Emerging Talent Pool for New York Start-Ups: Freshly-Failed Entrepreneurs

On his blog Sneakerhead VC, First Round Capital’s Phineas Barnes bemoans the plight of a friend who, after being forced

On his blog Sneakerhead VC, First Round Capital’s Phineas Barnes bemoans the plight of a friend who, after being forced to shutter his start-up, reverted back to his corporate ways. With a heavy heart, Mr. Barnes reports that the former founder will be, “joining a big company as some kind of VP of something.” He beseeches his readers not to let this kind of tragedy happen again:

“Having to give up on your company sucks for a month or two and it hurts forever, but it is not failure – if these teams are absorbed back into the world of cubicles and are allowed to return to the jobs they walked away from in the first place, that will be failure, and failure at the community level. When you meet the founder of  a failed business, reach out your hand, pick them up and do everything you can to keep them involved in our community… because our community depends on it.”

Mr. Barnes’s plea reminded us of a reoccurring theme we’d heard while reporting on New York’s geek gap. In “Raiders of the Last Nerd,” this week’s feature on tech recruiting, Kinda Sorta Media’s Rex Sorgatz offered Betabeat an ominous-sounding take on the struggle to hire local talent, “If you want a CTO, you have to go to, like, Tel Aviv.” But we didn’t have the space in the paper to really delve into why.

In his experience, Mr. Sorgatz said it wasn’t so much that New York was short on rockstar coders. Rather, it’s a side effect of the entrepreneurial bug gone viral. “People now run four-person companies where they may have otherwise led a five-person tech team in a twenty-person company.” (Is this a good time to say we told ya so? No? Okay, just checking.)

As evidence of this epidemic of Markus Zuckerbergius, Mr. Sorgatz offered up a recent incident between a “prominent start-up in town” and TechStars, a high-profile start-up accelerator. The prominent start-up got upset after TechStars convinced a recruit they wanted to hire for a top product position to launch his own company instead.

Charlie O’Donnell, who works with Mr. Barnes at First Round, noted the same phenomenon. “There’s more of a displacement than there is a shortage. If you just looked at all of the available appetite for developers, then you could say, yeah, there’s more money in ideas chasing after good people,” he told Betabeat, adding “But not all those ideas are good ideas.” Mr. O’Donnell, who now spends a third of his time helping start-ups in First Round’s portfolio staff-up, didn’t seem to think it was a lost cause. “To me the fact there’s anybody left working as a developer for Fox News over in Midtown, tells me there’s still work left to be done.”

The flip side of start-up fever, of course, is that not all of those wanna-be Zucks are going to make it. “There are a lot of people working for companies that are going sideways, companies where the writing’s on the wall,” said Mr. O’Donnell. Skeptics about the value of getting paid in equity, take note. “That’s the nature of the seed and angel stage market, not all of them are going to make it to a Series A. That’s where most of them drop off, because it’s the most risky point.” This also happens to be the point where Mr. Barnes is hoping founders who did make it past the valley of death will swoop in with job offers to keep the lost souls from wandering back to the corporate world.

Mr. Sorgatz offered a similar vision of the future. “It’s impossible that the rate of success stays as high as it has been, and many of these start-ups are going to have to decide if they are going to be viable companies, and I suspect a lot of them will not be. I would not call it the bubble bursting, but there will be a shift in the talent.”

It’s a cyclical process, explained Mr. O’Donnell. That’s why you’ve seen so many acquisition hires from start-ups launched a year-and-a-half ago. (Like Brooklyn’s Sam Lessin, whose start-up Drop.io was purchased by Facebook in October… mainly to acquire Mr. Lessin). “It’s saying, ‘Listen, we’ll put a little money in your pocket and make you feel good about that little product you started. Don’t feel bad you ended on a zero.’”

So next time you hear about a start-up with a questionable concept or execution, think of it less as a doomed-to-failure, and more as a rising talent pool for your own (no doubt rock solid) idea keeping you up at night. Emerging Talent Pool for New York Start-Ups: Freshly-Failed Entrepreneurs