Ever since we wrote that post where we trolled annoying recruiters, I’ve had quite a few conversations with entrepreneur friends about this subject. Overwhelmingly, most of these founders said something along the lines of, “recruiters are just worthless.” Obviously, I could see why they would think so; I used to feel the same way.
I didn’t use a recruiter to hire anyone for either of my first two companies or for the first ten people at 42Floors. The entirety of my interaction with recruiters was trying to get them to stop spamming us about their “MIT Alumni at Google who is a Ruby Ninja Rockstar.” Or even worse, that same recruiter spamming every engineer in our company promising to help them find a better job.
However, we’ve actually used recruiters very successfully at 42Floors, and all my friends who are claiming that all recruiters are worthless tend to be seed stage or first-time entrepreneurs that have not yet gotten to the best use cases for recruiters.
So I thought it might be helpful to show the different ways we have successfully used recruiters to scale 42Floors.
How you should actually use recruiters
Freelance Internal Recruiter
For us this was Oliver Ryan. He was introduced to us through NEA where he had been doing some work for their other portfolio companies and with a history of success including helping to build up Twitter’s team. We had high expectations for him. He didn’t disappoint.
He basically came in when our team had grown to 10-ish, most of whom were engineers, with a charge of helping us double in size as quickly as possible. The first thing he did was take over the recruiting function which, at that point, was spread over lots of different people and fairly disorganized. He cleaned up our Resumator job descriptions, spent a little bit of time with each person of the company understanding what they were looking for in each position, and confirmed with me the accuracy of both the job profiles and the budget.
One of the things a guy like Ollie is really good at is knowing when the company knows what it wants and when the vision is still blurry. For most of our positions we were pretty clear, but some of them were just too vague for him to get started and he encouraged us to spend some time figuring out what we really wanted before we wasted a bunch of people’s time.
Next, he manned our Interviewed account, which does automated job skill tests as part of our simulation-first interviewing system. Next, he started handling all the phone/Skype screens. His goal was to find the best candidates, but to do so in a way that minimized the distraction of the team. A really good internal recruiter is skilled enough to talk intelligently about whatever position he is recruiting. So while Oliver would never be the best test of an engineer’s ability, he was at least a good first impression of the company.
And because he was the first impression of the company, he got a 42Floors email address and signature, and presented himself to anyone who applied as a member of the team. Once he found candidates he was able to be their host and resource as they went through our process. He would make sure that no one ever felt unwelcomed during a busy day or was left sitting alone waiting for the next person to interview them. Candidates always showed up with an appropriate expectation of salary and already versed about the parts of our culture, like what to wear and lots of other little things that simply helped them be set up to have a successful interview.
So all of this covers managing the inbound process in an organized way, but Oliver also spent a bunch of time trying to find new candidates. He would use a tool like TalentBin or Entelo to help him identify candidates that were most likely in the job market or about to be in the job market and he would start cold contacting them.
Now I know what you may be thinking. I thought we’re the ones who hate cold emails. But actually when you’re doing a really targeted search and you’re finding individuals who are actually looking for a job and telling them exactly what the job would be and for what company, it can be a good match. Through him we found a bunch of people who had said something like, “looking for a new job in San Francisco” on their resume and he would reach out, explain that he was with 42Floors, what we’re all about and see if the they’re interested in applying. Total win.
If you’re going to hire an internal recruiter probably the best way to find a good one is to ask your investor network because they usually have seen who’s really good. And they’re not cheap. Expect to pay some combination of $50 to $100 an hour and a commission per hire of $3,000 to $5,000 if they successfully get one of your inbound candidates through your process; and $5,000 to $15,000 if they source one themselves successfully. You also get to put a money-back guarantee on the commission where you don’t have to pay if the candidate doesn’t last 30-90 days.
So all in, if you’re hiring a $120,000 a year developer, working with an internal recruiter could easily cost you $10,000 to $25,000 based on how good your inbounds are and how efficient you are in the process. Which, yes, is a lot of money and that’s why most seed company entrepreneurs I’ve talked to have never done it. We only really went to Oliver’s help when our network of friends wanting to join us had been tapped out and we had raised our Series B.
Non-Technical Recruiting Firms
In the last six months or so, our operations team has grown dramatically. We’ve hired ten people in the last month and we have another forty positions open, most of which are non-technical and don’t require a specific commercial real estate background: sales people, customer service, operations coordinators, etc.
In the first month of scaling up. each team had to run their own recruiting process. It was a total shit show. Emily was simultaneously running our real time operations of 42Floors while spending fifty to seventy-five percent of her time on recruiting. The real pain is that every time she found someone who was medium-good, she would feel desperate to hire them, but then our concerns for dilution of the quality of our culture would overrule her and she would have to keep searching. At one point we realized she had gone through 400 resumes and 60 Skype screens without making a single hire. This is a good way to destroy the productivity of your startup.
So we hired a recruiting firm to come help out.
