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Startup Outlook 2013: The Issue of Talent
Skilled Workforce and Immigration Policy Highlights
February 2013
Overview of the Startup Outlook 2013 Survey

The Startup Outlook report is based on an annual survey of private companies across the U.S.
in the software, life science, hardware and cleantech sectors. Silicon Valley Bank — the bank
for high growth tech companies across the United States — asks startups how things are going,
whether they’re planning to hire, and how government policies are affecting their growth.
Key Findings

   This year, the good news is that startups are hiring. The challenge is they
   are struggling to find enough people with the skills they need to grow.


   • 87% are hiring
   • 46% have at least one founder born outside the U.S.
   • 82% say STEM skills are critical to their business
   • 87% say it is somewhat or extremely challenging to find workers with
     the skills they need to grow their business
   • 66% say the biggest challenge to retaining the talent they need is a
     combination of finding and competing for the people with the right skills
Startups: A Bright Spot for Jobs

                                                           Nine in 10 are Hiring
                                                           “We are in growth mode … so
                                                           building our team to match our
                                                           goals is our biggest
                                                           opportunity for success. We
                                                           are also launching new
                                                           products again this year.”
                                                           - Treasurer of a digital media
                                                           startup




 Source: Silicon Valley Bank Startup Outlook Survey 2013
Immigrants Are an Important Part of the Startup Ecosystem


                                                           Nearly Half Founded by
                                                           Immigrants
                                                           46% of startups have at least
                                                           one founder born outside the
                                                           U.S.




 Source: Silicon Valley Bank Startup Outlook Survey 2013
Reward the Risk Takers

                “Recruits are willing to risk coming to work for a startup but
                              they can’t risk losing their visa.”
                                               — Benjamin Cohen, CEO of T-REX


               Startups are magnets for people willing to take risk in order to better their lot and contribute
               more meaningfully to the economy. Benjamin Cohen of T-REX, a San Francisco
               renewable energy finance company, says U.S. immigration policy doesn’t reward that kind
               of thinking. As a result, the U.S. is rapidly losing its attractiveness to foreign-born
               entrepreneurs and those who want to work in the startup world.

               There have been a number of instances where highly qualified recruits, who already work
               in the U.S. on visas with large corporations, can’t join T-REX because their visas won’t be
               supported. The U.S. visa policy requires salaries to be commensurate with their previous
               positions in large, established companies.

               As a startup that offers compensation consisting of a mix of salary and equity, these
               packages don’t meet the qualifications to support a standard U.S. H1-B visa. “Recruits are
               willing to risk coming to work for a startup but they can’t risk losing their visa,” Cohen
               says. “If you already have a skilled worker here contributing meaningfully to the economy,
               why wouldn’t you allow them to be mobile? It’s limiting our ability to grow, limiting their
               career opportunities, and ultimately hampering the growth of the U.S. economy, because
               employment resources aren’t allocated efficiently.”
STEM Skills Are Critical


                                                           82% need STEM skills
                                                           When asked what advice they
                                                           would give to President
                                                           Obama as he starts his second
                                                           term in office,18% said they
                                                           were concerned about making
                                                           sure the U.S. is building a
                                                           strong talent pool. More than
                                                           half of those were specifically
                                                           focused on immigration reform.
                                                           Other than suggestions about
                                                           how to address the tax/fiscal
                                                           situation, this was the largest
                                                           category of suggestions
                                                           directed at the current
                                                           administration.

 Source: Silicon Valley Bank Startup Outlook Survey 2013
Putting the Brakes on Fast-Moving Companies

                       “I can say with absolute certainty it’s slowing down
                                   innovation in this country.”
                                       — Allison Lami Sawyer, CEO of Rebellion Photonics


               Allison Lami Sawyer should be thrilled: She just landed a new round of funding for her
               Houston startup that makes state-of-the-art oil and gas leak detectors that protects lives.
               But the CEO of Rebellion Photonics also knows it will be next to impossible to find the
               talented scientists and engineers she needs to expand. She’s in a real bind when looking
               for highly specialized optic scientists with Ph.ds because almost all come from other
               countries.

