Nick Denton - e-mail from the valley

Nick Denton - e-mail from the valley - It was said once of Steve Jobs, founder of one of Silicon Valley's greatest personal computer companies, that he generated a reality distortion field.

by NICK DENTON, founder of Europe's start-up community FirstTuesday, is CEO of Moreover.com (nick@moreover.com)
Last Updated: 31 Aug 2010

It was said once of Steve Jobs, founder of one of Silicon Valley's greatest personal computer companies, that he generated a reality distortion field.

The effect goes way beyond Apple Computer. At the technology industry's ground zero, the whole business environment is warped.

Outsiders, thinking of the weird zone between San Francisco and San Jose, usually focus on the speed with which companies are formed and die, industries become hot and not and fortunes are made and lost. Or bizarre extremes of equity culture, in which landlords ask for equity over cash.

But most distorted of all is the state of the interview. Job interviews, hiring a public relations agency, appointing a headhunter - all are conducted by Silicon Valley rules that undermine all the established laws of the business universe.

Europeans may think that a start-up CEO is on top of the world, whereas he or she is actually towards the lower end of the Silicon Valley hierarchy.

In a job interview, do not think you are doing the interviewing, because the candidate is interviewing you.

This takes the form of a grilling on the company's business model. Potential employees have always done this to test for the likelihood of an initial public offering, but since the technology stock correction they also test the revenue projections to ensure the firm will be around by the time their stock options vest.

Often, candidates' questions are at least as sophisticated as those of the venture capitalists. After all, their time and expertise is the commodity in short supply in Silicon Valley, not venture capital cash. Many candidates have worked at two or three start-ups already, and are often more sophisticated than the green founders.

These reverse interviews, with candidate testing employer, can become ridiculous. We were interviewing candidates for a vice-president position.

After three hours of interviews, I'd still not had a chance to ask anything about the applicant. I did not even know whether he was an applicant and so, in frustration, blurted out: 'So, do you actually want this job?' His answer: he would not have spent so much time talking if he had not been interested. Only after I thought about the answer did I get annoyed: he simply assumed that his time was more valuable than mine.

Another irritating phenomenon: candidates are quite shameless in listing the companies that have made them offers, and set up bidding wars. That is true of senior staff but also of kids out of college, some of whom expect dollars 80,000 to dollars 100,000 for an entry-level business development position.

Of course, for the employer to suggest that he had alternatives would be rude. Or just unrealistic: in the Bay Area's overheated job market, good candidates are hard to find.

It is not only the job market that is distorted. Professional services are as short in supply as internet professionals. That companies have to pitch to investment banks may not be a surprise. More of a shock is that they have to pitch to consultants who used to be lower down the food chain, such as PR agencies and headhunters.

At Moreover.com, we have just appointed a PR agency for the US, a crucial move for any start-up that wants to rise up above the noise. One of the agencies we investigated was a boutique called Outcast, which has a good reputation for providing PR advice to early-stage companies. So good that they can afford to interview potential clients before they decide whether they have a 'slot'. And in Silicon Valley professional services the slot is usually opened by sacking a less promising client.

There are signs that, since technology stocks plunged in the spring, the madness is subsiding. We have actually managed to hire a well-respected PR agency, and they do actually seem to want to work with us. And we have had the courage - which we would not have had a few months ago - to pass over a couple of prima donnas to hire a head of marketing who talks about what he can do for us rather than we for him. How refreshing.

But we lost the bidding for a star programmer, who went for a salary of dollars 84,000 at another company. He was 21. With equity valued less highly than it was last year, candidates are more concerned about cash compensation.

They still have the bargaining power, so things have not changed that much.

Why is Silicon Valley so strange? The answer is simple. The region contains technology companies with a combined value of about dollars 2 trillion, all competing for talent among a population of about 4 million. And housing is so constrained, and so expensive, that mass immigration is not an option.

Some companies may flee to places where candidates still want jobs. That will ease some of the pressure that distorts the Silicon Valley market.

However, as the technology industry spreads, it is tapping the supply of talent in other places such as Israel, Bangalore, and south-east England.

Steve Jobs' reality distortion field is expanding.

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