High-tech firms hiring again as large company and startup salaries converge

backtohighsalariesIt is no secret that Israel’s high-tech sector has been badly hit by the global economic downturn. The most obvious impact on the export-dependent sector was the incidence of widespread layoffs and massive declines in venture capital investment. While some analysts warn of the risks of a “double-dip” recession in the US, Israel’s principal export partner, others point to green shoots signaling the promise of recovery.

Globes reports that there has been a revival in Israel’s high-tech labor market. Nisha Group, an Israeli provider of recruitment services to the high-tech industry, cites a 13% rise in high-tech jobs in Q3 relative to Q2 of this year, while Manpower Israel, Israeli subsidiary of the global human resources solutions provider, cites a growth rate of 6.9% over the same period. Both figures are encouraging and indicative of a resurgence in activity across the high-tech sector.

While this is overwhelmingly positive news, the article alludes to what might be considered an unwelcome development for Israel’s high-tech sector. Haia Borenstein, CEO of Dialog Consulting for Human Resources, suggests that

“People no longer think that if they have options, they’ll become millionaires in a couple of years. There are differences in the nature of work at start-ups and high-tech companies, but not in salaries.”

The quotation is troubling for two reasons. First, it suggests that high-tech workers lack confidence in the capacity for startup companies to achieve liquidity events as they did in the past. This is perhaps a reflection of the relatively low number of homerun venture exits that have been realized in a virtually non-existent US IPO market. If the people working at a startup are not convinced that what they are working on is going to be a big success, the startup’s culture will not be conducive to perseverance in the face of challenges. Further, the lack of belief among employees in the prospects for the company to generate extraordinary returns to investors will risk becoming a self-fulfilling prophecy.

Second, it suggests that the pool of talent available to Israel-based startups is more focused on earning comfortable salaries than on creating world-beating companies. There are different schools of thought on this, but I prescribe to the view that working successfully in a startup requires a certain kind of personality which is fundamentally different to that required for working at a large company. While it will vary according to the stage of the startup – joining as employee number 5 is different to joining as employee number 50 – there is something admirable about scrappy startups full of passionate people toiling away at a difficult problem in pursuit of a chance to change the world.

The challenge of driving a startup to success in the marketplace requires everyone to feel as though they have some ‘skin in the game’. Comfort, for lack of a better word, breeds mediocrity.

Written by Geoffrey Mugliston, a London-based Australia-born entrepreneur, strategist and blogger. See the About Page for his full bio and follow him at @gmugliston

gmugliston

Geoffrey Mugliston (mer-gliss-ton) is a London-based Australia-born entrepreneur, strategist and blogger. He began writing for VC Cafe in 2009 with the objective of showcasing promising Israeli startups to the global startup and investment community. He is co-founder of a consumer internet company with its development team based in Haifa (currently in stealth-mode). He also serves as adviser to a pan-European startup which develops software for print service providers. Prior to his current projects, Geoffrey worked in management consulting with a focus on the infrastructure sectors. When not working (though sometimes while working) he enjoys coffee, running and engaging in intense debate. He holds an undergraduate degree in finance from the University of Sydney.

gmugliston

Geoffrey Mugliston (mer-gliss-ton) is a London-based Australia-born entrepreneur, strategist and blogger. He began writing for VC Cafe in 2009 with the objective of showcasing promising Israeli startups to the global startup and investment community. He is co-founder of a consumer internet company with its development team based in Haifa (currently in stealth-mode). He also serves as adviser to a pan-European startup which develops software for print service providers. Prior to his current projects, Geoffrey worked in management consulting with a focus on the infrastructure sectors. When not working (though sometimes while working) he enjoys coffee, running and engaging in intense debate. He holds an undergraduate degree in finance from the University of Sydney.

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