               Still, with a staff of eight, she doesn’t have the resources to hire an immigration attorney
               and participate in visa programs. “And it’s a nine-month process when I need them
               yesterday. It’s too risky when you put in a lot of time and money hoping to get someone on
               a visa, and the big teams win out every time,” she says. She lost a large order recently
               because she is understaffed. She’s also in the market for six software engineers, and fears
               it will take half a year to complete hiring. “That slows down my development time and time
               is money …and it’s slowing down innovation in this country.”
Finding Skilled Employees Is an Enormous Challenge

                                                           87% find it challenging to
                                                           find workers with the skills
                                                           they need to grow their
                                                           business
                                                           [One of our biggest
                                                           opportunities is to] provide
                                                           21st century computational
                                                           thinking skills to children in
                                                           [the] K12 space to enhance
                                                           their creativity to prepare them
                                                           for Science, Technology,
                                                           Engineering and Math jobs.”
                                                           - CEO of a software company




 Source: Silicon Valley Bank Startup Outlook Survey 2013
Competition for Talent is Fierce

                    “As soon as good employees raise their heads, they are
                                       snatched up.”
                                               — Andrew Evans, CFO of Symplified


                 With demand for tech talent soaring, startups often find themselves in costly salary wars
                 with big-name firms. “As soon as good employees raise their heads, they are snatched
                 up,” says Andrew Evans, Chief Financial Officer of Symplified in Boulder.

                 The salary pressure can be particularly intense when the competition, as in Symplified’s
                 case, includes neighbors such as Google, Oracle and Microsoft. “If you’ve got Google 10
                 blocks down the street, you have to be creative to differentiate your company on more than
                 just salary,” he says. There are hard choices to make when every dollar counts.
The Problem: Too Few People With
the Skills Needed by Startups

                                                           A Huge Challenge
                                                           Altogether 66% said the
                                                           biggest challenge is finding
                                                           and retaining the talent they
                                                           need to grow their business.
                                                           The top challenges were
                                                           finding people with the right
                                                           skills (39%) and competing for
                                                           the talent they need (27%).




 Source: Silicon Valley Bank Startup Outlook Survey 2013
It’s a Math Problem

                  “It’s very difficult to hire software engineers. They are in
                 extremely high demand. In 2011, there were 1.7 million
                 bachelors degrees granted and 42,000 were in computer
                                              science.”
                                          — Dan Drechsel, CEO of HireIQ Solutions


                For HireIQ Solutions CEO Dan Drechsel, it’s a math problem. In 2011, just 42,000
                bachelors degrees in computer science were awarded in the U.S., out of a total of 1.7
                million. That makes his search for software engineers “very difficult”. To fill two or three
                engineering jobs a year at his Atlanta startup, Drechsel spends a lot of time at Georgia
                Tech scouring the campus for prospects. Adding to the challenge, the skill levels his jobs
                demand increase as technology marches on.

                “Let foreign students who are skilled and graduate from U.S. universities or elsewhere
                come in for a period of time and give them a path to stay here,” he says. Long-term,
                Drechsel says higher education needs reforming to produce more science and technology
                graduates. In the meantime, he takes a more hands-on approach to fill his ranks: “We do
                a ton of networking. I literally buy a lot of beer for meet-ups.”
Immigration Reform will Impact More than
High Skilled Tech Workers

                                                           Startups Creating U.S.
                                                           Manufacturing Jobs
                                                           Two in three of the startups in the
                                                           healthcare, cleantech, or hardware
                                                           sectors said they either currently
                                                           manufacture or plan to start
                                                           manufacturing in the next 18 months.
                                                           More than eight in ten said they’ll do
                                                           some or all of that manufacturing in
                                                           the U.S., and at least a quarter of
                                                           those newly-created U.S.
                                                           manufacturing jobs will go to people
                                                           with high school educations and/or
                                                           on-the-job training.




