Checking with WePay, Boston-bred start-up trying to compete in the Silicon Valley talent battles

I stopped by the Palo Alto offices of WePay last week to visit co-founders Rich Aberman and Bill Clerico; it was a chance to check in on a start-up born in Boston, funded by Lexington's Highland Capital Partners, and groomed by the Y Combinator prep school for promising start-ups, which was created in Cambridge but now operates exclusively out of Silicon Valley.

WePay is focusing on "a chink in PayPal's armor," as Clerico puts it — the experience around managing payments for a group activity, like renting a ski house for the winter or running a soccer league. They've raised just over $9 million, and recently executed a pretty neat publicity stunt to focus on what they see as PayPal's shortcomings.

As a die-hard Boston booster, it's painful for me to acknowledge that WePay has found a more supportive environment in the Bay Area. When I first met Clerico and Aberman in 2008, they didn't have a working prototype of the service yet, and they were having trouble convincing investors that they could make a dent in the complex and highly-regulated world of online payments. They weren't accepted into the first season of TechStars Boston, but they did get into the Y Combinator program, so they packed up and headed for California. Since then, WePay has attracted west coast angel investors like Max Levchin, a co-founder and former CTO of PayPal; Ron Conway, Silicon Valley's highest-profile early-stage investor; and a former Intuit technology executive. They plucked a top engineer out of San Jose-based PayPal. And they briefly occupied the same office space in downtown Palo Alto that was once home to Facebook, but are now in a shed-like space recently vacated by the video site FunnyOrDie.com.

But now, the downside: with so many Internet-oriented start-ups getting funding in the Valley, Clerico and Aberman describe a hiring scramble reminiscent of the late 1990s. "The talent market here is just absurd," Aberman says. "Google and Facebook are at war with each other to hire the best people and hold onto them, and to be a start-up like us during this battle is intimidating." (Twitter, LinkedIn, and Zynga are also "hiring like mad," he adds.) Clerico told me that when recruiters call WePay's offices, one of the start-up's 15 employees will often transfer the recruiter to Clerico's line. "I'll yell at them and threaten to call their client." WePay's board members often use their personal networks to try to persuade other companies not to poach from WePay.

There's so much funding available in the Valley for new Internet businesses, Clerico said, that the best engineers are going out to start their own companies rather than looking for gigs at venture-backed start-ups. "It's just so easy for them to raise $1 million for an idea they may have," he says.

So WePay's strategy has been to look outside of the Valley — especially to the Boston area. They've been to the MIT career fair, and Clerico spoke at September's Startup Bootcamp event on campus. As Boston College alums, they host current BC students at their offices during the school's annual TechTrek. They've also hired employees from Utah and New York.

WePay has gained momentum in the Valley (and found funding) that would have been difficult to attain in Boston. But the company is also feeling the hypoxic effects of a bubbly environment. Every new online payment start-up that emerges gets a flash of attention as the flavor-of-the-week, and bringing on talented team members occupies a good deal of Clerico and Aberman's time. "There are hundreds of early-stage start-ups around that can give new employees significant equity grants, because they haven't yet taken VC funding," Clerico says. "We're sort of in the middle," caught between those companies and brand-name Internet giants like Facebook and Google.

For WePay, the Valley is the obvious place to be — but also a tough environment in which to operate.