HireSweet - Access to highly-targeted passive candidates and recruitment at the click of a button (as All Schemes Considered)
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Podcast Notes
Aakash and Xand discuss HireSweet [https://www.hiresweet.com/]. HireSweet's product focuses recruiting and hiring passive candidates. They're building a marketplace where the buyers are people with job roles to fill and the sellers are passive job candidates. Recruiting is a competitive industry, and the prices are cutthroat -- so HireSweet only works on commission. That's risky! HireSweet has a dual challenge of growing both sides of its marketplace, and this is a tricky balancing act.
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Autogenerated Transcript
Aakash Shah: [00:00:00] Welcome to All Schemes Considered, the weekly podcast where we dive deep on a new startup and examine its viability as a venture backed business -- all in 20 minutes or less! Some people say that we're essentially the Harvard Business Review for early-stage startups. I'm your host Aakash Shah. As usual, my cohost Xand is here too.
Hello, everybody! Today, Xand and I are talking about HireSweet, which you can find at HireSweet.com. HireSweet promises to help you hire better, faster, and stronger. They say that you'll get access to highly targeted passive candidates, and you'll be able to recruit them at the click of a button.
Xand, what does that mean?
Xand Lourenco: [00:00:49] When you talk about passive candidates, you're talking about people who. Aren't on the market. They haven't signaled or hired a recruiter or really given you outward public indications they're ready to move companies. [00:01:00] But they are people who would be open to moving and it's a subtle but crucial distinction because I think -- and I think HireSweet would agree with me -- that the pool of people who would be willing to move, but aren't actively looking is much higher than people who are actively looking. And I think too, people who are happy, motivated, and successful are probably doing better work. So when you hire someone who maybe would capitalize on an opportunity, you're maybe getting a motivated, ambitious employee off the bat, as opposed to someone who's kind of feeling burnt out and wants to move. that's kind of where I'm coming at it from. It seems like a pretty cool niche. If they can pull it off.
Aakash Shah: [00:01:38] Right. So just to be explicit, they are promising companies that have, roles that they need to fill, that they'll bring these companies job candidates and talent that isn't necessarily actively looking for a new role. HireSweet or these, job candidates have indicated somehow [00:02:00] that it could be good to reach out to them because they might be willing to switch for a new position that might fit their capabilities more or just have higher compensation.
Xand Lourenco: [00:02:14] Yeah. Somehow they find people who meet this description and, from their website, it appears they're trying to do that via some sort of machine learning or algorithm on profiles from LinkedIn GitHub, and Stack Overflow -- these kinds of sources.
And figures out. What about these profiles indicates this person might be open to a kind of cold outreach that they're kind of passively as opposed to actively looking for a job.
Aakash Shah: [00:02:43] Yeah, exactly. So they're saying they kind of crawl the publicly available information. They look at it and they use those as indicators and maybe they found a repeating set of indicators that does indicate, " this person, if provided with an opportunity is [00:03:00] likely enough to switch jobs that we want to recommend them as a candidate for one of our customers". Now we also found that they are also building a talent pool, so to speak because you can apply to be on their platform as a candidate. Now, why would they want to do this? If their entire idea is kind of, "we help you find passive talent out there." Why would passive talent apply to be in a network.
Xand Lourenco: [00:03:35] So I think.
It's a bit of an imperfect proxy, right? So you really have no idea of a person's internal state when you're looking at their Github or their Stack Overflow, it would be very hard to build this kind of pool and then track whether they've moved jobs or not. So what you're doing, you're using this kind of internal talent pool as a proxy metric for [00:04:00] passive searchers, because it's the next best thing, right? So these are people who have an actively contacted a recruiter. They're not actively pursuing other job roles, but they're willing to put their name in a hat, you know? Assuming that you phrase or frame this internal candidate pool correctly. It's not a one-to-one, it's not perfectly people who are passive, right? Because they took the step of entering your talent pool. But it is people who are not quite ready to contact a recruiter or take more aggressive or active role in moving companies, which, If it's even a close enough metric could be really good for training, whatever algorithm that HireSweet is using. If that makes sense.
Aakash Shah: [00:04:42] You're absolutely right. The passive application process, the people that are opting in to being passive candidates, serve as a way to gather indicators of who might be a good passive candidate. From when you match the passive candidate [00:05:00] pool that you have to the overall candidate market. And you can say like, "Oh, maybe having lots of open source contributions means they're a good passive candidate", or you learn that, "Oh, after three years at a certain role, people tend to turn into good passive candidates", and then you can use that to improve your outreach to candidates so that, they apply onto this platform. I think it's also important to understand that HireSweet needs to only use people that are actually on their platform because it would be very, very jarring and bad for HireSweet if they were recommending people that they didn't know were willing to be contacted. It would really destroy HireSweet's metrics as far as like actually helping their customers, which are. Companies trying to fill roles. Fill those roles quickly and efficiently.