 Source: Silicon Valley Bank Startup Outlook Survey 2013
Current Immigration Rules Make the Task Tougher

                      “We change quickly. We need policies that change
                                     quickly with us.”
                                             — Damien Patton, Founder of Banjo

               Building a top-notch startup team is hard enough, says serial entrepreneur Damien Patton.
               But then there are, in his words, America’s unreasonable immigration rules that make the
               task much tougher, and more expensive. His current Silicon Valley startup, Banjo, has
               nearly 30 employees. To build (and keep) that team, he’s got 16 recruiters working on his
               behalf and a full-time immigration attorney. “When we find a engineer we want, it turns out
               we can’t hire him on an H-1B visa until next October. We change quickly. We need policies
               that change quickly with us,” Patton says.

               When he does find someone — paying as much as $75,000 in recruiting fees for top talent
               — the immigration rules can play havoc with their lives. “Why can’t the spouse of someone
               on a visa work? One of the senior engineers came here on a visa. and now they are
               starting a family. How are they supposed to live on one income? We pay well, but it’s
               Silicon Valley.” Patton fears he could lose the pivotal employee to a bigger company, or he
               might decide to leave the country.

               It’s not a concern without precedent. Patton has spent tens of thousands to recruit a visa
               holder, only to have them decide the rules are too onerous and they return home. “That’s a
               lot of investment in time and money for a startup,” he says.
Survey Methodology

Results for Silicon Valley Bank’s Startup Outlook Study were collected through an online survey conducted between
December 4 and 20, 2012. The survey was completed among a national sample of 758 executives of innovation
companies with less than $100 million in annual revenues and fewer than 500 employees. Over 60% of respondents are
President/CEO, 18% CFOs and 19% all other executive titles. The industry distribution of respondents is 433
Software/Internet, 212 Healthcare, 50 Hardware and 63 Cleantech.


Find the Startup Outlook report at http://www.svb.com/startup-outlook-report/




About Silicon Valley Bank
Silicon Valley Bank is the premier bank for technology, life science, cleantech, venture capital, private equity and premium
wine businesses. SVB provides industry knowledge and connections, financing, treasury management, corporate
investment and international banking services to its clients worldwide through 28 U.S. offices and six international
operations. (Nasdaq: SIVB) www.svb.com.


Silicon Valley Bank is the California bank subsidiary and the commercial banking operation of SVB Financial Group.
Banking services are provided by Silicon Valley Bank, a member of the FDIC and the Federal Reserve System. SVB
Financial Group is also a member of the Federal Reserve System.

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SVB Startup Outlook Report 2013: The Issue of Talent

