Why Hired.com is Winning Tech Recruitment
Recently I was strolling through Regent’s Park with my colleague Nathan Benaich discussing the recruitment industry and trying to understand why certain recruitment startups — including the current darling of the industry, Hired — succeeded where others fail.
For those unfamiliar, Hired is an online marketplace for technical talent, where both employers and candidates are highly curated (about 4% of the latter are accepted). Candidates are encouraged to interview with multiple employers in a short space of time, all of whom are required to make a tentative offer when initiating contact. In addition, much of the information — including which companies made offers to a candidate and for how much — is visible to every companies, creating somewhat of an auction environment.*
(*the company’s original name was DeveloperAuction)
Why Hired.com is Winning
Addressing a pain point is an obvious and popular strategy for building a startup in an existing market and Hired’s success lies in its decision to tackle not just one, but several of the key pain points in the market for technical talent. Crucially, it solves problems on both sides of the market, i.e. on the demand side (employers) and supply side (candidates).
Why companies love Hired
For employers, access to great tech talent is the single hardest aspect of hiring. And this is exactly what Hired provides: an on-demand pipeline of high quality job-seekers. Here’s how Forbes put it:
Thought exercise: What if one company controlled an exclusive pipeline of the top technical talent in the country? That would be a very important company and the person running that company would be a very nice friend to have.
By controlling access to such a valuable commodity, Hired can charge a premium to employers who want to participate in their market.
You can argue that traditional recruitment agencies already provide this service. But I think that the candidate-agency-employer dynamic is fundamentally different because the intermediary (the recruitment agency) has its own incentive (to make a placement at any cost) that doesn’t align with those of the candidate or the employer, creating an unbalanced marketplace fraught with distrust:
Hired, on the other hand, is incentivised to partner with, and provide long term value for, its clients. It does this by charging its clients in 24 monthly instalments and only for as long as the candidate is still employed with the client. It must be said that in today’s fluid developer market, this is a considerably brave move by Hired.
Why candidates love Hired
Hired really won the recruiting game by focusing on how it could benefit its high value candidates. Demand massively outstrips supply in the market for tech candidates, so the obvious strategy was to create a marketplace that provides the greatest amount of value for — and therefore attracts — the commodity.
Some of the ways Hired achieved this include, 1) restricting access to its platform to high quality employers, and 2) by having employers make upfront tentative offers.
But the real genius of Hired’s strategy is that candidates can earn higher salary offers from using the platform than they would on the open market. Auctions by their nature cause bidders to behave irrationally and pay more than “market value” for a commodity. And by making other companies’ bids visible, Hired creates a certain amount of social proof and an illusion of scarcity. This drives up the price that companies are willing to pay for engineers and, in turn, the fees Hired’s clients have to pay it.
It doesn’t matter that engineers cost employers more on Hired than elsewhere. The demand for great developers is such that employers are willing to follow them onto the platform and pay over the odds. Hired does rebalance the market somewhat for employers by allowing them to bypass the expensive (and time consuming) activities of pipeline building and filtering weak candidates.
Balanced marketplace
Providing incentives on both the supply and demand side creates market equilibrium, a condition necessary for both sides to want to participate. Other marketplaces (LinkedIn, Monster, StackOverflow, etc.) allow all companies to participate, resulting in high value candidates being inundated with requests from undesirable employers. This drives away high value candidates, which in turn drives away desirable employers.
Hired successfully disrupted the tech recruitment market by providing a “safe space” for highly sought after engineers and employers to conduct business and is being handsomely rewarded in return.
Playfair Capital’s Focus
At Playfair we’ve invested in several companies that are using innovative technologies to disrupt existing marketplaces, including:
We’re always keen to speak to ambitious founders building market disrupting companies. If that sounds like you, please get in touch.
I’m the Head of Talent at Playfair Capital. I’m particularly interested in the topics of hiring, interviewing and building high performance teams. I’m an advocate of evidence-based HR.
