Starting Up is Hard To Do

Andy Bechtolsheim, Tim Draper, and Jeff Clavier talk in this AlwaysOn Venture Summit West clip about starting up. Tim Draper talks about the challenges of starting up in the Valley which include:

  1. The Google Factor
  2. Hedge Funds and Trickledown Capital
  3. Sarbanes-Oxley

The Google Factor

“With starting salaries approaching $175,000 range, the choice of starting a business or going to Google is getting tougher” – Tim Draper

Talent acquisition is a real challenge for organizations. With organizations like Google and my employer battling over talent it is shrinking the available pool of available talent.

We’ve talked about the cost of acquiring talent in Silicon Valley versus Toronto. The price of talent is much lower north of the border. Canada has a greater percentage of technical talent available and is graduating more engineers than the US. And with payscales in the $58,000-$77,000 range, it’s a lot cheaper to acquire talent in Toronto than the Valley. One of the open questions for me is does the available talent have the appropriate experience, skill and risk tolerance to build successful startups.

Hedge Funds

I don’t know a lot about hedge funds. I don’t know how they operate or their direct impact on the tech sector. But it’s not the first time that this has come up in observation and not everyone is in agreement about the role that money plays in starting up. This is a very different problem than the problem that exists north of the border.

Sarbanes-Oxley

Sarbanes-Oxley is adding costs for startups to go public, approximately $3M according to Draper, and this is delaying the IPO exit window for early-stage investors. The regulatory and economic challenges imposed by Sarbanes-Oxley are similar to the taxation challenges experienced in Ontario and Canada by early-stage investors. Regulatory issues aside, there has been a huge market for acquisitions and I’m wondering if that is a direct result of 2 of the above observations. Companies are being acquired for their talent and the costs of going public have created a stronger market for acquisition by the big players.

Starting companies is hard.

2 thoughts on “Starting Up is Hard To Do”

  1. <p>Great Post David. I, myself, also believe that starting up a company is hard. The valley is definitely the place to be if you want to start a company. The amount of capital flowing and the breadth of knowledge and experience that people possess in the Valley is impressive. </p><br />
    <br />
    <p>I always wondered how new startups can attract talent when there are so many 'developed' companies like Facebook, Google etc. that are offering great packages. It's funny however, that the above 3 points you made still doesn't discourage entrepreneurs from making companies :)</p>

  2. Great Post David. I, myself, also believe that starting up a company is hard. The valley is definitely the place to be if you want to start a company. The amount of capital flowing and the breadth of knowledge and experience that people possess in the Valley is impressive.

    I always wondered how new startups can attract talent when there are so many 'developed' companies like Facebook, Google etc. that are offering great packages. It's funny however, that the above 3 points you made still doesn't discourage entrepreneurs from making companies 🙂

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