In a recent LinkedIn survey, I asked founders and the fintech community at large what they saw as the greatest challenge in the new year. The options in the survey included market volatility, Covid, political turmoil, and the war for talent. Whereas only 6% of respondents picked Covid as the top challenge, an overwhelming 48% pinpointed the war for talent as their top concern.
Believe it or not, based on board room discussions over the last few months, this does not come as a big surprise. In board after board, the founders we work with raise their hand to highlight being able to recruit the best people as their greatest challenge.
Given the amount of funding that has flowed into startups, (two record years in a row after all), most successful startups are now flush with cash, and as they now have to deliver on their lofty goals and ambitions. Not surprisingly, they are all trying to hire rapidly, and in most cases they are going after the same kind of talent, if not the very same people.
So what are the big takeaways from this? There are implications here not just for founders and VCs, but for cities and governments as well. There are many forces at work here, and the conclusions can be nuanced, so it worth picking them apart carefully.
To start with cities and government policy first, one clear conclusion is that cities where top global talent congregates have a lot to gain. Given a legacy of many years where we saw anti-immigrant sentiment rise in Western societies, it is now much harder for talented workers to gain entry and find jobs in big cities across Europe and the United States. Cities and countries which are more welcoming and more attractive for the global talent pool will attract more of these workers, and then will in turn become more attractive places for setting up the big startups of tomorrow.
It is worth noting that the primary axis of competition in this context will be between cities, not countries. For example Miami is emerging as an attractive competitor vs. San Francisco and New York given recent legislative changes to the tax code in that instance. This is not to say that national policies do not matter – decisions around granting visas are usual taken at the federal or national level, and can influence the relative attractiveness of cities within a given country.
Another strong force at play here is the emergence of remote working, especially for tech teams and developers. While some of this will undoubtedly get reversed as Covid (God willing!) becomes more endemic, it would be naive to think that there will be no permanent changes to remote work. Hence, companies that are able to hire remotely, and work effectively across a dispersed geographical base, also stand to gain.
Another winner will be companies that provide the necessary legal and operational infrastructure for remote work, and as QED we have already made several investments into this space we are very excited about.
From the perspective of the founders, there are also a myriad of takeaways that are worth noting. As we have been saying at QED for some time, it is now clear that every founder is first and foremost not in the fintech business, but in the people hiring business. Founders that internalize this fact as well as all the implications that follow, will clearly be better positioned. This probably means that founders will spend at least half of their time on either hiring, people strategy and organizational structure related issues in 2022.
The other big implication is that the cost of losing a team member in 2022 is higher than it has ever been. This in turn implies that retention and employee satisfaction are at all time highs in terms of organizational priorities. While this may be clear to most of us, what to do about it, and how to keep retention high can be far from obvious. While this short article does not allow itself to explore the issue fully, one important insight can be pointed out with confidence. Culture will matter more in 2022 than it ever has before.
At QED, we are known to be big advocates of building businesses on solid foundations such as strong unit economics, but the foundational importance of culture is one that we emphasize just as often. And culture is not something that a founder can outsource or let a Chief People Officer deal with. Culture is existential, and once lost or gone astray, finding your way back home may be impossible. Cherish and nurture your culture, and be clear about what your culture is, but just as importantly, what it is not. The best way to reinforce culture is to openly reward those that exhibit the cultural qualities you are looking to promote, and swiftly deal with those that do things that are counter to your culture. This is especially true for rapidly growing companies. We have many companies in our portfolio that are looking to more than triple their headcount in 2022, and the best founders in those circumstances are keenly aware the challenges involved in maintaining the right culture in with that sort of growth.
In fact, when expanding to a new geography, one of our founders spent a year growing and setting up the new location, primarily because they wanted to make sure that the new country is set up with the right culture. That sort of leadership sets the right tone for the whole organization, and lays the foundation for an amazing culture, not just today, but for many years in the future.