Xand Lourenco: [00:05:56] Sure, but that's kind of their whole [00:06:00] value sell, right? They have to figure out a way to get around that. Their whole pitch is they're finding passive candidates.
Aakash Shah: [00:06:06] And this is how they're doing it .
Xand Lourenco: [00:06:07] Yeah, that's fair.
Aakash Shah: [00:06:09] But they need to own the talent pool, so to speak. They need to know that the talent pool that they're offering up is actually willing and having a smaller, curated talent pool is way better than having a larger massively uncurated talent pool. It's better than having a larger uncurated talent pool because that larger uncurated pool probably would not convert into new positions as well as a curated talent pool. And I would bet actually very highly that that's the case. So the building of the candidate pool serves a dual purpose of providing the supply of candidates and also making sure that the supply is of high enough quality that it is worth selling - worth providing to the demand, which is the demand for good [00:07:00] candidates.
So we've dug into. Who they are, how they find their candidates. They say that if you're looking to fill a position, you can. Kind of provide an initial set of things that you want to see such as, I want to see five years of engineering, I want to see proficiency with react native and no JS, which are two technologies. I want to see proficiency. With.
Platform engineering or infrastructure engineering or something. And then what HireSweet will do what their marketing claims they will do is they will turn these initial set of requirements into job candidates. And then as you approve or disapprove outreach to these candidates, they will learn. From that feedback and start providing you better and better candidates for the role that you are looking for. Which I [00:08:00] think is actually very much what a human recruiter would do. and this reminds me of our thesis of the. SaaS SaaS sourcing of everything, where everything gets turned into a SaaS product. Eventually. SaaS" being software as a service. here you have an outsourcing, sorry. A SaaS sourcing of an external recruiter. Because an external recruiter has exactly this promise. You give the external recruiter, the information that you.
What. Sorry, you give the external recruiter. your requirements, the external recruiter find some candidates. You tell the recruiter. Nope or yeah, sure. This is good." And then the recruiter keeps on going out and finding you candidates. And the recruiter only gets paid when the position is filled because they get, they generally get paid as a percentage of salary. so if the position they're filling has [00:09:00] $100,000 salary. The recruiter will make between five to $20,000 as a commission on filling that position. And higher suite actually does the exact same thing. They only take a payment when they successfully fill a role, which makes me think even more explicitly that they're trying to displace the recruiter.
Xand Lourenco: [00:09:21] Yeah. And I think something really interesting about that is. Recruiters are really hit and miss. So I don't know if anybody listening has had too much experience with them. But there's a world of difference between good recruiters who really take the time to get to know a company, get to know a candidate, really attempt to match them. And these fly by night, I'm just looking to get someone placed a lie about their resume. I just want to get them in the door and get my cut and then I'm out. So I think for a company. For larger companies, you have an internal recruitment team, right? Because that is what takes care of the quality of recruitment. [00:10:00] You have an internal team whose incentives are aligned with the company. And so they are incentivized to do a better job. But for external recruiters, it can be tough to find out who the best recruiting companies are, who are the ones that will take the time to be good recruiters for you and for the candidate. So if you have a service like this, speaking to your kind of SaaSification thesis. Our our, I guess that's kind of the direction we've been going in. This is a great way to de-risk. The candidate selection process to de-risk, whether you're getting a good or a bad recruiter. Because higher sweets kind of. Taking care of the regularization for you. They're normalizing the candidate pool that they're using algorithms to get kind of consistent performance. And so as a company, it's probably cheaper a because it's a SaaS product and that's always what you're looking for, or you're all about value when you use a surface like this, especially for smaller companies. And B it's de-risking the possibility that you might get a [00:11:00] recruiter who was terrible, my match you with a terrible candidate. And that's additional stress because now you have to let that person go. It might be bad blood on both sides because that person may have been under qualified or overqualified. These kinds of things. So I think what a platform like this does is both potentially offer a cheaper way of recruitment, but also make a cheaper way of quality of recruitment.
Aakash Shah: [00:11:22] Yeah, I would definitely agree with that. It not only makes the recruitment easier to do and cheaper to do, but it actually makes training your recruiter, so to speak easier to do if HireSweet can deliver on that promise.
Xand Lourenco: [00:11:37] That's a big if.
