As we begin 2016 the chorus of voices that are predicting some level of readjustment, or outright popping, of what is being called the “unicorn bubble” are increasing in numbers while also getting louder. If this does happen a chain reaction will occur that will have ramifications (small or large) across a wide range of areas. Not the least of which is the effect it will have on the ability of companies in the technology space to recruit high quality talent.
In Silicon Valley there exists a persistent, but faulty, meme that goes something like this: “If the bubble starts to deflate and some tech companies go out of business or a bunch start to downsize it will actually be a good thing because it will free up hard to find talent from companies that should never have been funded in the first place and will allow us, the better start ups, to snatch them up”. Sounds good in a vacuum but it is actually wrong because it will actually be harder to find good talent in such an environment and here is why.
Historically two things tend to happen when the tech industry, or the economy in general, head south. The first is that some companies do indeed, like the meme above suggests, implode and others begin to downsize both of which do put a lot of people in play in the talent market. But the second thing that happens is that people, both those who have been involuntarily put into the open market, as well as those that are still employed, tend to gravitate away from risk and towards safety.
From experience I can tell you that the two hardest times I have found recruiting talent for start-ups was just after the dotcom bust and after the 2008 financial collapse. Most humans, by our very nature, seek stability and security. It is what makes true entrepreneurs so rare. The fact is that most people working at start-ups today have never faced risk. They got hired out of college, or recruited directly from another company, to work at a start-up that was well financed by a venture firm and in a business environment where there was little risk in finding additional money if needed. Sure, at an existential level there was risk, but most non-founder employees of start-ups do not feel that they are in a risky position. It is not something they think about on a daily basis.
So my point is that many of those who are currently employed by venture backed tech companies are not by nature “risk takers”. They are individuals trying to pay their mortgage, and raise kids, and pay for vacations and everything else. Therefore, if the market turns and start-ups start failing en masse and others start going through layoffs many of these people will seek to find employment at the most stable company possible. There will be a flight to stability. And this is where the meme cited above is correct is when it is used to describe the positive recruiting environment that large tech companies will find themselves in during a loose labor market as all of the employees laid off from venture backed enterprise software companies try like mad to get a job at Salesforce or Oracle.
If it does come to pass that the so called unicorn bubble bursts I predict, if history is any guide, that start-ups will find it tremendously tough to find top talent to join their company without having an absolutely compelling story. Think Google post dotcom crash or facebook post financial collapse.