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Foosball, Purple Squirrels, and Speed Dating: A summary of our roundtable discussions at Menlo Ventures on hiring in the startup world

by Nov 14, 2013, 6:27 am ET

Screen Shot 2013-11-04 at 10.13.44 AMI recently participated in a great roundtable discussion (video at the bottom of this post) on recruiting for startups, sponsored by Menlo Ventures and moderated by Jim McCarthy. On the panel with me was Manuel Medina of GroupTalent, Jon Bischke of Entelo, and Todd Raphael of ERE.

Each of our companies is bringing something unique to help disrupt the recruiting space: Readyforce for its attention to linking college students with startups and technology companies, Entelo as a metric-based recruiting tool, and GroupTalent as a high-end job board for software developers. And of course, ERE as a medium to bridge recruiters with the trends and companies like ours.

As startups, we recognize that managing our precious resources of limited cash and employees’ time to find the elusive purple squirrels requires a serious game plan. Here are three of the top takeaways from our discussion that can help firm up your recruiting:

What Are You Really Selling?

As a startup you need to come to grips with the fact that for now, when it comes to hiring, you cannot compete on salary, benefits, or even brand, because, well — you don’t have one (yet). You are selling candidates on the vision and mission of what your startup has set out to accomplish. Your selling proposition is that as employees they will get to be in the trenches and help solve the challenges. That’s your edge. They will play a significant role in forging the company’s success. At a larger and more established company, as Jon Bischke stated, they will only be “working on a very small slice.” They will not get the growth that your startup can offer.

Furthermore, you can’t compete with Facebook and Google, so stop trying. If you are interviewing candidates who are also looking at those companies, you are interviewing the wrong people. Life at a startup is very different from a Facebook or a Google. You want employees who have “startup DNA” — i.e. can do great work and get s(*&^ done.

There are no IT departments or marketing teams — and new employees need to feel comfortable wearing many hats. Those who you onboard should get that and embrace it. As Todd pointed out, it’s not all about fun either. Startup life isn’t all “funky and foosball”; your value proposition is one that the right people will buy into and you should compete on that.

Try Before You Buy Goes Both Ways

One strategy for confirming a great technical hire before you pull the trigger is to “try before you buy” or to contract out a paid mini-project. We all agreed there is tremendous value for all parties to have a small project scoped out and for everyone to do a little speed dating. You get a sense of the quality of work and how the candidate might interact with the rest of the team. If you do employ this strategy, John Bischke of Entelo advises to always pay and to pay well for the work that is done. That way if either party walks away there should be no hard feelings.

In some situations, it can even be worth it to orchestrate conflict just to see how the candidate will respond.

External Recruiters and Startups

This point about external recruiters is summarized from looking at few different conversations that we had throughout the discussion. First of all, using a recruiter simply may not be in the startup budget. But if you do have the funding for it and employ a recruiter, John Bischke of Entelo had a bold suggestion for making it count: if you are a 20-person startup and using a recruiter, pay them more than the competition. If they charge a 20 percent placement fee, then pay them 25-30 percent.

As a startup you are competing with larger more stable companies that are looking for multiple hires over time. The big company is their stable meal ticket. She gets paid 20 percent regardless of who makes the hire and she’s more likely to give that stellar recruit to the company that’s got potentially multiple hires for her down the line. You want to be their first call when they’ve found a purple squirrel, so you need to sweeten the pot. If you are willing to pay the fee anyway, you might as well make sure you’re not getting the sloppy seconds.

Manuel Medina cautioned strongly against this, saying that the primary reason why recruiting fees are so high to begin with is because companies’ hiring processes are “totally indeterministic.” Larger companies in general make it hard to get candidates through. If your company has a clear and transparent recruiting process and can make a quick close, a recruiter will appreciate that and they will return time and time again to make their 20 percent. If you start adding in last-minute coding challenges or “just one more interview,” then the process has now derailed and you make it hard. Manuel’s advice: Just keep the process clear and transparent from the start and be ready to pull the trigger if you put the right person through the process.

Hearing different points of view on what makes for best practices in technical recruiting always breeds thought-provoking conversations. You can watch the panel (in its entirety) below if you’d like. Purple squirrels may be forever elusive, but it’s nice to share tactics among peers and get just a little bit more efficient in your recruiting process.

