abundant available labor. That's not the case for fledgling tech companies making their crucial first hires. They report that finding software engineers is as hard as it was during the boom. Tech jobs site Dice.com reports a 38 percent jump in postings by employers over the past year, and listings for tech positions at TheLadders, another jobs site, are up 65 percent. The Bureau of Labor Statistics reports that employment in computer systems design and related services rose 2.8 percent between the beginning of the recession in December 2007 and this September. Over the same period, nonfarm payrolls fell 5.6 percent. "A year ago engineers were getting one offer and taking it," says TheLadders Chief Executive Officer Marc Cenedella. "Now we're seeing engineers with two, three, or four offers."

The growing demand for engineers squeezes startups because it's hard for them to compete for talent with big tech companies. Founders of startups and hiring experts say many engineers now favor stability and higher pay over the promise of stock options in a young company. "They know that game and think it's bullshit," says Joe Stump, co-founder of SimpleGeo, a startup that provides location data to smartphone app developers. Bigger companies such as Twitter, Facebook, and Google "obviously can offer higher salaries and better benefits packages," Stump says.

Fast-growing tech startups also find they need more engineers at earlier stages than in the past. Formspring, a site where people post questions for others to answer, launched last November. By January it had 1 million users, and today it has 17 million. (Facebook took three years to reach that level.) At peak times, Formspring users post 10,000 answers per minute, says CEO Ade Olonoh. "It's really more hard-core engineering that needs to go behind sites like ours," he says. His company has grown from 5 employees to 17 since moving from Indianapolis to San Francisco in March. Olonoh says he'd like to hire even faster. "It's not like we post a job and get 100 great applicants," he says. "It's harder to find people than most might think."

These days, engineers with their own ideas can also launch companies without partners that have business and fundraising expertise. "It has become much easier to start a company financially. You don't need millions of dollars for servers," says FounderDating's Alter. Nontechnical founders, by contrast, still need engineers to turn ideas into products, Alter says.

Logan Green, co-founder and CEO of Zimride, a Palo Alto (Calif.) ride-sharing website with 10 employees, has been trying to hire three engineers since raising $1.2 million in August. With most talented engineers already happy in their work situations, he says, "they're not going to be looking on job boards or talking to recruiters." Although he got scores of résumés, Green says few of the job seekers have the right experience, so he's tapping his investors' networks to find more candidates. As a young company, "you're going after the top echelon of talent," he says, "with the least amount of resources."

The bottom line: As demand for software engineers has increased after the recession, startups are finding it harder to recruit technical talent.