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Startups are finding it harder to launch with world-class talent and that is putting qualified job candidates in the catbird seat.

“Startups aren’t the destination employers for top talent anymore, and it’s a candidate’s market right now,” writes Dave Lefkow, CEO of talentspark, a Seattle-based talent management consultant. I followed up with Lefkow to find out why startups have lost their Mojo. Things have changed, he assured me: “It used to be the opposite - startups could take their pick of top talent.”

While I could find little consensus about what’s causing some startups to struggle for talent, the experts I interviewed agree that the fundamentals aren’t getting much better for startups despite several recent high profile acquisitions (You Tube and MySpace in a class by themselves) and the recent influx of venture capital and private equity investment. Salary surveys indicate that startups pay lower wages than established firms and big riches are mostly elusive.

Not surprisingly, executives are much less sanguine - and wiser - about their prospects in a startup. Paul Zellner, Managing Director, Russell Reynolds, Chicago, who mainly places CEOs, direct reports and board members, says, “Executives aren’t dramatically sacrificing cash in lieu of equity. Nor are they foregoing equity and going all cash. It’s hard to recruit a been-there done that executive without doing both.”

And yet the draw of startups is often the credibility of the executive team, which is based upon their perceived track record. “The[business] concept is secondary,” says Lori Blackman, president of DNL Global, a recruiting firm.

Blackman believes that startups are heating up again. “The stability message is hogwash in big companies too. Look at layoffs. Now it feels like candidates are wiser.”

Blackman contends that one strategic advantage enjoyed by startups is their ability to usher candidates through the hiring process much faster than larger companies. “The speed of getting candidates through the process is important because startups are more prone to lose them since the dot-com bust,” she says. “Large companies often a mundane, lengthy process.”

How do job seekers evaluate startups? That’s a challenge because, as Blackman points out, the books are private; non-disclosures limit available information; and the business model or ideas often aren’t market-tested.  “The only way to evaluate it is to talk to individuals in the company,” says Blackman. “And they all talk about ‘uncapped bonuses’,” and other hyperbole, she adds.

The primary disadvantages of startups :

• Lower compensation, including base and bonuses
• Higher risk, few startups are highly successful
• Longer hours

The primary advantages of startups:

• Opportunity to grow more in your career
• Long odds but could be richer equity payoff
• Intense social bonding

Another, possibly easier way to bring on board talent is to lease people for a while. Dharmesh Shah, a serial tech entrepreneur though just out of college, suggests that it’s in the interest of both startups and job seekers to “try before they buy.” That’s a strategy that may work well for entry to mid-level employees, but executives aren’t likely to work that way.

Many startups underestimate the commitment to recruiting world-class talent. If the CEO isn’t involved in the hire, that’s a red flag for Lefkow. “Not to say that it’s every CEO’s core competency, but when a CEO is involved, you can see a lot more rigor to making sure that the right people come on board.” 

As the talent crunch deepens worldwide look for startups to find more innovative ways to compensate talented workers without going immediately out of pocket. A startup may be something everyone should experience once in their career before retreating to the relative safety but typically quieter world of a larger employer.