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My name is Allan Grant. I'm a Rails developer as well as the co-founder and CTO of a new startup called Developer Auction. Today, I'm going to be talking about the ultra-competitive market for hiring developers. Over the last eight years, I have started three technology companies and the one thing they all had in common is that they had to hire great engineers. In recent years, this has become increasingly difficult.
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Before I begin, let me get a show of hands—how many people here are looking for engineers, or are at companies that are hiring developers? Cool! Well, have a look around at the people around you. These are the candidates you're competing with for the same pool of talent.
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The fact is, great engineers are never unemployed. They are typically in high demand, especially in big cities like San Francisco and New York. If they get laid off on a Friday, they’re probably starting a new job the following Monday. In fact, even developers with just one or two years of experience often find themselves with numerous job opportunities, as having a gap in their portfolio raises a red flag. Currently, a developer in San Francisco receives emails from recruiters every 31 hours on average. This trend highlights the competitive landscape for hiring developers.
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This discussion is supported by an excellent blog post by Elaine Wary, who created a fake profile for an engineer named Pete London, a self-proclaimed JavaScript ninja. Over two and a half years, she received numerous resumes and requests from recruiters trying to hire this fictional developer, even after she revealed that the profile was fake. This issue has grown so critical that Google currently employs 900 full-time and contract recruiters scouring the internet for talent. They are highly motivated and compensated, frequently earning commission based on the professionals they recruit, contributing to the excessive recruiter spam we experience today.
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Recently, we pulled some statistics, and according to Indeed.com, there are 38,000 open jobs available across various startups. These openings stem from 3,700 venture-funded startups that raised money in the last year. After securing funding, these companies immediately look to grow their headcount by hiring more engineers, leading to increased competition for talent. This situation has worsened to the point where even large companies like Google, Facebook, and Twitter are resorting to 'acqui-hiring' to fill their positions. In this process, smaller startups may be picked up for sums as high as four to seven million dollars, if they're performing well enough to attract attention.
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Job boards such as TechCrunch Jobs, Stack Overflow Careers, and Dice reflect this trend as they post these 38,000 jobs. Each posting typically costs about $500, but the challenge remains that many of these listings go unanswered.
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A few years ago, job postings would generate a handful of good candidates; however, it’s now common to post a job in multiple places and receive no qualified applicants at all. Statistics indicate that only about 19% of job postings lead to actual hires. Consequently, hiring developers today feels like searching for a needle in a haystack. You’re competing with not only 900 recruiters at Google but also 3,700 funded companies.
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In response to these challenges, many businesses, including my own, have turned to recruiters. Recruiting is now a $15 billion industry in the U.S., with $15 billion spent on contingency and paid recruiters seeking talent. There are around 32,000 sole proprietors and recruiting agencies in the U.S. alone targeting the same limited pool of developers, who represent that elite group of engineers who are rarely unemployed.
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Recruiters often receive contingency fees between 20% to 30%, which may prompt some to resort to unscrupulous tactics to meet their quotas. Some recruiters are under pressure to send a certain number of emails or reach out to a specified number of candidates or companies per week, which raises ethical concerns. There have been instances of recruiters shopping around the same developer's resume to multiple companies, sometimes altering resumes to make these developers seem more appealing than they are, even if it means not being truthful. Many recruiters pitch non-existent job opportunities and are sometimes unfamiliar with the technology they are hiring for. This lack of understanding can lead to mismatched candidates, further complicating the hiring process.
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Consequently, the influx of recruiter spam has become a significant issue. I’m sure many of you also receive numerous emails from recruiters. The earlier statement about receiving an email every 31 hours from recruiters applies particularly well here. A developer we spoke with about Developer Auction mentioned he received around 25 emails from recruiters—it turned out to be 25 per week, not a month! This highlights that when a candidate is in high demand, they often ignore many outreach attempts from recruiters, which dilutes the effectiveness of genuine opportunities.
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If you're a fantastic company working on innovative technology, surrounded by great people, and offering market salaries, your outreach efforts might still get lost among the rest. The underlying problem is that talented engineers have an overabundance of opportunity, making it challenging to capture their attention. The demand for skilled developers far exceeds the available supply, making recruiting efforts feel futile.
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As my co-founders and I discussed our frustrations around recruitment while sharing drinks, one idea emerged—the concept of an auction. Auctions have historically been effective in solving issues arising from high demand and low supply. So we developed Developer Auction and were astonished by the results. Let me explain how it works.