  • 1. Startup Outlook 2013: The Issue of Talent Skilled Workforce and Immigration Policy Highlights February 2013
  • 2. Overview of the Startup Outlook 2013 Survey The Startup Outlook report is based on an annual survey of private companies across the U.S. in the software, life science, hardware and cleantech sectors. Silicon Valley Bank — the bank for high growth tech companies across the United States — asks startups how things are going, whether they’re planning to hire, and how government policies are affecting their growth.
  • 3. Key Findings This year, the good news is that startups are hiring. The challenge is they are struggling to find enough people with the skills they need to grow. • 87% are hiring • 46% have at least one founder born outside the U.S. • 82% say STEM skills are critical to their business • 87% say it is somewhat or extremely challenging to find workers with the skills they need to grow their business • 66% say the biggest challenge to retaining the talent they need is a combination of finding and competing for the people with the right skills
  • 4. Startups: A Bright Spot for Jobs Nine in 10 are Hiring “We are in growth mode … so building our team to match our goals is our biggest opportunity for success. We are also launching new products again this year.” - Treasurer of a digital media startup Source: Silicon Valley Bank Startup Outlook Survey 2013
  • 5. Immigrants Are an Important Part of the Startup Ecosystem Nearly Half Founded by Immigrants 46% of startups have at least one founder born outside the U.S. Source: Silicon Valley Bank Startup Outlook Survey 2013
  • 6. Reward the Risk Takers “Recruits are willing to risk coming to work for a startup but they can’t risk losing their visa.” — Benjamin Cohen, CEO of T-REX Startups are magnets for people willing to take risk in order to better their lot and contribute more meaningfully to the economy. Benjamin Cohen of T-REX, a San Francisco renewable energy finance company, says U.S. immigration policy doesn’t reward that kind of thinking. As a result, the U.S. is rapidly losing its attractiveness to foreign-born entrepreneurs and those who want to work in the startup world. There have been a number of instances where highly qualified recruits, who already work in the U.S. on visas with large corporations, can’t join T-REX because their visas won’t be supported. The U.S. visa policy requires salaries to be commensurate with their previous positions in large, established companies. As a startup that offers compensation consisting of a mix of salary and equity, these packages don’t meet the qualifications to support a standard U.S. H1-B visa. “Recruits are willing to risk coming to work for a startup but they can’t risk losing their visa,” Cohen says. “If you already have a skilled worker here contributing meaningfully to the economy, why wouldn’t you allow them to be mobile? It’s limiting our ability to grow, limiting their career opportunities, and ultimately hampering the growth of the U.S. economy, because employment resources aren’t allocated efficiently.”
  • 7. STEM Skills Are Critical 82% need STEM skills When asked what advice they would give to President Obama as he starts his second term in office,18% said they were concerned about making sure the U.S. is building a strong talent pool. More than half of those were specifically focused on immigration reform. Other than suggestions about how to address the tax/fiscal situation, this was the largest category of suggestions directed at the current administration. Source: Silicon Valley Bank Startup Outlook Survey 2013
  • 8. Putting the Brakes on Fast-Moving Companies “I can say with absolute certainty it’s slowing down innovation in this country.” — Allison Lami Sawyer, CEO of Rebellion Photonics Allison Lami Sawyer should be thrilled: She just landed a new round of funding for her Houston startup that makes state-of-the-art oil and gas leak detectors that protects lives. But the CEO of Rebellion Photonics also knows it will be next to impossible to find the talented scientists and engineers she needs to expand. She’s in a real bind when looking for highly specialized optic scientists with Ph.ds because almost all come from other countries. Still, with a staff of eight, she doesn’t have the resources to hire an immigration attorney and participate in visa programs. “And it’s a nine-month process when I need them yesterday. It’s too risky when you put in a lot of time and money hoping to get someone on a visa, and the big teams win out every time,” she says. She lost a large order recently because she is understaffed. She’s also in the market for six software engineers, and fears it will take half a year to complete hiring. “That slows down my development time and time is money …and it’s slowing down innovation in this country.”
  • 9. Finding Skilled Employees Is an Enormous Challenge 87% find it challenging to find workers with the skills they need to grow their business [One of our biggest opportunities is to] provide 21st century computational thinking skills to children in [the] K12 space to enhance their creativity to prepare them for Science, Technology, Engineering and Math jobs.” - CEO of a software company Source: Silicon Valley Bank Startup Outlook Survey 2013
