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High-tech job hunters develop pack mentality

In reaction to the competitive high-tech job market, companies and venture capitalists are recruiting teams with winning track records instead of cherry-picking stars one by one.

When it became clear that AT&T Labs wasn't going to spin out its a2b Music division, employees who pined for a start-up atmosphere decided to leave. But instead of brushing up their individual resumes, the group packaged itself together, and several talent-hungry companies lined up to talk business.

In reaction to the competitive high-tech job market and breakneck product development cycles, companies and venture capitalists are starting to recruit teams with winning track records instead of cherry-picking stars one by one. One prominent venture capitalist calls this trend "the reinvention of collective bargaining."

Perhaps the most well-known example of team job hunting was an unconventional item posted in late April on the online auction site eBay. A seller advertised an "entire ISP management and engineering team" of 16 people that was on the block for $3.14 million.

Although the sellers yanked the item two days later, eBay says it wasn't a hoax. Kevin Pursglove, an eBay spokesman, said the team indicated it had a change of heart when contacted by the online auction company several days later.

In the case of the a2b Music exodus, company cofounders Larry Miller and Howie Singer led 12 senior managers and technologists out of AT&T to join Reciprocal, which provides digital rights management services and products to the online music industry.

"Time is the most precious commodity these days, more precious than capital, and a focused team that works well together provides a real competitive value. I don't think that was lost on Reciprocal," said Miller, who is the president of the company's music division.

"AT&T owned the intellectual property we created. They owned the brand we created and the underlying technology that we employed. But they didn't own the people," Miller added. "Reciprocal wanted to enter this sector up to their eyeballs, and we had a talented, deep group of people who could help them accomplish that."

For employers, there are several potential advantages to hiring a team.

"It was an exciting prospect to hire a team of people who already worked well together, understood each other's personality, and could hit the ground with the ability to run faster," said Reciprocal president Paul Bandrowski.

He added that teams tend to move faster from the first day, because they're more likely to step forward to ask questions and use each other as resources for issues they don't understand.

There are potential downsides to hiring ready-made groups, however.

Issues to guard against are the creation of two corporate cultures, an alienation of employees who are not part of the newly hired team, and a magnified problem where objectives and expectations are misunderstood.

Package deal
Another example of a mass defection comes from Phil Constantinou, a member of Atrieva's San Francisco product development team. Atrieva offers technology that allows users to back up PC files using a Web browser. The team was willing to negotiate its compensation as a group, rather than on an individual basis, in an effort to stick together.

The four engineers and two product design specialists previously had worked with one or several of the members of the group, but they never had an opportunity to work for the same company.

"We decided that as a group we had complementary skills and wanted to work together on projects. It was a process we started in December, and it evolved over months," Constantinou said.

The team initially approached VantagePoint Venture Partners of San Bruno, California, about funding a start-up for the group. The plans soon changed when VantagePoint suggested the team of engineers and product designers join an existing start-up it funded--Atrieva.

Constantinou said members of the group--some of whom were consultants or worked for various companies--were all on board at Atrieva by May 15.

"We created their San Francisco office," said Constantinou of the Seattle-based company. "We already have a fully functioning operation and are creating enough leverage to move the company forward."

Accentuate the positive
With all the potential upside, Reciprocal's Bandrowski noted that steps can be taken to minimize the potential problems with hiring groups.

Before hiring a team, he suggests that employers communicate to the team their expectations on the objectives that must be met. And once the team is hired, each member should be hooked up with an employee outside the team to learn the corporate culture and processes, he said.

"It's good to have each member separated from the team for 30 to 60 days," Bandrowski said. "This way, three things happen: the culture seeps in faster, you eliminate some of the reinforcements that came with the old culture, and the team members are able to build relationships faster outside the team by having one-on-one contact."

Some venture capitalists and headhunters note that the trend toward hiring teams so far has manifested itself within particular areas.

For example, Scott Sandell, a partner with New Enterprise Associates, said engineering and sales are usually the two groups that encounter the most group hiring.

"Their skills are more general," Sandell said.

Geoffrey Yang, a partner with Institutional Venture Partners, said that although one in ten potential job candidates requests to bring along a team of employees, he wishes the ratio was higher.

"My attitude is that's great if they want to bring people with them," Yang said. "If that person brings a whole team, [the employer will] likely give that person more equity" in the company, he said.

Burning bridges?
Although the prospect of employing a team of engineers who have previously worked together may appeal to many start-ups, one venture capitalist noted that doing so can be risky if it will anger the company from which the employees are coming.

Mike Schuh, general partner with Foundation Capital, noted that the start-ups and companies with the outflow of employees often are in a similar business. And during these times, start-ups have to be wary of alienating a potential partner down the line.

Nonetheless, Bandrowski believes the trend toward teams will increase in coming years.

"There is a huge opportunity with start-ups, and people recognize they can make a lot of money," he said. "And big companies that don't understand the value of their people and appreciate how important it is to be entrepreneurial are subject to a team loss."