Written by and shared with permission of: Mighty Capital Partner, Jennifer Azapian This is one of the biggest reasons startups must raise another round of funding sooner than expected.
Who pays higher salaries for data scientists -- Google or emerging startups in Silicon Valley? You might think it’s a silly question, but if you answered Google, you’d be wrong. For founders, skilled worker base compensation is no longer a cost cutting haven. In many instances, newer companies must match or beat the larger firms. And for entry level data scientists, the difference early stage companies are willing to pay might be as high as 20 percent. What’s causing this shift?The Good Old Days Five to seven years ago, early-stage companies could afford to pay much lower salaries for developers. Back then, the discount was easily 20-40%. Today’s market, however, has shifted dramatically, and this profoundly impacts new companies seeking funding. New Reality At Mighty Capital, we’re seeing software developer salaries at early stages nearly equal to mature companies. This is a huge change. For data scientists, the numbers are even more striking with a 5-20% discount in favor of the mature company. Market Forces Some of the main drivers behind the new salary distribution landscape in Silicon Valley are:
- Tight employment pool - Lots of work but few skilled workers.
- High cost of living in Silicon Valley and other tech epicenters.
- Robust VC market - Plenty of capital and investors seeking opportunities to spend it.
- Over-reliance on narrow talent set (graduates from Stanford, Cal, CalTech, MIT, etc.) Hint: there’s plenty of great talent out there that didn’t go to your school.