  • 10. Competition for Talent is Fierce “As soon as good employees raise their heads, they are snatched up.” — Andrew Evans, CFO of Symplified With demand for tech talent soaring, startups often find themselves in costly salary wars with big-name firms. “As soon as good employees raise their heads, they are snatched up,” says Andrew Evans, Chief Financial Officer of Symplified in Boulder. The salary pressure can be particularly intense when the competition, as in Symplified’s case, includes neighbors such as Google, Oracle and Microsoft. “If you’ve got Google 10 blocks down the street, you have to be creative to differentiate your company on more than just salary,” he says. There are hard choices to make when every dollar counts.
  • 11. The Problem: Too Few People With the Skills Needed by Startups A Huge Challenge Altogether 66% said the biggest challenge is finding and retaining the talent they need to grow their business. The top challenges were finding people with the right skills (39%) and competing for the talent they need (27%). Source: Silicon Valley Bank Startup Outlook Survey 2013
  • 12. It’s a Math Problem “It’s very difficult to hire software engineers. They are in extremely high demand. In 2011, there were 1.7 million bachelors degrees granted and 42,000 were in computer science.” — Dan Drechsel, CEO of HireIQ Solutions For HireIQ Solutions CEO Dan Drechsel, it’s a math problem. In 2011, just 42,000 bachelors degrees in computer science were awarded in the U.S., out of a total of 1.7 million. That makes his search for software engineers “very difficult”. To fill two or three engineering jobs a year at his Atlanta startup, Drechsel spends a lot of time at Georgia Tech scouring the campus for prospects. Adding to the challenge, the skill levels his jobs demand increase as technology marches on. “Let foreign students who are skilled and graduate from U.S. universities or elsewhere come in for a period of time and give them a path to stay here,” he says. Long-term, Drechsel says higher education needs reforming to produce more science and technology graduates. In the meantime, he takes a more hands-on approach to fill his ranks: “We do a ton of networking. I literally buy a lot of beer for meet-ups.”
  • 13. Immigration Reform will Impact More than High Skilled Tech Workers Startups Creating U.S. Manufacturing Jobs Two in three of the startups in the healthcare, cleantech, or hardware sectors said they either currently manufacture or plan to start manufacturing in the next 18 months. More than eight in ten said they’ll do some or all of that manufacturing in the U.S., and at least a quarter of those newly-created U.S. manufacturing jobs will go to people with high school educations and/or on-the-job training. Source: Silicon Valley Bank Startup Outlook Survey 2013
  • 14. Current Immigration Rules Make the Task Tougher “We change quickly. We need policies that change quickly with us.” — Damien Patton, Founder of Banjo Building a top-notch startup team is hard enough, says serial entrepreneur Damien Patton. But then there are, in his words, America’s unreasonable immigration rules that make the task much tougher, and more expensive. His current Silicon Valley startup, Banjo, has nearly 30 employees. To build (and keep) that team, he’s got 16 recruiters working on his behalf and a full-time immigration attorney. “When we find a engineer we want, it turns out we can’t hire him on an H-1B visa until next October. We change quickly. We need policies that change quickly with us,” Patton says. When he does find someone — paying as much as $75,000 in recruiting fees for top talent — the immigration rules can play havoc with their lives. “Why can’t the spouse of someone on a visa work? One of the senior engineers came here on a visa. and now they are starting a family. How are they supposed to live on one income? We pay well, but it’s Silicon Valley.” Patton fears he could lose the pivotal employee to a bigger company, or he might decide to leave the country. It’s not a concern without precedent. Patton has spent tens of thousands to recruit a visa holder, only to have them decide the rules are too onerous and they return home. “That’s a lot of investment in time and money for a startup,” he says.
  • 15. Survey Methodology Results for Silicon Valley Bank’s Startup Outlook Study were collected through an online survey conducted between December 4 and 20, 2012. The survey was completed among a national sample of 758 executives of innovation companies with less than $100 million in annual revenues and fewer than 500 employees. Over 60% of respondents are President/CEO, 18% CFOs and 19% all other executive titles. The industry distribution of respondents is 433 Software/Internet, 212 Healthcare, 50 Hardware and 63 Cleantech. Find the Startup Outlook report at http://www.svb.com/startup-outlook-report/ About Silicon Valley Bank Silicon Valley Bank is the premier bank for technology, life science, cleantech, venture capital, private equity and premium wine businesses. SVB provides industry knowledge and connections, financing, treasury management, corporate investment and international banking services to its clients worldwide through 28 U.S. offices and six international operations. (Nasdaq: SIVB) www.svb.com. Silicon Valley Bank is the California bank subsidiary and the commercial banking operation of SVB Financial Group. Banking services are provided by Silicon Valley Bank, a member of the FDIC and the Federal Reserve System. SVB Financial Group is also a member of the Federal Reserve System.