Hiring between portfolio companies – playing nice in the sandbox?

I put up a post this morning over on the Foundry Group site which I thought I’d repost here with some additional comments. It concerns whether companies in a shared venture portfolio should have any special rules of engagement about hiring from other companies in the portfolio. The question of whether Foundry has a “policy” around this has come up a few times and we wanted to clarify very clearly that we  absolutely don’t (nor could we – not only would such a blanket rule be to the detriment of our portfolio, it would also likely be illegal). That said, I do know that a few of the CEOs in the portfolio have a “no poaching” policy when it comes to friendly companies. That may include companies backed by the same investors (Foundry or others), or it may just apply to a few companies where the businesses have a tight relationship and the CEO feels that actively recruiting from that company would be detrimental to that relationship and therefore detrimental to their company. To me, this is the real key. Arbitrary rules around hiring and, in particular, recruiting practices seem spurious. Altruistic in their ideal, but flawed in execution. And in any event I think the lens here should be a business one. Companies with which you have an important connection are in a different class relative to recruiting efforts than other companies. There’s no real moral line to be decided – the business relationship itself is what drives the decision. Curious what other companies do in regards to their recruiting practices. Comment away!

The question of how we handle companies within the portfolio company hiring from each other has come up a number of times recently and we thought it would be a good idea to hit the subject head on, publicly.  With over 40 companies in the Foundry portfolio, and with many of these companies concentrated in specific geographies (in particular Boulder, San Francisco, Seattle and New York) there are often times when an employee from one company in which Foundry has an investment applies for a job or is approached by another company in which Foundry has an investment.

To be absolutely clear, Foundry has no policy relating to the hiring of employees by one portfolio company from another. We believe in the free and fair movement of people and ideas and we don’t ask that portfolio companies refrain from hiring employees from each other. Ultimately it’s up to each company to determine their own hiring practices based on what they believe to be the best interests of their business.

  • Kevin Doran

    I’m the co-founder of a technical talent agency in Denver, and have done work with a number of Foundry companies, and other web/software companies in the Boulder/Denver area. Here’s some of my thoughts on this:

    The web communities in Boulder and Denver behave very differently around this. 

    For the most part, Boulder companies (at least ones I have worked with) refuse to have us recruit from any companies where they know a ton of people- because Boulder is such a tight community that pretty much means “Don’t actively recruit anyone working at another downtown Boulder company.” I think this makes sense- Boulder is a small community, and a lot of folks have worked with each other. It will come out that you recruited a good developer from a friend’s company, and that is a headache not worth dealing with. Not to say you can’t move between Boulder companies as an employee- they just don’t want to actively recruit from each other. It’s a zero-sum game- helping your company and likely hurting ake one you take talent from.

    Denver area web dev shops pretty much don’t hold any of those standards, for whatever reason(s). I know a couple companies with Director of Engineers that are friends outside of work that have “taken” each others’ developers 3 or 4 times in the last year.

    I think the bottom line is what your post is about is more of a Boulder thing than a “Foundry Portfolio” thing. This is my opinion, not facts here at all, but I’m pretty sure most of your Boulder portfolio companies would be more comfortable taking employees from a Foundry company in Denver than a non-Foundry one in Boulder.

    • I wonder if even in Boulder this will need to be tightened up. At some point companies will run out of talent to recruit and will have no choice (ironically it would actually make more sense to have a “dont’ hire from friendly companies” policy in larger markets, not smaller ones). I’m curious about other smaller markets and if they have a similar dynamic.

  • Sean

    Absolutely the right policy.  From a VC’s point of view, the portfolio is an ecosystem of its own that you have created based on strategic investments in a few given areas.  However, it’s only an ecosystem that exists from the point of view of the investor.  Companies need to decide for themselves, independent of those investors, if its worth the potential blowback to poach an employee from another company.  Best to let the companies weigh the cost/benefit and stay agnostic as a VC.