Lately, I’ve noticed a startling paradox in Silicon Valley. I see shitty companies hiring more engineers than they know what to do with, while other, much better companies struggle to fill open roles. Now my definition of “shitty” is completely subjective, but I bet you too can name some ridiculous startups that no sane engineer should work for. Meanwhile, companies catering to huge markets, logical business models, amazing user growth, and cash in the bank from top investors, are having a hard time hiring tech talent. What gives?
I call this phenomenon the developer divide. It occurs after a company has cracked a user need and is gaining traction, the VCs have started piling on the cash and the servers are melting from all the users. But there’s one big problem. The company is having trouble hiring engineers to keep up with the torrid pace of growth.
Take Pinterest, the latest toast of Silicon Valley. The company is growing faster than Facebook when it was of equivalent size. Andreessen Horowitz, some of the smartest money on Sand Hill Road in my opinion, just invested in a $27 million dollar round only 5 months after the company closed its series A. The company has umpteen different ways to monetize and few serious competitors. Of course, the company is no sure thing and has plenty of risks ahead, but any investor could make a case for why this company is a good bet. But despite the opportunity, a LinkedIn search reveals the company still employs only 15 people.
The developer divide most often occurs when the company’s product is targeted to a distinctly non-engineer user base. As opposed to companies which build products other engineers use, the developer divide presents itself when technical talent just can’t see why anyone would actually use the service. Pinterest is a perfect case in point. Rural American women are the primary users of Pinterest, and though they use the site voraciously, their interest in Pinterest doesn’t draw dude developers.
But don’t feel too bad for Pinterest. The developer divide is a temporary vacuum that forward-thinking engineers quickly fill. Pinterest joins a long list of companies, which had difficulty recruiting engineers who didn’t grasp the value the company was creating. Facebook, Zynga, and Yelp, all catered to the non-engineer user and all found themselves in the developer divide in their early days, but no longer. As the world began to realize these companies were on to something big, the divide closed and engineers began wanting in. How many of us wish we would have joined Facebook in 2006, when everyone was calling Mark Zuckerberg a moron for turning down Yahoo’s billion dollar offer?
Time and again, young companies explode out of nowhere, only to be written off by those who don’t get it. They write off the company as nothing new and can’t understand the user growth. Skeptics are unable to see the site through the eyes’ of its users and they dismiss the potential for the site to go mainstream. Remember when Facebook was only for horny college kids? With hindsight however, jumping on board during the developer divide would have been a huge, career-making win and cynics are often left with regrets.
So how do you know if a company is in the developer divide?
1. Look for an obvious secret
The developer divide is characterized by a gap in information. The company knows something about their user, which is not obvious to the outside world, but is the key to the business’s success. However, to those who do not know this insight, the company appears to be little more than a novelty. I call this phenomenon the obvious secret. All great web companies started off as toys. It’s the non-consensus companies, those that others write off, but who end up being right about their vision of the future, which produce amazing financial returns and change the world.
2. Look for a new user habit
In the age of infinite ways for users to spend their time and attention, the value created by all successful web companies rests on one thing, the constancy of their users’ habits. A habit is defined as a series of behaviors, which occur nearly involuntarily. It’s the programmed response you have when you hear about a book you want to buy and think of Amazon instantly. It’s the spontaneous craving you have to check Twitter when you have a spare 30 seconds. Getting people to do something they’ve not done before, and getting them to do it regularly, often, and spontaneously, is damn hard. Wiring customers’ brains to habitually use a particular company’s product is the crux of value creation on the web, so look for companies that are creating rabid users of a new behavior.
3. Look for a huge potential market
This is self-explanatory but can’t be emphasized enough. The “big market test” is the first screen investors use to weed out companies and it should be among engineers’ requirements when assessing a new opportunity. Of course, while you could do your own market analysis and compute the company’s TAM, SOM, and SAM, a nifty shortcut is to piggyback on the VC’s hard work. Since institutional investors don’t invest in deals, which go after markets smaller than $1 billion, it’s a pretty good bet to take cues from top name investors on this criterion. Besides, VC’s all have a Roman galley of MBAs working in their basement doing nothing but market sizing, so why do all that hard work yourself?
Now, as the Valley froths with angel investor money and soaring engineer salaries, great software developers find themselves in an envious position. Many tech professionals can write their own ticket, either within an established company or by starting their own businesses. However, missing out on joining a company confronted with the developer divide, that fleeting opening when few see the scale of the opportunity, can be a costly and regrettable mistake.
Nir’s Note: I have no affiliation or investment in any company mentioned in this post.
Photo Credit: WOCinTech Chat
Jeremy Webb Blog | Startup Grind https://www.startupgrind.com/blog/the-developer-divide-when-great-companies-cant-hire/