Internet start-ups lift pay of junior staff

A scramble for talent among the latest wave of internet start-ups is boosting the pay of junior staff and forcing employers to entice star workers with perks reminiscent of the last dotcom boom.

The cash flooding into new ventures is shifting the focus of Silicon Valley’s long-running talent war from the top-level executives fought over by Google and Apple to low-ranking engineers just out of college. More than four-fifths of start-ups plan to hire this year, according to a report by Silicon Valley Bank.

“We’re seeing base salary inflation at a pretty significant rate,” said Jim Counihan, an investor with Prism VentureWorks, a company that works with Silicon Valley start-ups. “Two years ago, you could get an engineer from a good school with two to four years of experience with an $80,000 base and a $15,000 bonus. That’s gone up 25 to 30 per cent, at least, in some cases 50 per cent.”

The battle for workers has also led employers to think up new strategies to poach staff from more established companies.

A particular cycle is developing around star engineers’ four-year anniversaries at companies, a time when most Silicon Valley equity plans vest.

The soaring demand has companies looking at younger and younger candidates, and recent college graduates are commanding handsome compensation packages.

In the current wave of internet start-ups and social networks, the demographic of the talent war in Silicon Valley has shifted from giants like Google and Apple vying for top executives to start ups scrambling over junior engineers.

Path, a social networking site launched by a former Facebook staffer last autumn, recently attracted its 15th employee that way, attracting an engineer from Facebook just after his four-year mark. Executives had their eye on a rising engineer at Facebook, who agreed to make the switch after his four-year mark. He’ll become Path’s 15th employee in June. As with other small start-ups, Path is unable to compete with the on-site gyms and full-time chefs of established companies and is instead selling smaller perks and office culture to would-be workers.

It emphasises the awe-inspiring view of the San Francisco Bay from the 22nd floor office, catered lunches, and a refrigerator stocked with Red Bull, juices and beer.

“We want to foster a fun, creative environment,” said Matt Van Horn, Path’s vice-president of business development. Another problem many start-ups face is that the type of candidates who are most desirable are also types that usually want to launch their own start-up.

The company’s main selling point is the freedom and flexibility it gives employees to set their own hours and use the tools they prefer to be at their “most productive and most creative,” he adds.

Path is trying to harness that interest by offering training on business development and fundraising. “I expect half of our employees to start companies after this,” Mr Van Horn said. “We want to start the Path mafia.”