Advice for Recruiting Startups

Two weeks ago, the team at KODA threw in the towel. With their goodbye, the Gen Y business connection site joined a long list of promising startups with sweeping ambitions to change the way that people find jobs that ultimately failed.

Except for the runaway success of soon-to-IPO LinkedIn (and arguably Indeed & SimplyHired), there have not been any huge startup success stories since the job board explosion of the late 90s. And even those successes have been more about efficiency then radical change.

There has been no lack of aspiring entrepreneurs in the recruiting space, especially in the last few years, as the startup scene has heated up. So why do we not have more success stories? More change?

Before his current incarnation as a Venture Capitalist at First Round Capital, Charlie O’Donnell spent two years as the entrepreneur behind Path 101, a startup that attempted to be a “guidance resource for your career indecision.” Today, when aspiring entrepreneurs approach Charlie for his advice on launching a startup in the recruiting space, he advises them to run, because in his words, human capital is a “bad neighborhood.” Aspiring entrepreneurs should read Charlie’s post carefully, because it presents some good reasons why they should choose greener pastures.

I’ve been observing the recruiting space for over a decade, and like Charlie, I get approached by lots of startups looking for advice. The best advice I can give — don’t make the same mistakes as the guy before you. Most startups make the same mistakes over and over again.

It’s Easy to Spot the Problems in Recruiting — but Much Harder to Fix Them

Everyone knows that recruiting is inefficient. It’s slow. It has been done in much the same way for decades. In other words, a classic target for disruption.

In fact, it’s so easy to see that hundreds of startups have tried — and failed — at most of the “obvious” ideas in the space.

Job Matching? Dozens of well-funded startups have tried. Better Applicant Tracking System? Even more. Online/Social Employee Referrals? A graveyard.

For startups in the recruiting space, it’s not enough to identify the pain points. Everyone has known most of them for decades. You need to know the exact reason why your approach will succeed where others have failed. Even more importantly, you need to be able to effectively articulate that reason to your potential customers.

Hire a Sales Force

HR is a stereotypically conservative department inside most companies, and they are now your customers. You can either spend your time trying to:

  1. change the culture of an entire profession,
  2. ignore it because your idea is just that powerful, or you can
  3. acknowledge that the conservatism exists and treat it as just one more obstacle to overcome as you conquer the world.

There’s a strong engineering- and product-centric culture in the startup community. That’s powerful, because it creates innovative products that can become the foundations of great companies.

But in many cases it also comes with a “build it and they will come” ethos. In a market of consumers or early adopters, that may make sense. But I cannot think of a single major recruiting success story that was achieved without a very large sales force. If you can, let me know.

However many salespeople you think you’ll need, take that number and double it. Then double it again.

Immerse Yourself in the Recruiting World

As an entrepreneur, you probably have immersed yourself in startup culture. TechCrunch. Venture Capital. Pivots. Hacker News. Angels. Deadpools. Mashable. The startup ecosystem is infinitely more exciting than the HR ecosystem.

Understand that all of this is foreign to your new customers.

When you launch your product on TechCrunch, it may help you get your next round of funding. It may land you at your next hot startup.

It will not open doors to the vast majority of your potential customers.

As of the day that you found your company in the recruiting world, you need to immerse yourself in the peculiar culture of the people that are now your customers. You need to understand where they get their information, and their day-to-day challenges. Their frustrations. How their bosses evaluate their successes and failures.

But if you are serious about making your recruiting company succeed, make sure it is visible in a place where your future customers will see it. And the vast majority of your future customers are not immersed in startup culture.

Oh, and read this.

And Now for the Good News

Nobody is more aware of or more frustrated with the lack of innovation in the recruiting space then those who have made it their profession. There is a hunger among recruiters for new ideas and fresh approaches. In fact, sometimes it seems that in order to get talked about in the profession, all something needs to do is be labelled “NEW!!!”

Your challenge is in translating that hunger for the new into action. The profession has seen many companies making many promises come and go. I hope that this helps you become one that sticks around.

  • http://www.hireclix.com Neil Costa

    Dave – thanks for writing this article. Having been in and around startups since 1996, it is all so true. Recruiting does truly have its own set of traits and characteristics that make it an even more interesting and challenging business.

    The timing of this for our team HireClix is great. We just passed our one year anniversary on April 1, 2011, yes April Fool’s Day (you need a sense of humor, too.)

    I felt good as we started HireClix, but after a year of blood, sweat and tears, I know we will succeed. The fundamental reasons it will happen are:
    1) We care about the clients and the individuals faced with the daunting challenges in today’s recruiting marketplace, and we know we can actually help them.
    2) We educate first because the market moves so fast – everybody needs a sound understanding of their options.
    3) We are building a team that has good customer service instincts so helping clients comes naturally.
    4) We are committed to providing zealous service because the relationships matter.

    The technology will change, vendors will change, bosses will change, your job may even change, but the relationships last. It will be a rough and long road to build a company that lasts, but it will be worth it in the end. I know we can do it by helping folks solve the problems they face.

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  • Martin Snyder

    I found Charlie O’Donnell’s post lazy and arrogant, and knowing a bit about that state of mind myself, I think I can say that safely.

