Dave Schappell, Curtis Feeny and Greg Gottesman at the Barokas PR luncheon in downtown Seattle

Call it the Silicon Valley invasion. Facebook, Google, HP, Zynga and Salesforce.com — driven by an insatiable need for talented software engineers — have all established fast-growing engineering centers in the Seattle area in recent years to mine the riches of the Northwest tech community.

But what’s the real reason they are all coming here? Venture capitalist Greg Gottesman and Seattle entrepreneur Dave Schappell, speaking on a panel in Seattle this week hosted by Barokas Public Relations and GeekWire, summarized it in one word: Microsoft.

“They think Microsoft is weak, and they feel that they can steal technical talent,” said Madrona Venture Group’s Gottesman.

But the real fireworks came a few moments later when TeachStreet’s Schappell, not known for being a shrinking violet by any means, offered his take. And it doesn’t paint a pretty picture for the region’s largest tech company.

“September 15th is coming. That’s the big exodus from Microsoft every year. Bonuses are set. Cash is coming,” said Schappell. “And startups and Facebook, Google, Amazon — we are all ready to recruit out of that resigning class. And that’s why (the Silicon Valley companies) are here.”

I also sat on the panel, and so I took the opportunity to ask Schappell whether having the Facebooks and Googles and Zyngas of the world in town made it harder for startups to recruit. (I’ve actually been hearing some wild stories of startups losing top-notch recruits to the big dogs).

Schappell, a former Amazon.com employee, said there’s absolutely no way that startups can compete on salary with the tech juggernauts.

“They are totally insane. They are throwing out $150,000 to $200,000 salaries and $500,000 (restricted stock units) that will vest over three or four years. The only people you are going to attract at a startup are people who want to build something great.

If you want to go work on one element of a shopping cart check-out pipeline, go work for Amazon. If you want your brain to go numb, go work for Microsoft. The way we recruit is not by recruiting the same people, for better or for worse…. I am telling you that’s true, though. Startups do not compete, and we can’t compete hiring those same people.”

Later in the discussion, the topic once again turned to recruiting when an audience member asked whether the new engineering centers in Seattle really attracted the creative people that the region needs.

Voyager's Curtis Feeny and Madrona's Greg Gottesman

Schappell took issue with the premise, noting that software engineers are some of the “smartest and most creative people” around. “It is a different type of creativity, but their work is deep thinking, deep creative work,” he said.

Gottesman agreed, saying that “engineers are the builders of this new economy.”

“If you get a great engineer, they are the most creative people on the planet,” said Gottesman. The key, he said, is making sure that the visionary engineers are properly matched with the visionary business leaders. When that happens, he said great things occur.

Voyager Capital’s Curtis Feeny, who also sat on the panel, said that there are plenty of examples of technology companies crashing and burning because they didn’t assemble the right engineering team. In fact, MySpace eventually lost the social networking war because it couldn’t recruit the smartest engineers.

“It is a well-established startup mantra in the Valley: The world-class engineering teams often win more than anybody else,” said Feeny.

The good thing going for Seattle is that there are plenty of those folks walking around. They might just not being wearing the blue badges of Microsoft anymore.

Photos via Mira Poling at Mirastories.

John Cook is co-founder of GeekWire. Follow on Twitter: @geekwirenews and Facebook.

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  • guest2

    Of course it makes your brain numb. They say Microsoft cannot attract talent… it’s not an immigration or education issue; that’s the reason: people are too smart to want to work for Microsoft for less than $250k.

  • http://www.nosnivelling.com daveschappell

    I’ll admit that even I was bored with the Microsoft-bashing theme of some of my comments.  To preclude lots of likely bashing here, here’s probably a more correct summary of what I’ve often thought about our Redmond-neighbor.

    We all want Microsoft to lead and be awesome.  It’s good for competition and the industry (and ultimately, consumers) and great for our region and country.  And, there’s no doubt that Microsoft hires amazing people (and that we love to hire them, when we can!), and has many great products (Bing is one of my core iPad apps, Xbox/Kinect are awesome, Windows Phone 7 (or whatever it’s named nowadays) is slick, and we all love seeing Bing/Yahoo make inroads on %-search-share against Google).But, we want to see more leadership, ala Jeff Bezos (winning by doing):

    http://www.geekwire.com/2011/jeff-bezos-letter-shareholders-its-day-1

    http://www.geekwire.com/2011/amazons-bezos-innovation

    And less chest-thumping, ala Steve Ballmer (screaming to people that you’re winning, despite market validation) (sorry for TechFlash link John/Todd, but it WAS your story when you worked there ;-) ):

    http://www.techflash.com/seattle/2010/10/why_microsoft_ballmers_reply_to_underwhelmed_college_student.html

    We want to see more leadership & innovation, and less following; and it’d probably be good for employees to know that their are ramifications for efforts that look much more like the latter, as the latter looks more like minimal effort, stemming from just cashing-in-paychecks and vesting-RSUs-in-peace.

