“It's almost impossible to hire talent as an early stage startup and compete with high salaries,” said one respondent to our recent survey on recruiting in the current climate.
Another, who worked at a startup that’s raised more than $250m, told us they were “being priced out of the market by the flood of newly funded businesses”.
Recruiting top talent, it seems, doesn’t get any easier as you scale.
123 readers shared their experiences and, regardless of size, sector or stage, the vast majority of founders and startup operators told us that competition for talent has ramped up considerably in the last 12 months.
Here’s why — and what they’re doing about it.
Too much money sloshing around
Two thirds of Sifted readers thought the abundance of capital in Europe was one of the key drivers of recruitment woes, with VC investment in Europe hitting record levels in 2021. More than half of respondents told us that they’d hiked salaries by at least 10% in the last year to compete, as a smorgasbord of newly minted tech companies have found themselves able to offer far higher wages than they previously could.
One respondent, who worked at a startup that’s raised between $1-10m, said that companies avoiding raising huge sums faced an uphill struggle.
“Even some seed companies are offering FAANG (Facebook, Amazon, Apple, Netflix, Google) level packages now,” he told Sifted. “It’s so difficult to match that if you don't want to take on huge amounts of VC money — money that comes with strings and an expectation of a blitzscaling approach.”
Even some seed companies are offering FAANG-level packages now
“As a small company without major funding rounds it’s hard to build an employee brand and get visibility,” said another respondent from a startup that’s raised less than $1m and has fewer than 10 employees. Their company has begun to recruit in other geographical areas to tackle the problem, they said.
But the difficulties also extended to larger startups. One Sifted reader from a startup with more than 200 employees told us that “GAMMA [Google, Amazon, Meta, Microsoft and Apple] are hiring everyone at frankly ridiculous packages that we can’t compete with”. Another, from a large edtech, told us those companies were “recruiting an unsustainable amount of tech talent”.
The new world of work
A number of readers told us that with the rise of remote working, candidates had more choice than ever before when it came to finding a new role. That means European startups find themselves competing not only with each other, but with international tech companies too.
One respondent, from a mobility scaleup, said that candidates had “too many options” as global tech companies and startups had begun to accept remote working as the norm. Their company had also begun to offer remote working to its staff in the last 12 months to compete.
Covid has created a “working benefits revolution”, said another. In order to hang onto and attract employees, startups are having to offer more perks.
“People don't want to return to offices and I think many companies that are wedded to their HQs will lose talent to companies that are willing to be more flexible,” they added.
👉 Read: How to nail the hiring process
Other companies have been putting more emphasis on their employer brand.
“Everyone is always hiring and that makes getting through to the right people more difficult,” one reader told us. “It’s showing the importance of employer branding and attraction.”
Outdated recruiters also need to adapt to the times.
“Recruiter and HR teams aren’t adapting fast enough to the new climate, creating a drag on growth,” said one reader from a fintech. “Recruiter fees have gone completely out of control, yet candidates are meh,” agreed another.
Recruiter fees have gone completely out of control, yet candidates are meh
One respondent told us that they “seem to be trapped in a vicious circle of having trouble finding recruiters who then have trouble finding great candidates.”
“The shift to remote has helped,” they added, “but almost unlimited financing makes it extremely hard to compete and to promote your company among candidates.”
What candidates want
Candidates have also changed their priorities. 74% of respondents told us that they put more of an emphasis on company mission when looking for a job than they did 12 months ago.
“It’s harder recruiting Gen Z as it’s less about salary and more what they’d like to do,” said one reader. Simply throwing more money at these employees doesn’t convince them, they added, and “if they don’t think the work is always interesting then they move on”.
It’s harder recruiting Gen Z as it’s less about salary and more what they’d like to do
“People are less willing to commit and we have swung from a situation where everything is for the company mission to total personal value alignment,” said another respondent.
Others, however, saw the desire among candidates to up sticks and change jobs as a positive sign. “With so many candidates open to moving, it’s a great time to recruit,” one reader told us. “Keeping your employees is the bigger challenge.”
Could diversity be the answer?
91% of survey respondents told us that they actively recruit candidates from underrepresented backgrounds, and the majority said that tapping into talent pools in those communities is one solution to tackling the worker shortage.
