Summary

Company Overview

How it Works

A job seeker applies to Hired using their LinkedIn profile, which functions as a resume.

From these applications, Hired approves a group of candidates to go to an auction. As of writing, these auctions each typically consist of 40-50 candidates, and they are conducted every week.

Upon being accepted to an auction, a candidate is assigned a Talent Advocates who coaches the candidate through the process and assists them with improving their profile. The candidate’s profile serves as a resume that describes education background, skills, experiences, and significant projects. Candidates may also solicit written professional recommendations, which appear on the profile.

Companies seeking access to the Hired marketplace must apply in a similar manner. To qualify, they must be venture-funded or publicly traded. Upon being accepted to the marketplace, companies gain access to the profiles of candidates in the current auction. The system prevents companies from being able to see any of their current or past employees. Companies are also assigned an Account Manager.

There is no cost for job applicants or companies to join the marketplace.

When each auction begins, the new candidates are listed and any registered employer may visit the site and browse through each candidate profile. If anything on a candidate profile is unclear, the company may anonymously ask a question, which is then added to the profile with the candidate response.

Companies that are interested in hiring a candidate must submit a bid through Hired. According to current marketing materials, 85% of the candidates receive a preliminary offer, which provides information on the company, the role, the salary, and equity terms upfront. The average salary is currently $128,000. These offers are not binding, but according to the CEO of Hired, offered terms are reflective of final negotiated salaries 90% of the time.

For every job offer, candidates are presented with three buttons: “I’m interested,” “Request Revision,” and “Decline.” Candidates who express interest in a role proceed with interviews arranged by the company. Final salary negotiations take place after successful interviews.

A candidate who accepts a job offer through the Hired.com system is given a $2,000 bonus directly from Hired. The hiring company then pays a fee to Hired equivalent to 1% of the negotiated final salary every month for the following 24 months. Payments by the company to Hired only continue as long as the employee remains at the company.

To prevent companies from circumventing the bid process, Hired offers a bounty of $200 Amazon credit to candidates for reporting companies that attempt to hire the candidate without first providing an offer though the website.

History

Hired was founded in May 2012 as a Delaware Corporation under the name DeveloperAuction, but later rebranded as Hired in September 2013. The company’s first auction began on August 31st, 2012 and saw over $30M in preliminary offers. Since then, nearly $1.2B in preliminary offers have been made by over 700 different employers, which are usually startups in the Seed or Series A stages. During our interview, Hired CEO Matt Mickiewicz listed additional large companies as clients, including Square, Facebook, Staples, American Express, and Capital One. In January 2013, the company raised a venture funding round of $2.7M from investors that include SoftTech VC, New Enterprise Associates (NEA), and Google Ventures. After closing this round, Jake Medwell joined as an official advisor. All three founders, Allan Grant, Matt Mickiewicz, and Doug Feirstein, still remain with the company, while Trent Krupp joined as Director and Mehul Patel as COO. According to Crunchbase, Sujay Tyle briefly held the COO position for a six month period before Mehul.

Market Overview

Hired is a participant in the staffing and recruiting industry, specifically focusing on filling technical software roles at venture-backed or publicly-traded companies. Currently, they focus on recruitment for software developers with about 80% of their business in the San Francisco Bay area. In the San Francisco Bay, demand is high for talented engineers with six figure salaries for new graduates and company referral bonuses for new hires regularly exceeding $10,000.

Size

The demand for talented software engineers at technology behemoths such as Apple and Google has increased both the competitiveness and salaries in the software industry as a whole. According to inside sources, Apple relies on a network of over 1000 salaried and contract recruiters to staff the company. Perks such as private buses, free meals from private chefs, on-site gyms, and even private ferries have become the norm in the technology industry.

Major Participants

The most significant company in the recruiting industry is LinkedIn. Founded in 2003, the company now holds a $22 billion market capitalization and over 200 million members. It is one of the most important tools for modern recruiters because it serves as a database of job seekers. LinkedIn is free for members to join, but recruiters each pay a substantial fee of about $8,000 per year to view and contact member profiles. In 2013 the company earned $27mm in profits on $1.5B in revenue.