We’re working with two firms actually, Premier and Betts, both of which have been very productive for us. Their model is different than Oliver Ryan’s. We don’t get a freelancer who sits in our office. They don’t take over our recruiting function. They simply send us high quality candidates that have already faced one round of vetting.
I was super skeptical at first. I figured anyone who would choose to use a recruiting firm would clearly not be the type of person we’d want to hire. But actually this is different. What Premier or Betts do is go in to college campuses and help recruit smart, motivated students who want to get into an industry that they have no access to. So we’ve gotten a ton of people who really wanted to get into startups and wanted to move to San Francisco, but didn’t even know where to start.
The average quality of the candidates and their motivation was stunningly high. It only took us a week to realize that Emily was going to be able to reduce the time she spent on hiring from fifty to seventy-five percent down to like five to ten percent, simply because every person coming in for an interview was already medium-good at worst. Our hit rate at getting from first interview to hire went from 1 in maybe 400 resumes/50 Skype screens/10 interviews (which took us in total 50+hours) to 1 hire out of every 5 to 10 in-person interviews (which only took 5 to 10 hours). So the big win working with a firm like this is that you get to chop off ninety percent of the time that your team is spending on running a recruiting process.
The weakness is you have to be careful that you continue to have balance within your team. You don’t want every single person to be a motivated out-of-stater looking to break into startups. Often time people coming in through a recruiter don’t have a deep understanding of your startup, they just want to do startups in general. That’s generally okay with us because virtually no one in our company knew about finding an office space before they joined. But you still need to be careful to maintain a sense of balance and run your own internal process in parallel.
For this type of service expect to pay twenty percent of base salary. So if you’re looking at a $60,000 base, you’ll be paying $12,000 per sourced candidate. Which is expensive, but during these critical hyper growth moments of your startup’s life, speed may matter more than cost. The same money-back guarantee process will still be in effect. Think of this expense as what you would have had to otherwise pay for hiring and managing someone who went out to college campuses and did recruiting presentations with salary, benefits, hotels, flights, marketing materials, etc. While $100,000 to hire 8 people isn’t cheap, it may be worth it if it allows you to hire those 8 people in three weeks instead of three months.
Full-time Internal Recruiter
As your company grows, your ability to get substantially all of your employees through your inbound process will grow as well. In part because your team is bigger and thus, hopefully, your employees are happy enough to be recommending your company to their friends. Your name in this world reaches a larger audience through your PR efforts. And people like to join successfully growing companies.
As the cost of recruiting firms becomes too high, you’ll be ready for an internal recruiter. Now you’ll have your own person that can go to college fairs, manage your inbound process, and optimize your various job pipelines in the same way your marketing team optimizes between SEO, SEM, social media, etc.
This is also a great time to make sure you have things like referral programs in place (we pay $2,000 to anyone that refers us a non-technical candidate and $10,000 for a successful engineer hire). The salary for an internal recruiter can vary dramatically based on whether you’re paying for experience or working with someone more junior. It’s actually totally fine to work with someone more junior if you have quality inbounds coming in. You can then spend a little time helping them learn a process and they will be able to work it for you.
If you’re going to need a lot more help generating more inbounds and building a successful pipeline, then you’re going to need to pay for someone that’s done it before and expect to be a $100,000+ a year type job. The very best people who have worked on the recruiting teams of the top tech companies are in incredibly high demand.
Head Hunters for Executive Positions
When your company clearly has passed the product/market fit stage and are deep into revenue growth, you and your board will start to think about whether you have the right executive team in place to scale to the next level.
Hopefully, many of your early key hires will show both the interest and the ability to grow into these senior positions, but in some cases they clearly won’t make the jump. Usually it comes down to whether they simply enjoy being more of a general manager than a player/coach. This, by the way, goes the same for you as the founder. You may indeed find that you don’t like being CEO nearly as much as you thought you would once your day is used up with nothing but meetings.
At that point, you and your board may want to fill in the gaps with a highly specialized search for an executive. You hire a head hunting firm because they are actively keeping tabs of who the hot VPs and CEOs are in the market. When Fab decides to layoff seventy-five percent of its New York office, every quality head hunter immediately knew the names and backgrounds of every VP.
Expect this search to be expensive; it’s not crazy to spend $100,000 on a CEO search. And, again your investor network will probably know who the best firm is for your particular search.
So anyway, I hope you find this helpful. I still find it incredible annoying that everyone on my team gets pounded by annoying recruiter spam on a daily basis, but like anything else, I wouldn’t lump all recruiters into the same bucket as these bad actors.
And one final note: If you’re a founder of a seed stage, Series A, Series B, Series C, whatever startup, recruiting will always be your top priority. So all of these various recruiters and systems will help your team be more efficient. In the end, they can’t be successful unless you have created a phenomenal company and culture worth applying to and worth joining. And nothing can replace the importance of your direct involvement in every single hire.
So, while you want your key department heads to be freed up from spending sixty percent of their time interviewing, you need to make sure that you’re spending enough time with every single hire at every position in order to protect the culture you’re working so hard to create.
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