De-risk your investment: why Talent Acquisition Partner is what every VC 3.0 needs
The needs of the startups had changed and the age of the classic VC model is over. From the historical model of offering scarce financing we move to the model of Andreessen Horowitz, 500 Startups, and with that more operational support given to portfolio companies. 2020 had been a massive shake-up not only to the startups themselves but to the investors who fund them. The future is much brighter for VCs 3.0 who offer a hands-on, expert network approach to supporting their portfolio companies, and have an ultimate ratio of funds optimization for their LPs. The way you source, compensate, exit, and create value for your portfolio ventures is changing as well, but about that, perhaps, in the separate post.
So how does recruitment come into the picture and why is it that important to partner up with the talent search firm?
Ventures raise because they wish to grow, growth for SaaS means a bigger better product, in order to build one you need more people, right people, rather fast. At the point of the funding, the likelihood of your team working at the capacity is close to a 100%, and the need to execute on the planned growth becomes a priority. What this means in simple terms:
you have no time to waste on non-core activities that do not bring you growth (like interviewing the wrong candidates for instance), and at the same time
you are at capacity and do not have time to develop new features, you are stuck on maintenance and support (a necessary evil yet as a dev team hardly what you want to do each day all day)
you grow into a long term “overwork state” (you might even think of quitting)
Math time!
Suppose you have an interview process with the following - 1-hour with CTO, 1-hour CEO, 1-hour cross interview with 2 Engineering/Product peers, 0.5h de-brief.
Say, you have 30 roles open, you need the right people to jump on the tasks ASAP, preferably within 3 months, which means you need to hire within 30-45 days.
Your company’s contribution per candidate is 4.5 hours of prime time, multiply by 30 - that's 135 hours, 67.5 of which is C suite time and 67.5 dev/product time, which translates to 35% of your time spent on interviewing candidates and hoping they are the right ones.
That is not even counting the time reviewing, sourcing, and screening, which is another hefty chunk of your time (let’s assume 30h/ month, which just bumps you up to 60% of your team’s time on the activity).
Wouldn’t it be great if you only interviewed the top 2-3 candidates and saved all this time?
I think so too.
Your interviews also will be focused and enjoyable.
A brief recap on the choices you have:
Work with CV forwarding agencies. What is the success rate of candidates via the “CV dropping agencies” you may wonder - pretty low - it’s 19%. This means that 4/5 of the time you and your team is spending on interviews is lost.
Hire someone as an employee to work with you, knowing they will have a limited capacity and (importantly) limited outreach to candidates
Work with talent search partner on your priority roles so they can do the job for you and you will interview the shortlist of well pre-qualified individuals.
Agencies that work on a pure success fee are unlikely to be interested in spending more than 20 min with each candidate and will grow cold if no result is shown (what did you expect - they are working for free..). That does not help your representation, brand image, and (frankly) costs.
This is why I stress the need for a talent acquisition partner, someone who focuses on your niche and will be working with you on your timeline, hand in hand.
So once more - as a startup why you (absolutely) need a talent acquisition partner:
As a CXO your priority time should be focused on enabling the success of your product, your team, and on your sales growth as well as ensuring your employees are happy in their roles (recall the “overwork state” from above), it should not be spent on interviewing the wrong candidates.
NB: in the calculus above I have not even factored in the cost of lost opportunity or a mis-hire, which alone can bring in the cost of $ 0.5-1.5M.
As a VC - why shall you partner up with one:
By bringing the right people at the right time we ensure the team is able to get through the planned product development without burnout of the team members and urgent follow-up funding, therefore de-risking your investment. Bonus point if you bring your talent partner before the funding round is completed to feedback on salary bounds and compare it to market rates.
Smooth sailing!
