In a start-up, there are a couple key resources: people, money, idea’s (which come from people) and technology (even if you aren’t a tech company – it’s your secret sauce – and most of these come from people too).
From what I understand, money used to be the hardest one to get – entrepreneurs would have to scrape, beg, and scream to get money. It was in the hands of a few groups, and was doled out at their discretion. Think about a couple hundred years ago – a small aristocratic class controlled all the capital, and business was EXTREMELY capital intensive. If you wanted to start delivering cotton from the Americas to Europe, you needed ships, men, money to buy the cotton in advance, etc. There was a huge need for liquidity to finance all these outlays.
However, over the last hundred or so years (and especially over the last ten years) there has been a shift. A shift to services has meant that businesses need less and less capital to launch and then grow. In tandem with that, more money has become available for investment through the general enrichment of western society. Those two factors – the increased availability of money from investors, and the decreased demand of money by entrepreneurs – has had a substantial impact: money is no longer the hardest thing for an entrepreneur to obtain. Now, it seems, the hardest thing to find is people.
While firms need less and less money to launch, they also can get by on fewer people – but now they need great people. It’s much better to have one great person than two mediocre people – it’s just much harder to find them. In the past, anyone off the street could press a button on an assembly line – there wasn’t much to it. Now you want (read: need) to hire people who have it all – a technical skill or area of expertise, an inquisitive and creative mind, a cultural fit, and everything else. As this shift has happened, these people have become more and more sparse – they are either working somewhere, or building their own business – and they have very little interest (without some aggressive selling) in joining you – and nor should they. Money is plentiful, ideas are ripe, and you have to convince them to join you on your journey, rather than heading out for riches and glory on their own.
This trend will only be compounded with the IPO of Facebook. Now you have billions of new dollars being introduced into the venture capital space. Many of these former Facebook employees will either be looking to launch their own funds (and thus not needing outside investing, but still needing people), or fund new ideas as an investor (and therefore further diluting the funding pool, and make it easier for people to launch their own business).
This is a huge paradigm shift – one I am only starting to appreciate myself. Funding is not the Holy Grail anymore. Finding, hiring, and retaining GREAT people is the new Holy Grail – and it will only be possible by recruiting those people every day, building a great environment, and selling them on the dream.