    The big problem with the “space” and making money in it quickly and via venture funding is that staffing/recruiting are BASIC ECONOMIC PROCESSES. They happen everywhere, at all times and all places where organizations are built up and taken down.

    How many startups really believe that they are going to come up with a website, software, or business process that will revolutionize all of manufacturing, or all of accounting, or all of law? Sure there are major success stories in those areas, but there is also massive fragmentation and endless niches of continuous improvement and relationship-driven deals.

    There are law firms and accounting firms with thousands of employees, and some with a handful, yet both kinds manage to survive, and have survived for many, many years. Basic processes are hard to scale (up or down) because the kinds of investment and innovation needed to change a basic process are immense- in time, in human energy, and simple habit.

    In HR, PeopleSoft, Monster, LinkedIN, Kenexa, ADP, CareerBuilder, SHL/Previsor and others have managed to build major businesses. Manpower is a major, major business. Other big staffing and services firms have made some major money too. Taleo and SuccessFactors have made moves, and there are untold hundreds or thousands of firms making a good living for owners and employees that you have likely never heard of.

    The notion that you can throw a handful or few dozen million bucks at something as massive as HR/Staffing and expect to move the mountain is questionable at best. It can happen, it has happened, but it ain’t gonna happen with any regularity.

    On the other hand, if you select a portion of a process, you add value, you do it in a cost-controlled way, and you do it for a long time, and you are almost certain to generate some amount of positive cash flow/ enterprise value and sustainable success. Probably not enough to excite the big shots ahead of the game, but if you happen to be that lucky and smart 1 in 1000, they will come begging for a piece of the action sooner or later anyway; their prejudice against the space notwithstanding…

  • http://www,dtg-usa.com Joe Sabrin

    I agree with Charlie with personal losses of $1 million for a candidate centric portal eHire, I realized that Human Capital for enterprise corporations is not mission critical. Now, I can give free advise, and do a little bit of recruiting for clients that trust my judgement.
    Joe Sabrin
    212-736-9544

  • Mark Hornung

    As someone who got bloodied in the dot com Bubble with an online behavioral interviewing SaaS venture, I feel qualified to weigh in on the topic. A huge part of the problem for HR start-ups lies beyond the customer (HR), i.e., hiring managers and senior executives. In our case, after knocking on hundreds of doors and doing demo’s until I was blue in the face, I asked a prospect for candid feedback. Her reply was that our service would never fly because her hiring managers would never give up their authority to say ‘yea’ or ‘nay’ to a candidate, no matter how scientific and objective our service might be. So a start-up may have a very good idea, backed by solid science and vetted to a fare thee well, but if an executive feels it threatens his (and it is mostly men, sad to say) power, it will not go very far. We shed a career development module early on because we also realized that, at the end of the day, most people are not proactive about planning their careers and working those plans. I would also add not to hire lots of sales people until you have some initial successful beta trials under your belt. My predecessor hired dozens of sales people, outfitted them with lavish laptops and Aeron chairs, all of which I had to sell at cents on the dollar after laying off the hapless salespeople.

  • Keith Halperin

    @Mark: Well said. If you count on your customers to be generous, humble, brave, or knowledgeable for you to make money, you will be destined for disappointment. On the other hand, if you expect them to be greedy, arrogant, fearful, and ignorant (the GAFI Principles) and can still make money, well then- you may have a chance. Your product should be aimed toward making/saving the client more money, obtaining more control/power/authority, more certainty (against making a wrong decision), and more information to back up their existing preconceptions and prejudices. It would be particularly ideal if successfully using your product/service allows the decision-maker to have all the credit, and none of the blame if it doesn’t work.

    Cheers,

    Keith

  • Rachel Schneider

    Having worked with a number of start-ups, not just HR, I wanted to weigh in.
    @Martin – that is absolutely true, instead of revolutionizing things, take a piece of inefficiency – a relevant piece and try to resolve it with technology, consulting, or process. It is very hard to change an ingrained process involving so many participants. Plus to Mark’s point, understanding the whole picture is important – some of those salespeople should have sold to the hiring managers to influence HR since HR is their client – more complexity in the sales process.

    Other general observations:
    1. Startup founders today are reluctant to hire salespeople or do outbound prospecting because there is a prevalent feeling that Twitter and Constant Contact are enough to drive sign-ups and market awareness. The relationship aspect which can be a critical differentiator in longevity and value is being dropped out. The factor of “talking to people” also influences the amount of early stage market learning which can influence the development and competitive build of a solution.

    2. Because the solution is SAAS it will be purchased immediately. While SAAS is definitely easier to manage, maintain, and access, problem is the field is growing more crowded and the core value proposition and solution value still needs to be clearly positioned.

    3. VC money is it and grow,grow,grow fast. The startups today all want to be Google and want rapid growth, lots of customers, and quick ROI. Problem is, we are still in a global recession, competition is fierce, and customers are reluctant to just use something – new or not due to economic justification. It takes time and patience and work to build a brand, reputation, and customer base in any economic situation.

    Clearly, in the article and responses – the notion of “understanding the customer and ecosystem”, “competitive differentiation and value proposition”, and “major awareness/marketing/sales” drive, not to mention “it takes time to build a business” – still hold true – HR or not HR related.