The Rising Costs of Scaling a Startup in San Francisco

    > immature state of the US agency
    > recruitment market compared to Europe

You really have no idea about mature recruitment markets. The UK recruitment industry you represent needs to be replaced with a number of short Bash scripts, so that people like you (yes, you) will lose their jobs and suffer. The sooner it will happen, the better for everyone.

I'm a Russian living in London and always mention Russian recruitment industry as an example of smoothly-functioning market with most inefficiencies resolved in a way you would expect in a modern economy. In short, agencies in Russia only deal with hiring top-level execs, equivalent to someone on £200K+ salary in the UK (i.e. less than 0.1% of the country's labour force).

The rest is handled directly by companies directly through two of the largest websites -- job.ru and hh.ru (it actually feels weird to describe this on a forum that talks about disrupting something all the time!) The traffic on those websites is enormous, the number of applicants for any vacancy is much higher than any recruiter I used in the UK ever brought in.

It costs the company a fraction of recruiter costs; it shows the applicant the company name immediately so he or she can do their own due diligence without listening to things like "top-tier investment bank" that you and your colleagues have invented. It's better for everyone. Compared to that, UK recruitment looks like car boot sale compared to eBay.

Best companies like Yandex normally also advertise on their websites with few questions dropped into a vacancy to filter out non-qualified people (see, for example http://company.yandex.com/general_info/jobs/develop_cpp.xml).

Now, please, tell me about the added value recruiters in the UK bring anyone.

Yes, unfortunately in London either:

1) recruiter effectively steals a percent of your starting salary;

2) company is so cheap they cannot afford a recruiter;

3) big tech companies are paying extremely low in comparison to the primary sector - finance (and the most interesting stuff will still be developed in USA).

I love how this is the most important comment on hacker news and gets the least upvotes.

This guy also has these ridiculously generic datasets and the geekerati goes nuts because he's a vc.

Please clarify your assertion. Are you saying real estate price increases have contributed 5% of employee costs, or (and this is what everyone else so far reacting to your assertion is interpreting) are you saying residential real estate is 5% of employee compensation costs? Increases in SF and SV area alone over the past 10 years, I can easily buy the 5% figure; could be even smaller. But see my comment further below on the where the bar is for companies to make major changes to capture small payroll savings.

If you are describing an increase as a contributory factor, then you are obviously missing the time period that goes along with that increase you are talking about, so readers can go and look up the historical real estate pricing data.

At 6-figure high-competency-developer total compensation package (and salary) levels in the US, you are looking at the 28% marginal tax bracket for the employee. High-wage employees like these developers will typically pencil out to 100-150% fully burdened to the company. For top 20 metro areas in the US, you will tend to see most such employees spend closer to 45-50% of gross pre-tax income on shelter costs (counting PITI plus maintenance), rather than the 33% that is the historical prudent personal financial planning guideline (and those guidelines should be taken with a grain of salt for reasons I won't get into here).

With my CFO hat on, I look at the ratio of third-highest decile (with 50% pinned to the median) of PITI plus maintenance in the parts of the city I anticipate most such employees would prefer to live, to the total burdened cost per developer, to establish just how much the company is paying for shelter costs of its employees. It's a surprisingly large percentage for the top 10 metro areas, though everyone's specific numbers will be different based upon neighborhoods they choose, time period, etc. The ratio of course goes up as you travel down the skill (and payroll cost) ladder.

Even with highly-compensated and -skilled employees towards the higher end of the skill ladder, I was coming up with ratios closer to 10% than 5%. I've seen companies move mountains to capture far, far smaller payroll savings percentages.

What is much more difficult to quantify however, are the soft benefits of ready access to the large, concentrated ecosystem that grew up around the industry in that geographic area. Clearly, many companies today consider those soft benefits worth the incurred hard total compensation package costs. It's a calculation that you and your advisors should make and continually revisit once in awhile for your venture's own individual circumstances.

For some smaller outfits who already have an assembled team and are in their early development stage, it is arguable that those soft benefits do not outweigh the immediate cash flow benefits of avoiding the high cost of living areas.

Unfortunately not many companies are willing to consider that - even Slack[1] isn't interested in remote workers.

[1] https://twitter.com/mrmrs_/status/567832899854065664