Aakash Shah: [00:11:38] One benefit that just jumped out at me was when you work with a recruiter, whether it's internal to your company or an external recruiter, there's an interface with a human and you have. Cognitive load and you have to deal with working with that person and that's not good or [00:12:00] bad. It's just additional work where you have to communicate and you have to chit chat and it is... Working with somebody inherently takes more effort than working with a piece of software. Especially if that piece of software doesn't care, if you ignore it. Like if I sign up for HireSweet, because I want to fill a role for a content marketer or for a business analyst. And HireSweet sends me recommendations. I assume it's probably like Tinder where it sends you like five recommendations and you just like swipe, right. Or you say no. And it sends me five recommendations. And I ignore it. HireSweet isn't hurt. They'll just send me more recommendations the next day or the next week. Whereas if I do this to a human recruiter, I know, and the recruiter knows that. If I'm not engaged, then I am letting someone down, and I might not be worth spending the time on the [00:13:00] human recruiter might not send me the best candidates simply because I'm probably not likely to look at them. And so there's a, there's a. I don't know what the term here is, but there's like a effortfullness that goes into working with a human recruiter. It takes a lot of energy when you're in a hiring process that HireSweet reduces the energy required to passively hunt for candidates. I think that's a very interesting angle that they're providing.
Xand Lourenco: [00:13:30] And that -- so -- when you talk about effort fullness, it's actually, it always comes back to incentives, right? It's the same thing. If. If I'm a recruiter and I want to get my cut and I'm working for my cup. I'm always going to send the best candidates to the person who is most engaged with me because that's the equivalent of like a warm lead, right. Someone who's actively engaged with me as someone who's probably looking to hire soon. Someone who's not, I'm going to ignore or send worst candidates too, because [00:14:00] it's less likely I'll make money from them. This is this the same effect of the same phenomenon as waiting tables? If you've ever talked to someone who's made a tables. They're going to go after it, where they want to go after tables that might provide a higher tip or it's a big group. Like you as a service provider will always naturally gravitate to the lead that will earn you the highest ROI. And so what HireSweet does is kind of remove that incentive because it's scalable, it's infinitely, scalable, HireSweet doesn't care if you're a hot lead or a cold lead or a warm lead it's just offering asleep to everyone because it can, it's effectively at no cost. For example, if a recruiter, if it was no labor costs or know if there was no cost for a recruiter to offer you to offer all of their leads, all of the candidates all the time they would do so. Right. HireSweet, effectively removes that cost. And so. There's no benefit to preferentially sending candidates to any one company, but the benefit is in volume because of scalability. You can send candidates to [00:15:00] everyone and you'll pick up the opportunistic leads as well as the warm leads. In that, in that scenario.
Aakash Shah: [00:15:05] Yeah, exactly. You've said what I was trying to say, but better, faster, and stronger to use HireSweet's motto.
So it sounds like we're pretty confident about the product we feel like is a good value proposition. How does HireSweet grow? How do they get more? People onto their platform. So more passive candidates are more people willing to be passive. And how do they get more people hiring? And here is the crux of providing a marketplace. Uber had to face this problem. E-bay had to face this problem.
Any marketplace requires sellers and buyers, and here the sellers are the passive candidates who are selling their availability to fill a job role. And the buyers are the people that are trying to fill their ... Fill their [00:16:00] roles.
So let's discuss how HireSweet can fulfill this dream of having a passive candidate marketplace. What do you think is more important to have first buyers or sellers? So the passive candidates or the people filling job roles.
Xand Lourenco: [00:16:16] Given their marketing, they've got to have the candidate pool first. So everything about their website is "you sign up, you get 10 leads every day." So the, the volume that they're promising necessitates having a large pool by launch. If that makes sense. So, I don't know, in terms of strict, in terms of strict supply and demand calculations in this sort of business, whether it'd be better to have a large pool or a large demand first. But given their marketing, I think they really cornered themselves into having a large enough pool where you do have to be able to provide 10 leads per day, to anyone who signs up for your saaS product.
Aakash Shah: [00:16:53] Yeah. If they're providing 10. 10 candidates per day. That is a lot of candidates.
[00:17:00] Xand Lourenco: [00:16:59] That's a lot of candidates.
Aakash Shah: [00:17:01] That's a lot of candidates. So let's dig into how they could find these candidates. We've already discussed that they probably do analysis of social profiles and they collect emails, presumably from these social profiles. I suspect they just. Like do direct outbound and just email these people that they think would be good fits and say, "Hey. sign up to our passive job board." And it's that easy.
