The “iTunes” of Recruiting Gets $5 Million

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.”

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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.

John Zappe is the editor of TLNT.com and a contributing editor of ERE.net. John was a newspaper reporter and editor until his geek gene lead him to launch his first website in 1994. He developed and managed online newspaper employment sites and sold advertising services to recruiters and employers. Before joining ERE Media in 2006, John was a senior consultant and analyst with Advanced Interactive Media and previously was Vice President of Digital Media for the Los Angeles Newspaper Group.

Besides writing for ERE, John consults with staffing firms and employment agencies, providing content and managing their social media programs. He also works with organizations and businesses to assist with audience development and marketing. In his spare time  he can be found hiking in the California mountains or competing in canine agility and obedience competitions.

You can contact him here.

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