Silicon Valley talent wars: Engineers, come get your $250K salary

Weeby thinks the way to hire superstar engineers in hypercompetitive Silicon Valley is to pay them like superstars, to the tune of $1 million over four years, and be totally transparent about it.

In Silicon Valley, even the smallest team of talented engineers can hit the jackpot.

Take Instagram, which entered into tech folklore when its 13 employees -- only half of whom were developers -- created a simple photo-sharing app that wound up getting bought by Facebook for a $1 billion in 2012. WhatsApp took that dynamic even further. With just 32 engineers, the company built a messaging tool that Facebook -- once again digging into its considerable coffers -- bought for $19 billion in February.

That's why the best software engineers are difficult to find these days. In some ways, the most bitter competition between tech rivals isn't for market share; it's to hire these skilled workers, who can easily command multiple $100,000-plus job offers replete with attractive perks and equity packages. In an attempt to control the hiring market, companies like Apple, Google, and Adobe were found to have illegally conspired on a wage-fixing scheme, leading to a nine-figure settlement in April.

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Weeby CEO and co-founder Michael Carter Weeby.co

So it is that one Silicon Valley startup is trying out its own version of shock and awe to grab the attention of the best of the best engineers. Weeby.co, led by a CEO whose technical work is used on more than 2 billion devices worldwide and who has advised more than 100 companies on fundraising, is building an innovative development platform for social games and is offering to pay its engineers an average salary well above market rate: $250,000 a year, or a million dollars over four years, plus equity.

There's obviously some gimmickry here. Like many startup CEOs, Weeby.com's Michael Carter has struggled to distinguish his company in the hiring wars. The 22-person company, which plans to launch its platform this year, already has what Carter considers a superstar team. But he wants to grow, albeit only with the right new people.

The 29-year-old, 6-foot-2 Carter argues that while individual engineers are unlikely to profoundly impact public tech companies, they can make a huge difference at small startups like his. "If you look at a really talented engineer," said Carter, "they'll help Facebook, Apple, or Google, but they won't fundamentally change anything. Whereas that same engineer at a small company could be the difference between failure and a billion dollars."

Many in the tech world believe that giving quality engineers substantial amounts of equity, which can turn into valuable nest eggs for very early employees at successful companies, is the way to build for the long haul. Those people think paying market rate salaries, which average $111,000 in the Valley, according to Glassdoor, a company that aggregates salary data, is the best approach.

But Carter counters that even at $111,000 a year, people will worry about mortgages in one of the most expensive real-estate markets in the world, other debt, or the cost of raising kids. By paying market rate, he feels, startups force would-be hires to hunt for more lucrative employment, or drive them straight into the arms of the higher-paying Googles and Facebooks of the Valley.

To Carter, talented engineers should be paid as if they are the foundation for potential 10-figure companies. That means salaries far higher than average, combined with total transparency about compensation, and performance. That's how you build a great team, he believes.

That's why Weeby is launching its all-new compensation program this week, a bold gambit to shake up what Carter believes is Silicon Valley's "backwards" pay structure. Employers feel betrayed if engineers are worried about salary, "Or they have the wrong response, like, 'if you really believe in our mission, you'll stay,'" Carter said. "Which totally ignores peoples' financial constraints. We thought that was ridiculous. There's so much effort lost in the world to people playing this ridiculous game. People who don't play the game, those are the people we should be celebrating. But it's [usually] the opposite."

2 billion people

Few outside the Valley have heard of Carter, but he's a big name in entrepreneurial circles, especially those focused on building apps and tools for real-time communications. In 2008, he created the WebSocket protocol for HTML5, the latest major revision of the World Wide Web's core language. Adopted in devices used by more than 2 billion people -- and nearly every Fortune 500 company -- WebSocket made it easy to build new classes of real-time applications like games, stock tickers, chat rooms, and others, that previously would have required up to 20 times the engineering resources.

Carter is also a three-time founder and adviser to more than 100 startups, largely due to his relationship with StartX, a Stanford University-based accelerator. "He has gone out of his way to help other teams," said Cameron Teitelman, StartX's founder and CEO. "He holds this fundraising workshop...that we recommend every founder goes to and always has very high attendance. Basically, people get a ton of value from his insights on raising money, so they come back and recommend it to others."

Now, though, Carter is trying to make Weeby's platform the linchpin of what the market research company Newzoo estimated in 2011 is the $18.2 billion global casual games industry. Weeby's platform is designed around a common set of tools for building game levels, user interfaces, high score systems, and other elements that make up what are called the "game loop."

Developers can create new games and roll them into Weeby's game loop, enabling very small teams to build the kinds of hit iOS or Android games in weeks that today require dozens of people up to 18 months. The financial promise of this platform was considered lucrative enough to merit a $12 million A round of funding in 2012 led by Highland Capital Partners.

Though the platform is mainly aimed at third-party developers, Weeby has also built a few titles of its own, like Mecha-Mecha Panic, Doki Stars, and Bubble Story. Weeby won't say how much money those have earned, but Carter said they've generated a revenue stream "that's given us confidence to launch this [compensation] program."

In the past, Weeby, founded in 2011, paid its people much like other startups, with an emphasis on equity and a plea to take pay cuts in order to be part of something that could "change the world." That meant salaries in the $60,000 to $70,000 range, even for executives. Carter himself collects just $59,000 in base salary. But it became clear "we were doing this wrong....Even when we find people who want to work here [many would say] 'I just can't at this price point.'"

As a result, Carter said, "we lost a lot of candidates."