While large tech companies maintain a staff of recruiters to search for talent, there are also many third party recruiting agencies for hire. These agencies are small to medium sized, can be found in any major city, and serve as a middleman to connect job seekers with companies that are hiring. Recruiters working for a company are paid on salary, but these third-party recruiters work mostly on a commission-based compensation plan. Generally, these recruiters demand an upfront fee of 15-20% of a candidate’s yearly salary upon placement. This fee is non-reimbursable, however a recruiter will generally replace a candidate pro-bono if the initial one leave the company in the first 90 days.

History and Trends

Companies place high emphasis on employee referrals due to the low recruiting cost and high retention of these candidates. Financial payment startup Stripe reported that 70% of their hires come via referrals while under 5% came via dedicated recruiting.

There still remains an high demand for quality talent in the tech industry, and that factor alone has kept the need for many dedicated recruiters, despite such a low success rate. In San Francisco, experienced engineers can receive upwards of 100 LinkedIn InMail a week, which makes the service lose its utility. The high demand and current system for networking and communication has caused job searching to be a difficult and extremely inefficient task for many, further limiting the hiring abilities of companies desperately in need of talent.

In the past few years, new startups have sought to fix the massive inefficiencies with the current recruiting system by building career marketplaces. Some take a personalized approach while others approach the system with advanced mathematical systems. The goals of these companies are to streamline the process: reduce time spent screening candidates, offer better candidates, and make it easy for candidates to find the right company without an overwhelmed inbox. Hired sits in this class and uses a personalized approach with an auction format.

Key Factors

Hired takes a unique approach relative to third-party recruiters. Rather than serving as the advocate of a company to pursue candidates, it serves as the advocate of a select group of candidates. They help these candidates find positions at a variety of companies with their unique auction marketplace.

In the technology industry where candidates seem to hold the dominant position in the market, this has allowed Hired to decrease opacity in the hiring process. Companies interested in hiring a candidate must be open about the opportunity and disclose salary and equity options prior to any interviews.

Like all recruiting agencies, Hired demands a percentage of the employee salary for each successfully placed candidate. The industry standard is a payment of 15-20% of the salary delivered immediately after the employment begins, but Hired asks for 24% spread out over a 24 month period. If said employee leaves the company before 24 months, then payments cease. This system incentivizes Hired to find high quality candidates, giving them an edge in the eyes of an employer.

Investment Timeline

Hired was founded in April 2012 and was personally funded by its co-founders.

In January 2013 received a Seed Round of 2.7 Million. SEC Filing. The primary investors for this round included New Enterprise Associates, Sierra Ventures, Crosslink Capital, Google Ventures, SoftTech VC, Step Partners, and Haystack Fund.

Management Team

Matt Mickiewicz, CEO and Co-Founder

[ Wikipedia / Website / LinkedIn / Twitter ]

Matt Mickiewicz is a successful serial entrepreneur who was born in Poland and who now lives in Vancouver, BC. He co-founded Sitepoint, a diverse media company focused on monetizing the web development community, at the age of 14. He then co-founded 99 Designs, for which he served as a co-founder, sells design services as a product with a community of graphic artists. His third company Flippa serves as the largest marketplace for the sale of established websites. All three of these businesses were co-founded with Mark Harbottle in Australia, and the websites continue to thrive. Former business partner Mark Harbottle served as a Founding Investor for Hired.

Matt was featured as a member of the Forbes 2011 30 under 30. He recently turned 30 and married.

Douglas Feirstein, Co-Founder

[ LinkedIn / Facebook / Twitter / AngelList ]

Douglas Feirstein studied finance at the University of Florida. He is best known for his company LiveOps, which was founded in 2000. It provides on-demand customer service, and today continues to grow after raising a recent $30 million debt round to fund an acquisition. Most recently, Doug founded USell, a digital marketplace for used cell phones. He also has invested in numerous startup companies.

Allan Grant, CTO and Co-Founder

[ Linkedin / Facebook / Twitter ]

Allan serves as a technical co-founder of Hired. He graduated in 2006 from the Georgia Institute of Technology with degree in computer science. Another serial entrepreneur, he co-founded companies including: * Curebit * Introduction Agent * Mailytics * 3L Systems * Webmasters International

He is best known for Curebit, which provides a referral marketing platform for digital stores. Curebit was in the Winter 2011 class of YCombinator, and went on to raise a $1.2M venture round in 2012.

Growth Outlook

Financial Model

To determine the financial status of Hired.com, we built a financial model to estimate the number of job placements made. We based this model on a funnel analysis of candidates every month from their first auction to present, and extended our model outlook to the fourth quarter of 2014.

