Startup Spotlight: Lack of capital is no longer the biggest problem startups face – it’s talent

Startup Spotlight: Lack of capital is no longer the biggest problem startups face – it’s talent

Editor’s note: Investor, entrepreneur, author and founder of Cofounders Capital in Cary, David Gardner is a regular contributor to WRAL TechWire. Startup Spotlight isa recurring feature in WRAL TechWire’s Startup Monday which also includes our Triangle Startup Guide updates, calendars of events, a list of Triangle Meetups, our Startup Rewind week-in-review and more.


 CARY – One of my favorite local restaurants closed down last month.  This was shocking to me because for as long as I could remember I had never been by and not seen a long line out the door waiting to be seated.  An article the following week in the Triangle Business Journal  interviewed the owner who explained that even after offering $15 per hour plus tips and free meals, he could not attract the staff necessary to continue.   This is an unfortunate loss for the restaurateur and our community. Worse yet, it is a story playing out all over the Triangle.

There are several factors that have contributed to this labor crisis.   Baby boomers are retiring out of the workforce in droves but they still want to purchase goods and services so the demand has not diminished; just the number of laborers.  Anti-immigration policies have made it very difficult for labor-hungry immigrants to enter the US and it typically takes years of processing before they can legally enter the workforce.  Insurance premiums have made child care costs so prohibitively expensive that many parents are choosing to stay home to tend to their children rather than returning to the workforce.

With the economy pumping and companies growing and hiring again, startups have had a disproportionately difficult time hiring and retaining talent.   Adding to the labor shortage there have been several big companies that have moved to Triangle recently, paying top dollar for talent.  Inflation continues to drive salaries ever higher to where it is extremely difficult for an early stage company to compete even when offering generous stock options.  Every single company I am on the board of has had multiple positions open for the last several months and it is starting to impact their forecasts.

While there are many advantages to allowing employees to work from home, such isolation and lack of office commeradory does seem to be having a negative impact on worker loyalty and longevity.  One of my early stage companies has had three controllers in the last sixty days.   Another has had three CTOs in the last year creating constant technical turmoil.

Staffing agencies and executive search firms are expensive but becoming the norm now for key hires even for small startups.  Unfortunately, after spending weeks interviewing, vetting and negotiating with candidates, they often turn down the job offer because they were entertaining three other offers at the same time.   Technical and sales leadership are particularly difficult to recruit.

It is almost enough to make one long for the good old days of mild recession when employees showed up for work, appreciated having a job and were loyal (at least for the first year).  In spite of all of this, our companies continue to somehow thrive but not without some extra capital and hiring creativity.  All of this to say that I believe that “talent acquisition and retention” has now surpassed lack of capital as the single biggest challenge startups face today.

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Kassie Hoffman
Kassie pens down all the news from the world of politics on ANH.