Our Thoughts on the Hired News
By: Joshua Goldstein
Tags: Entrepreneurship, Mergers And Acquisitions, Job Search, Recruiting, Startup

It’s been a bizarre couple of weeks for talent marketplaces.

Last Thursday (11/19), The Information broke a story that Hired, Underdog.io’s biggest standalone competitor and a company that had raised at least $132.7m from investors, was virtually bankrupt. The company, once considered to be the market leader, was to be sold for parts.

Then Monday (11/23), Vettery announced it would be purchasing Hired’s assets. For those unaware, Vettery is a competing talent marketplace owned by staffing giant, The Adecco Group.

While news of Hired’s demise and Vettery’s acquisition were not shocking to us, many in the industry have been wondering what happened. Given where we sit, as one of the only US-based talent marketplaces still operating, we think we have some idea.

We Must Become Cockroaches

Like most small businesses in early April, we were having several difficult conversations about our company’s outlook. It became clear that we were in for a rough go.

At one point, we said to each other, “We need to be cockroaches. We just need to survive. It’s possible our competition might not make it out of this alive.”

Hired’s Crash

By all accounts, Hired isn’t just a victim of the COVID-19 pandemic. The business was already hurtling toward a cliff before the virus hit the United States. The coronavirus was the fatal push.

As many in the industry have known for years, Hired’s marketing spend was off the charts. They outspent all of us to acquire candidates and companies for their platform and, in doing so, drove candidate acquisition prices sky-high.

There is a known scarcity of supply for top engineering, product, and business candidates. It seems that, because Hired started capturing companies at a faster rate than top candidates, they were forced to lower their bar to accept more candidates.

But, we don’t believe their heavy marketing spend nor the degradation of their candidate approval process are the things that broke them. We think Hired’s attempt to become a pure SaaS business did.

The company decided to push all of their existing customers to make a decision: either pay a subscription fee to access the platform or leave. We believe many chose the latter.

It’s clear why SaaS is desirable. In the face of competition, Hired was attempting to lock customers into the platform. They wanted to decrease the inevitable candidate attribution concerns that are exacerbated at scale. And they wanted to be able to claim a higher multiple for an exit.

But high SaaS multiples require low churn and we heard that Hired’s renewal rates were not good. Not because the product was bad, but because companies weren’t locked in like true SaaS. They’d need the product when they were hiring, and then they could walk away if (a) it wasn’t successful, (b) it was too expensive compared to other products on the market (like Underdog.io), or (c) they had stopped hiring. Switching costs were too low given the elongated sales cycle.

Eventually, we heard they enlisted outside consultants. Their findings: the business can’t be run strictly as SaaS. If you want every technology company to use your platform, you need to give them pricing optionality. Unfortunately, the pivot back to transactional revenue was too little, too late, especially after COVID-19 hit.

Hired + Underdog.io = 👎

Ironically, two years ago, Hired attempted to buy Underdog.io. They made an all-equity proposal that we never considered in earnest. Their pitch: they were the market leader on the fast track to unseat LinkedIn. We needed to join before it was too late.

Interestingly, we know Hired offered all equity deals to at least three other recruiting-related businesses in the past few years. All declined (luckily).

What Does This Mean for Our Space?

Since the news broke last week, people have asked us if Hired’s demise is a referendum on the space. In truth, we couldn’t be more excited about the prospects of running Underdog.io today.

Hired ran their business on steroids. Everything was ratched up to 10. Their exit was the quietest thing they did.

Recruiting is still a people-focused business. There is a delicate balance when building technology for job seekers and recruiters. As we’ve said before, recruiting doesn’t start with an interview and end with a hire; it’s a process that touches all facets of a company’s organization and lifecycle. Job searching is stressful, and even with the help of technology, we are empathetic to the oftentimes emotionally draining experience. Everything we build tries to take these things into consideration. If you push too hard on one side of the marketplace, it can throw the whole thing out of balance.

As technology companies begin to hire, even in the face of COVID, we’ll be here as a trusted, independent partner to help supercharge existing recruiting efforts. And as more and more candidates enter the job market, we’ll be here to help empower them by giving them more options and freedom in their job search.