Xand Lourenco: [00:17:27] Yeah, and I so, thinking about it a bit more I don't know that they necessarily have to control the entire job pool. If their algorithms are good. So I think you're right, that they do need to have kind of a captive talent pool, especially in the beginning, but I'm just, I'm thinking back. Like, especially on LinkedIn, like I'm not actively looking for any sorts of positions and I get contacted constantly by all sorts of different companies. And so I don't think it would be... I don't think it would be a stretch to say [00:18:00] that at their algorithms are good enough. They would let companies reach out to these candidates, even if they haven't been in the talent pool. If the algorithm says, "Hey, there's a 60% chance this person would be receptive to a cold outreach." So I. I think potentially. They could be reaching outside of their talent pool.
Aakash Shah: [00:18:18] I think you're absolutely correct. It's definitely. A relevant strategy for them to let people reach outside of the talent pool that has directly signed up onto HireSweet. I think it's a decision for HireSweet on. What they, what metrics are important to them? Is it more important to have a larger number of candidates or is it more important to reduce the success rates of the candidates they suggest. I think if you're having 10 candidates per day is probably a mix of people that are on the platform and people that are off the platform.
Xand Lourenco: [00:18:52] Yeah. I mean, I keep coming back to 10 candidates a day. That's so many candidates that's I don't know if. those of you listening, if [00:19:00] you've used any sort of hiring software or done like hiring. Any sort of hiring, but 10, especially 10 qualified candidates a day is, as a guaranteed number is quite high. Yeah.
Aakash Shah: [00:19:12] Yeah, absolutely. So we feel pretty confident that they can build the supply side of this marketplace, both with automatic detection of supply with their algorithms, direct outreach to the supply. Through. Probably having someone go and just messaging them.
Now, how do you build the demand? How do they get. People to say, we want to use HireSweet to fill our roles. And remember, HireSweet only gets paid if they fill a role,. They don't get paid. If the role goes unfilled . So they're effectively working for commission. And working for commission is. Very... Unstable
Is unstable the word I'm looking for.
Xand Lourenco: [00:19:55] Yeah. Yeah, absolutely. It's not, you know, you don't think [00:20:00] like when you're, when you're a VC and you're looking to fund companies, you always see these words thrown around, like "ARR, we like SaaS cause it's monthly. We want stable, predictable income". Which is not their business model, right? Commissions are inherently difficult to predict.
Aakash Shah: [00:20:14] Right. So they want recurring revenue. So annual recurring revenue, ARR or monthly recurring revenue MRR, and a very good example of this is Netflix. Netflix has a $12 monthly fee. And so Netflix can say, we know that 50, at least 50%, probably more like 80 to 90% of our customers are going to stick with us from one month to the next. So we can forecast. 90% of our customer base times $12 per month. And that's how much money we're going to at least have next month. And that is a beautiful model. I would argue that technically every single employee loves having recurring revenue too, because it means you get paid every two weeks, regardless of how well you [00:21:00] perform. You're either getting paid or you're not getting paid. If you get, let go.
Whereas if you're working on commission and if you're working entirely on commission, you have to deliver regularly and you have to deliver at volume regularly. If you're going to run a company based off of commission.
Xand Lourenco: [00:21:15] Right.
Aakash Shah: [00:21:16] If I was HireSweet and I was looking to build demand. Demand being like the demand side of my marketplace. I would leverage the fact that I'm commission only, and I'm only getting paid on commission. So I would go out to people who I know are hiring, and I would discover people who are hiring by seeing who's recently posted job listings.
And say, "look, I know you're trying to fill these positions. I promise that I can get you good candidates and you won't even have to pay for these candidates until they are in their role. So it's a no cost to you except for an additional email containing 10 candidates in your inbox, and you already are looking for candidates. So what's 10 more."
[00:22:00] Xand Lourenco: [00:21:59] Right. And I think as well, Something to consider here in terms of a commission based, like marketplaces. This is already a pretty crowded space. You've got companies like Triplebyte. You've got companies like. Toptal, hackerrank, gun.io. You've got, you've got these different companies that are purporting to do something similar to what, what higher suite does, but from a different aspect. So I think. The tough thing they're gonna see here is. one of those decision makers being, seeing what higher suite has to offer and saying, Hey, it looks pretty cool, but I'm already getting more than enough. Qualified candidates from Triplebyte are from Toptalor from a HackerRank. So there's, it's a, it's a tough competitive market and it's good. I think it's going to be tough for higher suite as kind of a new kid on the block. To consistently promote themselves at as best in class, because I don't think it's a big enough market place where a lot of CEO's are gonna be like, yeah, sure. [00:23:00] Send it to these six hiring platforms and we'll see what sticks, because if you're getting enough candidates from one, you're not incentivized to go to the next. So I'm curious to see, they really do have to give better conversions, better candidates, better outcomes. For them to really compete effectively in this space. I think.