“It's vital to look beyond your own network if you're a 30-something white tech guy,” said one reader.
While most people said they wanted to build a more diverse tech scene, more than 60% of respondents told us they had trouble finding candidates from underrepresented backgrounds.
“We struggle in certain areas despite a conscious effort,” said one reader. “Whenever we put out job descriptions for engineers, we'd welcome more female applicants but rarely get any. In some areas, it's tricky to level the playing field.”
Another told us that because of the amount of competition for talent from underrepresented backgrounds, they’ve begun to focus on what they called “overlooked diversity”, like those “who may not go through university-level education, or from a completely different background than tech”.
But, as is increasingly the case in the VC and startup scene, the desire to scale at breakneck speed — coupled with leaders who aren’t in the least bit interested in levelling the playing field — leads to candidates from underrepresented backgrounds getting left out. One respondent told us that they didn’t care how diverse their team was, as they “just need to build fast”.
“It just so happens that 99.9% of people that are even remotely interested are white males,” they added. “Really struggling to attract women to work too.”
No prizes for guessing why.
What roles are the most difficult to fill?
It’s a good time to be a software engineer in European tech. Sifted readers told us engineers were the hardest to recruit for. In January we reported that those roles accounted for almost a third of all jobs advertised on Otta in the UK.
There’s such a talent shortage in that department, one respondent told us, that recruiters are getting desperate, and engineers are “frustrated and exhausted by constant attempts to poach them”.
Another commented that they’ve never seen packages for engineering candidates grow so quickly, making it “very difficult to get experienced people”.
What are startups doing to lure talent?
“Intensive mentoring of new people and team building activities.” Services (consulting, legal, PR etc.), 11-50 employees, $1-10m raised
“Increasing work flexibility (hybrid-native), adding benefits (dedicated learning & development funds, time, and access; pension management; new insurance coverages), keeping pace with salaries, company-wide bonus and incentive programmes and more.” SaaS, 51-200 employees, $10-25m raised
“To attract candidates the best solution is to offer a good project to work on and a good benefits package.” Services (consulting, legal, PR etc.), 51-200 employees, $1-10m raised
“We are offering substantially higher salaries due to competition and counter offers.” Healthtech, 51-200 employees, $1-10m raised
“Focus on mission and values, competitive compensation, branding.” SaaS, 1-10 employees, $10-25m raised
“We are really championing our share scheme. Most companies still don't offer one and in this climate, it's something that definitely sets you apart from the crowd. Particularly useful if you can't compete with the whales in terms of salary ranges.” Fintech, 51-200 employees, $250m+ raised
“We are being more flexible to what we need in-house; are constantly adapting the seniority levels of the roles we are hiring (although not always effectively so); are open to more flexible weekly hours; are investing in facetime; are building a larger people and talent team (both management of teams and hiring need support in a remote context).” SaaS, 10-25 employees, $10-25m raised
“Tailored roles to the candidate, more flexibility for them (e.g. less travel, remote work) and looking for people with the right motivation.” VC, 1-10 employees
“Reaching out personally on LinkedIn. Recruiters are pretty useless, regardless of the price.” Fintech, 11-50 employees, $10-25m raised
“Using a few other service providers to find the right candidates. Otta.com and getgigl.com have been great for finding engaged and personality-filled people.” Healthtech, 1-10 employees, $1-10m raised
“We've had to focus on candidates that care about the problem we are solving, if your only means of attracting people is paying them more then you are hiring mercenaries and there will always be people willing to pay them more.” Deeptech, 51-200 employees, $250m+ raised
“We are using referral schemes to get our own people to bring good people. We are also using gigl to make the recruitment process faster so we can look to snap up talent faster.” Services (consulting, legal, PR etc.), 1-10 employees, $1-10m raised
“Showcasing the onboarding process before you hire gives people a really clear line between advert and working. 42% of tech workers churn in the first 12 months because of a misleading advert, bad onboarding into the work environment.” VC, 1-10 employees
“We've been focused on refining our employee value proposition so it's really clear what we have to offer a potential employee. Hiring great talent takes commitment from every stakeholder involved in the hiring process, to deliver an exceptional candidate experience throughout.” Edtech, 51-200 employees, $250m+ raised
Breakdown of respondents
123 Sifted readers, spread across Europe and working in a number of different sectors, completed our survey.