I was in San Francisco last week for a few days of meetings, and while I was there I heard more than the usual amount of grumbling from entrepreneurs about the engineering talent shortage in the city.  Hiring software engineers is always hard, but there is an environment now where almost any engineer can raise angel money, and this has exacerbated the problem.  It has even caused a new complaint to surface, which is that the “free agent” engineers who aren’t starting their own company (i.e. any engineer who would respond to a job posting) are either not good quality or are unwilling to work the long hours that were once the hallmark of successful SF startups.

There is also finger pointing that extends beyond the angel investors.  Another common culprit is the actions of companies like Google, Facebook, Zynga, and Twitter. They have supposedly so coddled their employees with smorgasbord lunches and cushy job perks that everyone now expects similar treatment at other start-ups.  As a result the expectations of typical start-up life have run amok.

I have my own theory on this topic.  You see, I spent an hour at Twitter last week, which makes me an expert on this issue.  In all seriousness, Twitter has no problem getting people to work long hours.  They do offer a very nice breakfast, and probably have lunches in the office too, but nothing compared to the over-the-top Google cafeteria.  I think that a handful of companies that are perceived as “solving interesting problems” or viewed as “high status SF firms” (i.e. Klout, FourSquare, Twitter, Facebook, Zynga) have gone a long way towards cornering the market on talent.  I didn’t think it was possible, but it is a competitive job market out there and the value of the restricted stock/options at these companies is driving a serious gap between the haves and the have-nots.

There is one other explanation for this new talent divide in San Francisco, and I hesitate to mention it because I know some people will find it insulting, but I am going to bring it up anyway.  The fact is that if you talk to a large law firm or a large investment bank, and you ask them if the SF office “works hard”, you will get an earful that the west coast guys are working half days compared to the New York office.  That is not to say that everyone is checked out in San Francisco, but New York has long been known to have no knowledge of work-life balance, particularly in Finance.  I think for the first time ever we are seeing software infrastructure companies built in New York, and these companies are often recruiting engineers out of the finance industry.  It is becoming apparent how much more gets accomplished if you have a fleet of people working 100 hours a week on a product versus, say, 40 hours a week.

Regardless of the reason, it is an undeniable fact that companies are finding it hard to recruit engineers in Silicon Valley, and as a result many are resorting to outsourcing their engineering.  At the end of the day San Francisco may be a victim of its own success, because the primary reason that people cite for starting a company in San Francisco is that you can find engineers there more easily.  If that is no longer the case than the future will point to another city as the center of the Internet universe.