Free ATS SmartRecruiters Secures $10 Million Series B Round

“The ATS has to die,” says the man who built a business and made a name on that earliest technological breakthrough for recruiters, the applicant tracking system.

What’s especially ironic is that it’s on the strength of the market’s acceptance of SmartRecruiters, his free ATS, and his vision for how to evolve it, that Rembrandt Venture Partners and others are giving Jerome Ternynck $10 million.

The B series funding was announced yesterday and follows a $5.5 million A round just a bit more than 18 months earlier.

Three years ago, after selling MrTed, Europe’s leading ATS to competitor Lumesse, Ternynck introduced the U.S. to SmartRecruiters, an ATS for the social recruiting era. It was targeted squarely to the SMB and independent recruiter markets, where it readily found takers lured by its no-fee price and simplicity. Instead of charging per seat, per month — as is still the prevailing SaaS business model — SmartRecruiters made its money by taking a commission on sales of job postings and recruiter services such as background checks, and assessments.

Free is still the model today, even as SmartRecruiters has added features, expanded its partner base, and made inroads among employers with tens of thousands of workers and hundreds of open jobs.

But it’s the emotional engagement — an odd term for an ATS — that Ternynck promotes and the venture capitalists apparently see, that sets SmartRecruiters apart. Yesterday, the company announced the hiring of Daniel Lee as director of product. It’s an announcement that a $10 million funding round would ordinarily overshadow, except that Lee’s last job was head of product for Zynga’s FarmVille, one of the most successful online games ever.

Lee will lead the way to add fun, and emotional involvement into the SmartRecruiters DNA, says Ternynck.

Eric Van Delden, recruitment and development director of 35,000 employee Education First, is as enthusiastic about SmartRecruiters as is Debbie Fields, HR director of 50 employee Boulder Imaging. Not only does the system support hundreds of users — hiring managers and others collaborate with recruiters — but Van Delden explains in a video on the SmartRecruiters that the system is so intuitive it requires practically no training to use.

Making it a “consumer” tool is one of SmartRecruiters’ three differentiators, Ternynck says. It’s “engaging,” he boasts, and “super intuitive” enough that anyone can get the hang of it in minutes.

The other two differences from the traditional ATS are in how SmartRecruiters approaches recruiting. It still tracks applicants — Ternynck says it will even work with an existing ATS. But its core is social, and its architecture is more of a platform concept. Think of it as akin to Google’s App Marketplace or Force.com.

Want to post a job or buy a background check or anyone of dozens of other services? There’s an app for that and it runs right from SmartRecruiters. In the last several months a Recruiter Marketplace has been added where invited search firms and recruiters can bid on open jobs. SmartRecruiters takes a cut or a fee from each transaction.

The third difference, says Ternynck is the social and collaborative focus of the system. Not just simplifying the transition from one social network to another, posting jobs to each and collecting profiles, its the built-in internal social groupings it enables. Recruiters, hiring managers, team members and others can privately discuss candidates, a recognition of the trend toward collaborative hiring.

Ternynck should have added emotional engagement as a fourth differentiator. Until Ternynck said it, I’d never heard anyone describe any HR system as having an emotional component.

Yet, bringing on a gaming professional to handle a recruiting product “speaks to our commitment to software that is fun to use,” Ternynck explained. “Emotion centric design,” is how he described the direction SmartRecruiters will take.

Call it gamification. The vision, though, is not adding badges, or accumulating points. It’s personalization, and humanization of the algorithms of recruiting. What does Ternynck point to as an example of a success? A few words added to the SmartRecruiters’ acknowledgement each job applicant is sent. It merely says, Ternynck told me, “Good luck. We’re rooting for you.”