    • Bob

      Very well said. I would also like to see a MS that won by doing instead of talking about winning while losing. Unfortunately, MS’s board seems intent on letting Ballmer continue to drive the company into the ground.

      So I guess that’s at least good for you and your fellow companies recruiting their talent.

    • http://blog.sentientmonkey.com Scott Windsor

      (disclaimer: I work for Dave at TeachStreet, and used to work for Amazon. I’ve never worked for Microsoft).

      I think what makes Microsoft an easy target is that they were such a force to be reckoned with in the 80s and 90s, and really got hammered by emerging internet tech companies in the late 90s and 00s.
      In terms of attracting tech talent, Microsoft has a challenge – much of the products that users aren’t industry leaders right now (Bing vs. Google, Windows Phone vs. iPhone, PC vs. Mac). I think they have a long way to go to “reinvent” themselves image-wise and make them more appealing for engineers.

      Good compensation goes a long way to attract talent – especially for engineers that don’t live in this area, including newly graduated college students.

      I’ve never worked for Microsoft, but I did work at Amazon for 5 years after graduating college. It was probably one of the best decisions I’ve ever made. It brought me to Seattle, and I learned so much from the time I was there that’s helped me going forward.

      But, it’s hard to innovate and have input at any large company (even those that have 20% time) compared to what you can at an early stage small startup. Dave is right there – you can’t compete on compensation, so you have to compete on experience. This is pretty appealing for many engineers working at larger companies, and a great selling point.

      On the business-side, I don’t know if working for Microsoft turns your brain to mush (sorry, I’m an engineer), but as an engineer I’ve had a few friends leave and had a chance to talk to them. Although this is anecdotal, many have felt that either they do work that is of little practical use (internal or research projects), or never really got a chance to do anything big or challenging (instead work on small pieces that aren’t noticed by many).

      I’d love to see Microsoft step up and “reinvent” themselves as leaders in the engineering field. They have smart people, big market shares, and lots of opportunity. They have a bit of a black eye dealing with developers, and if you’ve built anything on the Microsoft platform in the past 3 decades, you’ll agree – it’s expensive, changes frequently, and tends to lag in terms of what’s going on in the industry.

    • Christi

      I agree! I’m an ex-MSFTee and I want them to succeed, but I think that the leadership needs to change and that MSFT needs to start taking more risks and innovate more. It’s easy to sit back and let other companies innovate and take risks and then acquire them once they become a sure thing, but it’s hindering employees who want to do more than just cashing-in-paychecks. 

    • Christi

      I agree! I’m an ex-MSFTee and I want them to succeed, but I think that the leadership needs to change and that MSFT needs to start taking more risks and innovate more. It’s easy to sit back and let other companies innovate and take risks and then acquire them once they become a sure thing, but it’s hindering employees who want to do more than just cashing-in-paychecks. 

    • http://profiles.google.com/tuseroni austin hamman

      i agree that we all want microsoft to be awesome, i dont think i want them to lead…just because we have seen how they handle leadership. as much as i hate the company they still have a place in my heart, windows 95 was my first OS, and you never forget your first OS. come around XP windows started to feel sterilized, all the nerdy touches you find deep in the OS are gone in their place simply cold clinical business. microsoft chases the enterprise market but dont realize that enterprise is where companies go to die. enterprise is slow to adopt new technology, resistant to changes in established technology, and literally(ok figuratively) have to be dragged kicking and screaming into the 21st century.

      when you focus on this market to the exclusion of all others you force yourself into obsolescence.

      there are thing microsoft could do that would put them well into at least MY good graces at least (i can’t speak for all the others who have been burned by this company)
      1:big one, just open source IE, you arent even selling the fecking thing. we can fix it, we WANT to fix it. if you just open source it a ton of people will write code to make it better for FREE. just frikken do it! if they did that, at the very least i would have a lot fewer reasons to stab my steve balmer voodoo doll. anyone who writes web code would be happy to have a good IE, it doesnt even need to be GPL, just let the community fix that piece of crap so your team can go focus on something else.
      2:bring back bill gates. microsoft needs a nerd at high office someone who at least understands technology. get more nerds, nerd up windows it might not seem like much and businesses might be all like “you arent taking this serious” or whatever but for people who like to feel a connection to their OS these little things are refreshing (case in point go to about:robots in firefox. its useless, its silly, but its funny and tells me a person was involved in this. not a cold code churning machine)
      3:they just get less and less as the list goes on: please bring back the ms agents. i love those little things, kids just learning programming love those little things. dont kill them…

      but maybe some of these are in conflict with running a multi-billion dollar empire. maybe the money is more important to them. if so…they may well dig their own grave.

  • Ray Burt

    Sorry, the comments coming from Schappell who never worked for Microsoft are not even worth the electrons used to send this useless diatribe over the interwebs.There is ZERO credibility in these statements.  

    • Guest

      He has to have worked for MS in order to see what’s obvious to competitors, the market, the media, and the public – basically everyone except MS’s board and apparently its shareholders (though they’ve felt the impact more than anyone)?

      Um, okay.

