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September 29th, 2014 at 11:24 am

There’s a shortage of software developers – tell your kids to become coders

kids-coding

Companies can’t find enough coders.

Alibaba has gone public in a $25 billion deal. Now an avalanche of IPOs may follow. It is rumored that dozens of disruptive mobile, cloud, network systems and biotech companies are ready to tap public markets. Even before Alibaba, about 190 companies had raised $40 billion in 2014, a 40% increase from last year, according to a recent report from Renaissance Capital. Investors who remember the dot-com days of 1999 may cringe at the thought of a deluge of IPOs. But it may be a sign of vigor.

 

 

These companies all have one problem: They can’t find enough coders. And every modern company, regardless of industry, needs software developers. The public has taken notice of the shortage. Britain, for example, recently announced that coding would soon be core curriculum in the country’s primary and secondary schools. In Estonia, coding class starts in first grade.

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Schools like DaVinci Coders, full-immersion 13 week programs, are meeting some of the demand, but will it be enough?

The coders living in Silicon Valley enjoy a seller’s market. One I met lives in San Francisco and commutes to a fast-growing publicly traded Web company in Silicon Valley. She takes an unmarked, Wi-Fi-enabled bus each way, allowing her to code as she commutes. But it can take two hours to get home on a Friday afternoon. Plus the Wi-Fi is kind of slow. So she’s interviewing at a privately held company in San Francisco, and in this market, why not?

I also chatted about this shortage with a recruiter who works for a prominent venture-backed startup. I asked what hiring is like these days. He lowered his head, slumped his shoulders and said, “It’s tough. Everyone that’s any good knows they are good and don’t hesitate to tell you how good they are.” He networks until he finds someone decent. “They’re maybe 27, 28 and working at Google. Can’t stand it. They’re just one of 52,000. They just get lost. They can’t make an impact. But they’re pulling in $240,000.”

So he makes them an offer. The coders go back to Google, Facebook, Apple or Twitter ; the companies bump their pay to $280,000 and give them $8 million in restricted stock units, typically vesting over four years. The recruiter tries to match this. He offers $180,000, which is about as high as his company can go—with $10 million in stock. The problem is that the stock is funny money. The company is still private and so the valuation is basically a made-up number that won’t be realized if the company never goes public.

“Then,” the recruiter tells me, “the wife gets involved. ‘Wait, you’re going to walk away from a guaranteed $8 million? Oh no you’re not.’ So it’s back to the drawing board looking for decent talent.”

This may explain why a two-bedroom, 1,300-square-foot apartment in San Francisco runs $6,000 a month. And why a four-bedroom, 2,200-square-foot home on one-seventh of an acre in Palo Alto costs $3.65 million.

Meanwhile, the flurry of IPOs has given bankers plenty to do. Predictably, we’re now hearing talk of bubbles. Twitter is worth $31 billion—24 times its sales. Private company Pinterest is worth $5 billion and Snapchat $10 billion, neither with much in revenue. Facebook bought the messaging company WhatsApp for $19 billion in February.

In July, Federal Reserve Chair Janet Yellen suggested in congressional testimony that social media and biotech valuations “do appear substantially stretched.” Has she looked at Treasurys lately? Treasury yields actually turned negative this week. Meantime, LinkedIn shares are up 30%.

A lot of questionable things are being funded—Kickstarter has raised about $1.3 billion through crowdfunding, and surely not all of it is going to worthwhile projects—but bubbles are best predicted in retrospect. More than a billion smartphones will ship this year. Lots of companies are getting growth capital to shake up transportation and logistics and energy and medicine, not to mention retail.

Watch as products and services, from taxi dispatchers to wallets and door keys and doctor visits disappear into your phone and the cloud. These are the IPOs of the next few years. The peer-to-peer lender Lending Club should be public soon, along with the cloud-storage service Box, and expect Uber, Airbnb and Dropbox to take the plunge in 2015.

And it isn’t a bubble until financial shenanigans appear. In the 1990s, AOL would ship millions of enrollment CDs and write them off over 30 years, even though they had only been shipping them for maybe two years. That stopped in 1997, but then investment bankers told Web companies they would gladly take them public if they got their page views up. AOL jumped in, exchanging millions of pop-up ads for half or more of companies’ IPO proceeds. These financial gimmicks haven’t appeared yet, and perhaps the shortage of programmers will keep them at bay for a while.

Venture capitalist Mark Andreesen tweeted the other day pointing out there are many things for which there are no public stock plays. “Sharing economy, cryptocurrency, nonmilitary drones, Internet of things,” he listed. He’s right, but probably not for long. Meanwhile, send us your coders.

More about DaVinci Coders here.

Photo credit: WebArt

Via Wall Street Journal

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