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The “iTunes” of Recruiting Gets $5 Million

by
John Zappe
Jan 18, 2012, 9:48 pm ET

A $5 million investment in a company that charges nothing for its product would seem to have the same shot as a straight bet in roulette. Yet the Mayfield Fund just gave SmartRecruiters a $5 million boost to fund new development in its SaaS-based free ATS.

It’s certainly a vote of confidence in the company and the business model launched by Jerome Ternynck. He  introduced SmartRecruiters to the SMB market in 2009 when he still owned and ran MrTed, a European ATS company that was entirely SaaS.

MrTed was an enterprise system. SmartRecruiters was intended for smaller companies, many of whom had either no ATS or rudimentary products. Promoted as “Free and Easy” — which it was and is — so resonated with recruiters and hiring managers that Ternynck quickly had hundreds of customers paying nothing.

When he sold MrTed to StepStone (now Lumesse) in August 2010, Ternynck held on to SmartRecruiters.

Today he’s approaching 11,000 customers and, despite doubters who questioned the staying power of a free — not freemium, but really, truly free — business model, SmartRecruiters is still here and growing. The company makes money by taking a cut or commission from sales of third-party recruiting services such as placements to commercial job boards, assessments, and background checks. Buying those services is entirely optional.

Ternynck likens SmartRecruiters to iTunes. “The way we play it is almost a platform play,” Ternynck told blogger and HR marketer Maren Hogan. “Some clients have called us almost an iTunes for recruiting.”

Mayfield Fund partner Rajeev Batra suggested that it was the “free and frictionless business model for hiring” that caught the fund’s attention. “When you combine a serial entrepreneur with deep industry expertise like SmartRecruiters founder/CEO Jerome Ternynck, with a disruptive model, you can transform a market and build an impactful company.”

While the investment may accelerate the build-out of features, and increase the number of marketing partners, Ternynck and SmartRecruiters haven’t been sitting still. Just a few months ago the company introduced mobile career sites for its clients, launching 10,000 of them. For free. They supplement the WWW career sites that are part of the SmartRecruiters feature set.

On the horizon, Ternynck said, are enhanced candidate features and job seekers that, Aberdeen’s Madeline Laurano says, will “provide a more engaging experience between recruiter and job seeker through a social platform.”

Mayfield’s Series A investment follows a $1 million angel investment the company got in fall 2010. Mayfield, one of the oldest Silicon Valley venture capital firms, has a wide-range of investments and over the years has invested in such startups as Gigya, Snapfish, and Affinity Labs. The company was also a heavy investor in the ill-fated Jobster.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  1. Steven Rothberg

    We’re very happy with our partnership with SmartRecruiters. They’re excellent communicators and very long-term focused.

  2. Gareth Jenkins

    I’ve always been very impressed by what Jerome and his team have created here. However I’m not convinced that this doesn’t qualify as a Freemium business model, since to my understanding they make their money from charged value-add extra features which to me would just qualify as a more complex take on a usual basic/premium model. Great to see them getting further recognition and investment nevertheless though!

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  4. lucas martinez

    This sounds very good but these guys are certainly not profitable and I believe wont be for a long time. They don’t charge recruitment services, don’t make money out of advertising because of they b2b model and their ATS is free and clearly aimed to small enterprises. Correct me if I’m wrong but additional services won’t give enough cash (just saw the video) to keep their shareholders happy… Anyway, I’m sure they will be smart enough to come up with something! Good luck to them

  5. Steven Rothberg

    It isn’t a freemium model, Gareth. They give away the ATS software hoping that you’ll find it easier to buy related services through SmartRecruiters rather than directly from their partnerss.

    For example, you can post jobs through the ATS to job boards like Monster, Careerbuilder, CollegeRecruiter.com, and others. The job boards pay SmartRecruiters a commission so the cost of the posting is the same to you and the ATS is free. The job board makes a little less per posting but likely sells a lot more postings.

  6. Gareth Jenkins

    Ok, thanks for the clarification there Steven. Definitely an interesting business model. I do wonder if Lucas is right though, and whether that kind of model is indeed a long term way to good profits. However, that aside, this service has given access to robust recruiting technology to many who may otherwise still be using emails and spreadsheets, so it’s definitely great to see them moving it forwards again.

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