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With Developer Auction, developers create a profile and apply to participate in the auction. We currently select about 12 applicants who indicate a genuine intent to seek a new job, actively searching in the market. We're looking for candidates who possess solid job backgrounds, strong education, good GitHub portfolios, or noteworthy personal projects. We curate both sides of the marketplace, ensuring that only serious employers are included.
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To date, we have approximately 500 employers who have been approved to participate in Developer Auction. These employers are typically viable technology companies—whether venture-funded or bootstrapped—that we believe developers would be excited to work for. The auction itself lasts two weeks. During these 14 days, developers typically receive an average of 5 to 15 job offers, which include full compensation details upfront, an essential detail that traditional recruiting methods often withhold until later in the process.
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By reversing the traditional hiring funnel, we place all pertinent information upfront. Developers can determine at a glance which opportunities are worthy of their time for interviews. While passing the interviews is still critical, after completing the auction period, they can opt to interview with the companies they find most appealing.
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Our revenue model involves charging companies 15% of the developer's initial salary, a rate that is generally lower than traditional recruiting agencies. Additionally, we give 20% of that charge back to the developers as a signing bonus. As soon as a developer accepts an offer, they receive an additional check for between three to six thousand dollars, which adds extra incentive for candidates and makes our platform attractive.
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In the beginning, we pondered what kinds of companies would be interested in participating and competing for talent using this innovative approach. To our pleasant surprise, over 500 companies have signed up. These range from smaller startups recently funded to larger entities such as Groupon and LivingSocial. Let me share some statistics from the most recent auctions; the company has been around only since August last year, and we have conducted eight auctions to date, processing 1,400 developers through the platform.
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During this time, we generated $415 million worth of annual salary offers on the platform, with an average salary of $121,000. One initial concern from employers was whether the auction would attract 'mercenaries,' or those purely motivated by money. However, we discovered that there are many important factors at play for developers in their job searches.
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Developers are looking for aspects such as culture fit, technology stack, and the people they will be working with. Our data suggests that there is not a stark difference between the accepted and rejected offers regarding salary. Typically, these decisions come down to cultural alignment, work environment, and other vital components of the job experience.
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In comparing traditional hiring methods to our auction approach, only 5% of developers who go through the auction do not respond to interview requests. In contrast, reaching out to developers via platforms like LinkedIn often yields a much higher non-response rate of 95%.
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Furthermore, I want to share some insights on how to ensure the developer hiring process runs efficiently. One common mistake companies make is taking too long to respond to candidates, delaying interview setups. Google has analyzed their hiring data and determined that added interviews beyond the first or second do not significantly enhance the chances of hiring the right person. They discovered that after the initial interviews, any additional ones only slightly improve the likelihood of making the right hire.
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In response, they have shortened their process from taking about six months in the 90s to now six weeks or less. The founder of Kayak famously stated that whenever he meets a candidate he wants to hire, he sets a seven-day timer to close the deal. This strategy allows for a more streamlined process.
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As part of our recommendations, it's vital to conduct a phone screen within the first 72 hours of contacting an interesting developer. Following that, companies should quickly organize a half-day in-person interview that includes multiple meetings and a lunch to assess cultural fit. If there are lingering doubts about the candidate's abilities, a take-home coding challenge can be introduced, but it’s crucial that companies do not drag their feet in an industry where developers are highly sought after.
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Additionally, we are excited to announce our next auction, which will be the first industry-specific platform auction. This auction will commence on Monday and will be tailored specifically for Rails and Ruby engineers. If you are in search of developers or are a developer interested in new opportunities, I encourage you to visit developerauction.com/railsconf, where you can have your profile reviewed and approved more quickly.
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Now, I'd like to show you an example of what a developer profile looks like as well as some of the offers available through our platform.
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This here is the profile of Nate Clark, who is actually in the audience with us today. Nate went through our site and was ultimately hired for Developer Auction. He previously worked at Pivotal and has eight years of Rails experience. Creating a profile on our platform is straightforward—you can connect your GitHub, LinkedIn, and everything else imports into the profile automatically.
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As you can see, Nate has listed his skills along with his experiences and education. On the right side, you can see some of the offers that he has received, which range from $120,000 to $175,000 from various companies. The simplicity of the process allows developers and employers to streamline their hiring efforts.
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Thank you all for your attention. If you have any questions, I would be happy to answer them. I hope to see many of you engaging with Developer Auction.