Saturday, October 10, 2015

Increasing Demand for $1 Million Payday

Tech Engineers
It has started. Venture capitalists have begun to support the growing demand for unicorn startups or companies that are valued at US$ 1 billion and up.

The effect was almost immediate. Software engineers and developers reacted by setting a target of their own - US$ 1 million pay packages - to go work for the unicorns.

Companies ranging from ride-hailing giant Uber to grocery delivery service Instacart to cybersecurity specialist Tanium are offering compensation packages to software experts in high-demand areas worth US$ 1 million and up, recruiters and venture capitalists say.

To reach US$ 1 million, however, the packages count a few years of salary at US$ 150,000 to US$ 175,000 plus equity that vests over several years and may or may not ultimately be worth as much as it is today.

"For startups with Us$ 1 billion-plus valuations, they're willing to pay aggressively and offer stock," says Scott Purcell, a division manager at recruiter Jobspring Partners in San Jose, Calif., who focuses on developers and big data experts. The big appeal of stock from unicorns is that "with a large, private company, it's already worth something."

The offers come as VC money pours into startups at a heady pace not seen since the Internet bubble. In the second quarter, venture capitalists invested US$ 17.5 billion to back startups, the highest total since the fourth quarter of 2000, according to a report from PricewaterhouseCoopers and the National Venture Capital Association.

Equity-heavy compensation packages make sense given the battles over the most sought-after engineers, says Jeff Bussgang, general partner at Flybridge Capital Partners.

"We are in the midst of a talent war and there's no truce anticipated," Bussgang says. The best engineers are worth 10 times more than a mediocre developer, but huge differentials in cash salaries wouldn't go over well. "It is against social norms to offer 10 times the cash to a 25-year-old as compared to their cube mate," Bussgang says. "So, equity is the best tool."

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