Aakash Shah: [00:23:18] Yeah. Yeah, it is a, it is a crowded marketplace and a lot of people are trying to improve the hiring process. We'll have to see how it plays out.
I think.
It can work out for them because they're there like killer app. So to speak that are killer feature is that it's passive candidates. And I feel like Triplebyte and. Triplebyte is the largest new kid on the block. I feel like a lot of the other platforms don't filter necessarily on that passive angle. It feels like HireSweet is really looking for a. You don't necessarily need to hire right now, but you are looking for new hires and this is a good way to [00:24:00] have a steady pipeline of new hires. Or at least new candidates, but I could be wrong.
So HireSweet has raised $2 million. They raised 1.8 million in. 2017 and then they raised $150,000 from Y Combinator . In March, 2020. So that's a lot of money. And if we expect a 10 X return. At least. Do we think that this can turn into a $20 million company and even sell for as a $20 million company?
Xand Lourenco: [00:24:34] Yeah, I mean,
I would be bullish except for. I don't know that the passive angle is maybe the killer app. I don't know that it'll, it'll be as great of an indicator. Or whether they can filter on that indicator, if their algorithms will get good enough to really identify those passive candidates. And just that's a crowded market. I think they're, they're kind of, they're kind of niche. [00:25:00] Appeal. So to speak that their, their value prop has to be good enough. Where they'll break into the. Where they're kind of break into this space. And I, I guess my concerns are, I don't know that passive job seekers is enough of like a, like a strong segment that they, that it will really catapult them to the top of most hiring managers minds. Cause at the end of the day, no matter how much marketing you have, no matter how much. Play you have in these larger companies or smaller ones. If you're working on commission, if you're not delivering, you're not making that money. And so I guess that's where. That's where I wonder if they'll, if they'll get to that 20 million valuation.
Aakash Shah: [00:25:39] Right. And for a company to be worth $20 million, I would expect HireSweet to have annual revenues around five to $8 million. Cause you could say this company would pay itself back in four years. So it's a four times multiple on annual recurring revenue. Which is a pretty high, multiple, well, it's not a high multiple, [00:26:00] but I think it's a good rule of thumb. And. I agree, Xand. I think. They almost put a clock on themselves by being commission only, I wouldn't be surprised to see a small switch to some sort of alternative pricing strategy or additional pricing strategy. I wouldn't be surprised to see if they have an active recruiting arm also that we just aren't able to see because we're not, we're not signed up to the platform. so maybe a way to get more revenue out of existing users, existing customers by providing greater value to those existing customers. if we are to do some quick math, If we say that HireSweet needs to make. $5 million a year.
we look at the numbers and they want to make $5 million a year and they're placing people at a a hundred thousand dollars salary with a 10% commission, they need to do 500 placements. So they need to do [00:27:00] over one successful placement a day.
I think that's a pretty high number. I don't think it's an impossible number.
And I think they could achieve the promise of being a profitable company for their venture capitalists investors. profitable being like they pay out and they exit and life is good for the VCs and the founders. et cetera, et cetera.
It seems like for us, the biggest risk is risk in the promise and risk in the market. Cause there's a lot of big players already here. And if HireSweet doesn't do what it says it does as well as it presents itself. That could be the biggest drag on their business.
I can't think of anything else we need to talk about for them, anything from you Xand.
Xand Lourenco: [00:27:47] I both intuitively agree with them that passive job seekers is a good like candidate recommendation filter. But I don't have anything to back that up. And I'm also a little skeptical about whether you [00:28:00] can pull that effectively from a public. From kind of public views of a person.
So, I like for them to succeed, which is different from me being confident that they will Due to the aforementioned problems.
Aakash Shah: [00:28:12] Sounds good.
Okay. Thanks everybody. And I'll see you all next time.
Xand Lourenco: [00:28:17] later. Thanks for listening to this episode of All Schemes Considered. It means a lot to Xand and I. If you enjoyed this episode, make sure to subscribe and check out a few of our older episodes. We're available on our website allschemesconsidered.com and every podcatcher under the sun. If you really want to make our day, consider sharing it with a friend or coworker.
If you have a scheme, you'd like us to consider a guest you'd like us to have on. Maybe you just loved or hated this episode. We want to know your thoughts. I'm on Twitter @aakashdotio. That's A A K A S H D O T I O. Or you can send an email to [00:29:00] allschemesconsidered@aakash.io. Xand, you can't find online because he doesn't believe in the digital public forum.
Thanks again and keep scheming. See y'all next week.