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.

  • http://www.originate.com Rob Mallery

    Thanks for sharing Alex! Good panel.

    Definitely agree with Manuel on the external recruiter topic. Startups should use recruiters who enjoy working with startups more than big companies and would actually PREFER to land the hottest candidates with their startup clients.

    There are a lot of recruiters who recruit specifically for startups. These are the recruiters you want filling your positions. It’s just like hiring the right employees. You want people helping you and working for you who love startups.

  • http://www.thehiretalent.com Fletcher Wimbush

    Since recruiting is not my primary business I tend to consider what I do more outsourced recruiting. I assist the company through the entire selection process from writing the ad to ensuring the people are on boarded correctly. Because clients pay a portion of the fee upfront it keeps the overall cost low and creates an opportunity for the client to have some one teach them how to recruit properly. I am aware there are these services available and probably meet the needs of a start up better than convincing a contingency recruiter you are good for multiple placements or for payment period.

    Ultimately like most start ups they probably need to outsource many functions and recruiting may be one to consider since they are probably to consumed with other activities to execute a highly effective purple squirrel hunting exhibition. Using a cost effective expert with a commitment to your team can yield great results. When you need to find multiple purple squirrels of the same species it is also much more cost effective to outsource this task to an expert. Since the preparation needed doesn’t have to be duplicated thus making the fees lower for multiple placements.

    Creating and outsourced partnership can really help small companies streamline costs while having experts help them execute important parts of their business on their behalf.

  • Martin Snyder

    Well done Alex. I like the idea of conflict holding some positive value, which as a proxy for competition in some cases, it surely does. And of course I agree that simulation is the best pre-hire selection method available.

    When dealing with third party recruiters, it may not be so useful to pay them more, rather it may be more productive to pay them differently. Most third-party recruiting models are based on a contingency hire; if no hire is made, no fees are paid. The other model is retained, where a fee is paid regardless of whether a hire is made.

    Because highly skilled recruiters tend to serially work on broadly similar searches for different customers, a good way to connect with some third party recruiters is by offering a combination of retained and contingency work; progress payments during active searching periods and a balloon after the hire to complete the fee.

    The understanding is that during the billable time, YOUR search is primary, and the other contingency customers get the spillover. At the other times, YOU get the spill, at attractive % rates.

    The spillover may not be lower quality talent at all; a great many things go into a hire and someone may be a perfect fit for you and just a little less perfect for someone else for any random reason(s). If they were turned up on someone else’s dime, all the better.

    The contents of a recruiter’s database vary and a low-effort search on their part may yield for you at the right moments. Not every hire, even at a startup, can be or needs to be an “A” player.

    Flexing with a third-party recruiter in their focus and payment can help get you the stars where you need them and lower your overall recruitment spend…

  • http://www.verticalelevation.com Carol Schultz

    Alex: This is a very interesting post.

    Manny Medina’s cautioning about paying higher fees to get a recruiting to deliver their best candidates is valid, but totally geared to contingent recruiters. Recruiting processes are “totally indeterministic” because 90% of companies choose the ineffective contingent model rather than committing to retaining the right recruiter and getting the search done properly. Remember, you get what you pay for.

    During the tech boom in the 90s companies begged me (and I’m sure many other quality recruiters) to work with them and paid almost anything. I will still turn away business (regardless of what they’re willing to pay) if I don’t feel I’m a fit with the company and what they’re trying to accomplish. As an extra note, I wouldn’t dream of charging a startup more than any other client. If I did a project for a large company the financial model would be identical to a startup. Again, this idea is geared toward the contingent recruiter. Retained recruiters don’t sell themselves to the highest bidder. That just makes me feel like I need a shower…

    Your comments about startups not being able to afford professional recruiting is, unfortunately often the case, but I can tell you many, many stories about companies that went that route, not once, but maybe two or three times before realizing they had pissed a ton of time and money away and bringing me on to get their searches done properly. I’d love to see a discussion devoted to this issue. It’s an important one.

    @Rob: You are totally correct about finding recruiters who focus on a particular market. Almost all the work I do is with startups. Why? Because they’re exciting and I can make a much larger impact in their business.