The 1 problem shared by all founders
In 2018, we are mourning (well definitely not celebrating) two seemingly unrelated but (soon-to-be) obviously intertwined anniversaries. It is the 10 year anniversary of the largest bankruptcy filing in U.S. history, with Lehman Brothers holding over $600 billion in assets at the time, triggering a massive global economic downturn. Much less infamous is the 20 year anniversary of the term ‘the war for talent’ being coined and a corresponding study being published in the McKinsey Quarterly. Allow me to connect the dots.
‘The war for talent’ was referring to ‘a severe and worsening shortage of the people needed to run divisions and manage critical functions, let alone lead companies.’ A core part of the argument was demographic, built on the exodus of baby boomers from the workforce. The paper provided a glimmer of hope projecting a market bottom for talent shortage in 2015, followed by steady improvements in the availability of talent. Yet, in 2018, this term is far more relevant than ever before.
‘A certain part of talent eludes description: You simply know it when you see it.’ — The War for Talent
Demographic shifts are impactful but seismic shifts in industry are far more powerful. The Great Recession of 2008 will always be remembered for the jobs lost and the lives affected. But it also sowed the seeds for the ongoing digital revolution and altered the talent landscape irrevocably. The reputational pummeling the banks took resulted in a power shift from Wall Street to Silicon Valley. All of a sudden, the top fresh graduates and MBA students were choosing tech over finance with post MBA employment ratios changing from 20% : 12% in favor of finance to 17% : 13% in favor of tech over the last 10 years. This shift reverberated to the top of the business pyramid, where the top 5 publicly traded companies are now in tech versus just 1 a decade ago. This year, 2 of these tech titans have breached the $1 trillion market capitalization.
So what does this all mean for the war for talent?
- It has escalated. Since moving to Berlin at the start of the year, I have personally spoken to at least 100 founding teams and most of them say that talent is their biggest bottleneck. Across the global world of startups, the talent shortage is a universal problem. It is telling that talent from all over Europe are moving to Berlin as I detailed in a past post and yet there is still a massive shortage as detailed by Atomico. Similar reports by Manpower Group and Slush Singapore emphasize that this is a prevailing issue globally. The demographic gap has been replaced by a skills gap as global startup hubs race to fill up roles that did not exist 2 decades prior such as app developer, UX designer, social media manager, not to mention blockchain engineer and deep learning solutions architect. The digital revolution has made some jobs redundant but has created many more new jobs waiting to be filled.
2) We now have the tools to produce winners. Why should we continue to just ‘know it when we see it’ when there is so much technology at our disposal? Now more than at any point in history, we have the tools to expand our talent pools and produce clear winners in the global war for talent. Why hire only in Silicon Valley, London or other major hubs, when there is talent from the Midwest, from Eastern Europe, from Africa, and from Asia? The digital revolution has evened the playing field by making knowledge more accessible and self study more feasible. Myriad solutions have emerged to upskill the present labor force and to equip the incoming generation. Many platforms provide remote working opportunities. Within HR Tech, numerous sub segments address the war for talent in some way. But as an investor, I am most excited by the advancement of technology and computing power, which has paved the way for use of big data and machine learning as a means of minimizing our cognitive biases in hiring.
By doing so, we will be able to access alternative pools of talent that were unfairly excluded in the past. We can increase the likelihood of finding talented outliers that do not necessarily fit the profile but are out-performers nonetheless. We can reduce the gap representing the ‘Lost Einsteins,’ which has been shown to persist across income class, gender and race.
Golden Age for HR Tech
As an investor, I have a strong conviction in an imminent golden age for HR Tech, propelled by solutions that help source, identify, match, and develop talent from all over the world. Our first investment in Berlin is a validation of this conviction. We are glad to have co-invested with High-Tech Gründerfonds, Atlantic Labs and some angel investors in Berlin-based AI-first Recruiting SaaS Bunch.ai. With a simple-to-use Chrome extension Bunch.ai helps hiring teams in high-growth companies to source the most relevant candidates fully automatically from LinkedIn, taking into consideration hard skills, the mindset and cultural impact of each candidate. This is going to be a critical differentiator for the young startups who want to be market leaders of the next decade and need to hire digital natives who value autonomy, flexibility and purpose. But what excites me even more with Bunch.ai is how they integrate their machine learning core with different sources of public people data to profile the global talent pool in order to enable companies to build high-performance teams at scale.
The early days of a startup’s journey is critical. One bad hire can set you back months or prevent lifting off altogether. As we look for more startups bridging Europe and Southeast Asia, we want to help them build strong global teams starting with Bunch. Our intention is to focus on HR Tech in the beginning and invest in solutions that the rest of our portfolio can benefit from.
While this budding genius cluster of Berlin will serve as our headquarters, we keep our eyes open for opportunities everywhere because we believe that talent transcends income class, gender and race. We are looking for the Lost Einsteins.