A million dollars in four years

About nine months ago, Weeby took the initial steps toward restructuring its compensation program. Here's how it works: New hires get a base salary commensurate with their experience -- at least $100,000, and more than they were previously paid. They join with the promise, if they perform well, of automatic $10,000 monthly bumps until they hit $250,000. Even then, the raises continue, so that after four years, it adds up to a million.

Weeby doesn't ignore equity, offering up to four times what similar-sized Valley startups do, Carter said. Employees, in fact, will own more of Weeby than even its biggest investor.

The salaries aren't paid in a vacuum. Equally important, Carter believes, is transparency, so no one wonders what others are making.

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All Weeby applicants must pass a coding test, which takes the form of a traditional role-playing game tasking them with fighting monsters -- while also navigating the vagaries of Web servers and other technical challenges. Weeby.co

Weeby would hardly be the first company to implement a transparent compensation system, or one that pays most people the same. Indeed, one inspiration for the program is Next, the computer company that Steve Jobs founded after his ouster from Apple in 1985 and that was subsequently bought by Apple in 1996. Next paid senior staff $75,000 a year, and everyone else got $50,000, regardless of experience.

Not every Weeby engineer will earn the million dollars. Weeby will subject everyone to monthly performance reviews, and managers will make quick decisions, either granting the next $10,000 raise or offering feedback about needed improvement. Some will be terminated but given a "healthy severance" of at least $20,000, plus references.

Ultimately, Carter said, Weeby's new program "is not about paying people over market. It's way more about finding the best engineers, who could earn that level of all-in compensation now or in the future and giving them a clear way to get there....You should work here because the culture's amazing, one of the best teams in the world, and do really cool things with technology."

Before any paychecks, though, new engineers first have to pass Weeby's rigorous coding test, which was designed to determine who's got the required engineering chops. "This allows us in an interview to focus on what it is like to work with this person," Carter said. "We'll already know they're $250,000 engineers. [Then] we just want to know that they're a good [cultural] fit."

'Missionaries, not mercenaries'

Weeby isn't looking at using its new hiring program to get huge. Rather, it wants to grow from 22 people to perhaps 40. But it's all about who those people are. "I expect the right 40 people at Weeby," Carter said, "to be able to compete with companies with 200 people."

But while Carter wants to build Weeby's roster of superstar engineers, he also plans on evangelizing the program near and far, because he thinks it will help keep top talent in the Valley and out of the hands of high-paying Wall Street investment banks. "The greater story is that this is not just a way we can briefly compete," he said. "It represents a fundamental shift [toward making] startups and Silicon Valley more competitive with the rest of the world."

Plus, he said, paying substantially more than today's market rate for engineers should make startups "able to move quicker than Microsoft, Google, etc."

But not everyone agrees that it's smart to pay engineers more than market rate.

It's "a horrific idea," said Sam Altman, the president of Y Combinator, Silicon Valley's most prestigious technology incubator. "It seems on paper like a really good idea [since] great engineers can create huge value. [But] here's why it doesn't work: You really want a company full of missionaries, not mercenaries. And so if your company is known as the place where you can make a huge cash salary, you end up attracting" the worst cultural fits.

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Y Combinator president Sam Altman Sam Altman via Twitter

Altman added that startups should look for their first 20 to 50 employees to be "maniacally dedicated" to the company and its products, and to "believe it's bigger than themselves. They believe there's a purpose to what they're doing. That's what inspires people to do great things."

Steve Newcomb, a three-time Silicon Valley founder who's currently CEO of Famo.us, a developer of a JavaScript framework that lets people build cross-platform apps, thinks startups that pay above market rate are foolish. "If you have to pay people more money than market to come work for your company," Newcomb said, "then that's a statement of the value of your product and the value of your company. I believe the right way is to pay market, and stay strict to that."

Beyond attracting the wrong type of engineers, Newcomb said paying above market also may upset investors and "make it difficult to raise money down the road."

Both Altman and Newcomb spoke generally, and not specifically about Weeby.

But Weeby's investors believe in Carter's vision. "Getting technical talent is more important than ever, and particularly here in the Valley, it's tough," said Peter Bell, a partner at Highland Capital Partners who is on Weeby's board. "Michael [Carter], who's a terrific entrepreneur, came up with this idea that's an aggressive, fair, transparent, and open way to get the best technical talent."

Bell wants to be sure the program isn't simply a gimmick and is sustainable, but argued that although Weeby will pay more per employee, hiring top-tier talent will reduce the company's overall cost structure. "You'd rather have a team of eight superstars," Bell said, "than a team of 16 mediocre" engineers.

Another supporter is Karl Jacob, a longtime investor and founder who, among others, advised Mark Zuckerberg when Facebook was just a six-person team. Jacob is currently a Weeby adviser and a fan of its compensation program, in part because it takes care of early employees, especially those below the executive level. "We've gotten good at rewarding founders," Jacob said. "I don't think we've gotten as good at rewarding [those] one or two levels below that."

Among those who criticize the general concept of paying engineers substantially more than market rate, a common refrain was that such a plan must be the brainchild of a first-time founder. Carter isn't that, but he recognizes the sentiment -- and rejects it.

"Silicon Valley's about getting a great team together and trying new things," Carter said. "Every time you try new things, and build brand-new innovative technology, you always get this response that, 'Oh, it's a first-time team that's inexperienced.'"

In the Valley, he argued, people should celebrate risk-takers, even those who haven't been around the block. "When you do something for the first time, it allows you to approach something with a fresh eye," he said. "Sometimes, you get a result like Google, Facebook, or Snapchat."

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