Within the online recruitment ecosystem horizontal platforms are largely focused on lead generation with ATS’s the principal touch point. “But a new set of companies is emerging with technologically powered recruitment capabilities,” Myers said.
“They use programmatic candidate sources, matching candidate profiles to positions using candidate engagement screenings via inbound or outbound chatbot’s to do initial candidate screening. Hardcore testing apps that verify candidate skills are used and all these services work together.”
Where is the money being made?
The value of online quoted recruitment platforms was $80 billion as at March 31. Most of this — 80% — is from two companies; LinkedIn and Recruit Holdings. The rest are very small and this $80 billion is just a small part of the overall market.
One billion people change jobs each year and $750 billion is spent each year on hiring compared to $14 billion of revenues from quoted players. This means less than 2% of revenue potential is captured by those quoted recruitment platforms, a very small piece of the pie.
The periphery markets around recruitment marketplaces are also creating opportunities. Most employers’ recruitment budget is going to old models and not much of that revenue is being invested back into holistic online recruitment solutions.
This should drive a healthy investor appetite in the future. We know $4 billion of VC money was deployed in recruitment startups up to Q1 2020 since 2017.
Most has gone into the U.S. and the average amount of money raised is $100 million per company. In China, over $500 million is shared between five companies. In Europe about $25 million goes to each successful bidder
For temporary and blue collar, Europe is the biggest market and the amount being invested in each company is going up. Investors want pan-Euro services, not just one market.
For ATS’s, most money has gone into the U.S. an average of $50 million per raise. It would be difficult to raise money today in Europe in this area.
In testing U.S. and China is bigger, In Europe not much is going on yet. Investors are likely to get excited about Covid-free strategies.
What should you actually do?
Myers offered insight into how VCs see the landscape by providing examples of why they say no to investment pitches.
The competitiveness of the product and within market is one factor, differentiation is another. Some say they are underwhelmed by a specific overall market, also size of return and the exit value of offers and how the job market will react in poor economic times are important reasons for rejection. And this was pre-Covid. There is a disconnect between the addressable market and how companies can have success in that market.
5 ways to maximize your chances of securing an investment:
- Explain why Google4Job and LinkedIn won’t crush your business
- Be both regional and global
- Provide a model of sustainable differentiation
- Ensure model is scalable — lots of tech, few human touchpoints
- Evidence of attractiveness and improving unit economics
Myers also took a few questions:
Q – In a recession do deals happen that would anyway?
There is much less competition. M&A becomes a priority for companies with cash. There is less pressure on those companies to redistribute to shareholders. For companies with foresight there is still capital available. The bar gets higher during a recession and the price goes down.
Q – When is a good time to sell in the recession cycle?
There is no right answer. You will only now afterwards. Focus on liquidity, grow first, grow fast and then you can negotiate your sale on a better basis. If you run out of cash you have less bargaining power.
There is now a chance for companies to create an end-to-end recruitment platform and I expect to see that.