From the outside, a talent acquisition looks a little bit like a failure: a founding team got together, launched a product—and couldn’t get traction. The company was liquidated, and its most valuable asset turned out to be the founders’ resumes.
Every career has an “efficient frontier” of compensation. On one end, there’s a job that pays you what you’re worth; on the other end, there’s a job that you know will pay for next month’s rent. In some sectors, you can switch from one to the other at the same company (being a full-commission salesperson instead of a salaried “account manager”). In the technology industry, there’s not a strong tradition of pure incentive-based compensation; I don’t know any designers who will get 10% of the extra revenue from a successful A/B test.
VCs throw money at startups because they’re scalable. With the right model, the thinking goes, you can double your revenue while your expenses rise 10%. Then, you can do it again.
This works pretty well for some companies. Facebook, for example, hit 100 million users in mid 2008, with “more than 600″ employees. Now they have 500 million users, and 1400+ employees. 400% growth in users; 130% growth in employees. That’s exactly the kind of math VCs like to see, and it’s why they were willing to fund Facebook generously in the early stages. Facebook will run into scalability barriers after a while. At some point, the limiting factor is not engineers (a scalable resource) but customer service reps and servers.
For many of the current crop of hot companies, the end of scalability is coming much faster.
The Economics of Advertising: Why Advertising Agencies Used to Be the Best Business in the World (And Why They Never Will Be Again)
There’s only one notably successful business personality who made his money in the ad agency business. He’s an accountant, and that should tell you something. The ad business is simply not a great place for making money.