      • Ray Burt

        No, but that’s not what he said.  He said it makes your brain numb.  Just idiotic garbage from someone who apparently has serious issues that need dealing with.

        • Guest

          To his credit he seems to acknowledge that his earlier statements were too strong. His restated views above are hard to disagree with.

          • Ray Burt

            Yes…agree.  Good to see him realize all this.   His retraction does increase future credibility.

  • http://www.facebook.com/aaron.a.bird Aaron Bird

    I disagree with Dave, we (start-ups) can compete with Microsoft and Amazon for the same engineering talent.  I left Microsoft for a start-up and we will be competing with Microsoft for the next engineer we hire.  We may not be able to match the compensation package 1:1, but engineers like to ship awesome products that they had a huge impact in building and designing.  Our pitch is “Ship daily, have a huge impact and influence on the product, and build something from scratch that is going to change the world.”  Microsoft and Amazon can’t offer that and no amount of higher compensation can change the core of what engineers want to do with their time.

    • http://blog.sentientmonkey.com Scott Windsor

      A number of years ago, at an Amazon all-hands, Jeff was asked about the current attrition rate at Amazon, and what were some of the reasons behind it. 

      His answer (paraphrased):

      “We hire builders. Builders want to build. If they can’t build here, they’ll go elsewhere.”

      Granted, there are lots of reasons why engineers leave big companies (and specifically Amazon), but a major theme is having barriers to building and shipping code more often.

      Now I ship code 6-7 times a day (at least). :)

      • Anonymous

        Great perspective, Scott!  Being part of this larger and nuanced discussion at the panel, I’d chime in that the entire startup ecosystem, talent economy and region can benefit as Seattle is recognized as a talent hub for tech companies who are hiring. A few reasons for this in my view: when we have a critical mass of big employers, it can make a move to Seattle much easier for trailing spouses and families. When one wage-earner takes a job at a startup, we’re not a one-trick pony when it comes to the other partner finding employment here, and that’s a good thing. And not to rain on the parade, but if your startup doesn’t succeed, it doesn’t suck to have lots of tech companies looking to hire talented people. Secondly– as you mentioned– tech companies like Amazon, Real Networks, and certainly Microsoft and many others– have a great track record of hiring smart people.  Some of these smart folks have entrepreneurial DNA and have ultimately left big companies to launch the region’s great startups. 

  • http://twitter.com/lunarmobiscuit Michael ‘Luni’ Libes

    I’ve never asked a question to a panel which continued onward into a online discussion before :-)  But thanks John, as I now get to rebut Dave’s response…

    I don’t agree that these companies are all in Seattle due primarily to suck Microsoft of talent.  I expect that was perhaps reason #5.  Reason #1 being that in looking at all the cities in the U.S., Seattle is one of the handful of software development centers.  Even without Microsoft, it must be #2 or #3 in the country for the sheer quantity of programming talent.  This despite the latest wave of hype about New York City, or what now feels like a decades old hype of Route 128 outside Boston.

    If I were running Google or Yahoo or Facebook or Zynga development, and I needed another few thousand developers, and hiring started getting extra difficult down in the Valley, what would be my options?  Seattle, Boston, Austin, or Bangalore.  Where else has the scale of talent to hire 500 experienced programmers?  1,000?  5,000?

    If this were my decision to make, I’d start with the nearby city, in the same country, in the same timezone.  If that worked, in a few years, when hiring became difficult there, I’d replicate the effort further afield.

    So… rather than debating why all these companies came here, the more important question is how long can we keep growing our talent base before these companies move on to the next city, at which time we risk not being the #2 software city?  When we risk not being the only city joined at the hip with the Valley.

    • johnhcook

      Luni, it was a great question, and really set off a fun discussion on recruiting and how Seattle is positioned as an innovation hub. 

      I think you are right that more needs to be done to make sure that smart engineers, developers, designers, artists, etc. live, work and play in Seattle. 

      But the fact is that Microsoft is still the largest employer of software engineers in the region. They’ve hired the best and brightest for years, and now some of those worker have a lot more options in Seattle. To me, that’s part of a maturation of the tech hub.

      As Dave Schappell pointed out, not all of those folks at MSFT make for a good fit in the true early-stage startup environment. 

      However, could they fit into a company like Salesforce or Facebook or even Zynga?

      Maybe, since those are more stable than your traditional early-stage startups like TeachStreet. I agree with Dave that the people who joins startups are of a truly different mind. They exist at Microsoft, and we see some of them leave to do their own thing or join with an existing startup. 

      But, I’d argue the vast majority at Microsoft probably aren’t in that camp. Given the  choice, some Microsofties might not jump to a startup, but they may jump to Facebook or Zynga.

      Thanks for the great question and comment.

  • Dathan N

    I’d rather work for Microsoft than a pretentious overly-ambitious inexperienced underfunded overbearing soul crushing start-up. Microsoft gets developers and respects them highly. It’s a developer’s Utopia – which could be why they’re products aren’t out to speed ahead of the competition – because they’re doing right, and their developers are happy people.

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