Several important metrics from news articles were used to build the model. First, we found that Hired.com averages between 40 and 50 candidates per auction, and this number has appears to have been constant since the first auction, which completed in September 2012. In the model, we assume a constant 45 candidates per auction. According to the Hired.com homepage, 85% of candidates receive an offer. This means that about 38 candidates receive an offer per auction. The most important metric, which Matt declined to share during our interview, is how many of these 38 candidates with offers accept a job through Hired. We found that the entire model was dependent on this vital statistic, so we attempted to make it the only independent variable.

For candidates who accept an offer, Hired earns 1% of their salary per month for the first 24 months of employment. According to the Forbes in October of last year, the average salary offer is $128,000. CEO Matt Mickiewicz stated in our interview that this offer number is reflective of the final salary 90% of the time, so we assumed that the average salary for every placement was $128,000.

Hired is paid for the first 24 months of a job placement, but our model covers only 27 months. Based on our research, most technology companies such as Google and Amazon have a median employee retention of twelve months. Thus, we modeled the number of candidates that continue to earn Hired a placement payout based on a monthly attrition. We chose 5% monthly attrition because it puts the average employee retention at about twelve months, which we believe closely reflects the technology industry. For simplicity in the 27-month model, we did not cut off referral payouts after 24 months and instead solely relied on attrition.

Currently, Hired completes one auction every week, but when they launched it was one auction every two weeks. We modeled this using exponential growth from 2 auctions per month (about biweekly) at launch to 4.3 auctions per month (weekly) at present, then left the auctions per week constant in the future.

We assumed that operating expenses for Hired.com were directly proportional to the number of employees. With an average employee salary at Hired of an estimated $100,000 per year, we then calculated that the full cost to the company per employee is approximately $160,000 per year, per employee. This figure includes salary, benefits, equipment, and office space per employee. Expenses such as web hosting were assumed to be negligible. With a known number of 29 employees at present, we assumed that the company had about 15 employees at launch in 2012, and then used an exponential growth curve to model the number of employees from launch until the end of 2014.

We found two other sources of monthly expenses for Hired. The first is the $2000 signing bonus that Hired directly awards candidates that accept offers through their marketplace. The second was added to the model after what seemed to be extraordinary profit margins.

Based on our research, Hired appears to use advertising to secure job candidates for auctions. Known numbers of 3000 applicants per month in September 2013 and approximately 4000 candidates per month in February 2014 (calculated from Hired marketing material) were used as data points to build an exponential growth model of the number of applicants that Hired received to fill their 50 candidate slots per auction.

Assuming that these applicants were acquired exclusively using advertisements, we reviewed cost per click metrics in Google Adwords and LinkedIn Ads to determine an approximate cost of applicant acquisition of about $3. Thus, we assumed that in February 2014, Hired spent about $12,000 on advertising to acquire 4000 applicants.

During our conversation with Matt, he stated that the New York office was already profitable. We were unsure of whether this meant that the whole company was profitable. The most vital metric in our research came from a blog post by one of Hired’s investors, Semil Shaw. Semil stated in an October 2013 blog post that Hired was doubling revenue on a quarterly basis, and in October 2013 was already profitable. Thus, we used these metrics plus a starting revenue of zero to calibrate the number of candidates that accepted offers - the secret metric that CEO Matt declined to mention.

Based on our discussion with Matt, he stated that the number of job applicants and the number of open positions through clients grew inline, so we assumed that the percentage of candidates that accepted an offer would remain fairly constant. However, we decided to have a slight increase in this metric over time to reflect increased efficiency and name recognition.

Based on our model, we estimate that, at present, about 40% of candidates that receive an offer accept a job through Hired. Our model shows that the company became profitable between September and October of 2013. In January 2013, Hired raised a $2.7 million venture round. Based on our model, between raising that round in January and reaching breakeven, about $700,000 was lost, thus leaving a considerable cash position for the business. This appears inline with the statement in investor Semil Shaw’s same blog post about their January 2013 funding round: “They didn’t need to raise money.”

February 2014 Auction Estimates

Estimated EBITDA

View the model in Google Drive

To experiment with the values, add it to your own Google Drive:

View file in Google Drive -> File -> Make a copy... 

Future Funding

Based on our model, Hired will net nearly a quarter million dollars in profit per month by the end of 2014. Do they need to raise additional funding?

To continue with their current business, it is clear that city-by-city expansion may be self-funded. In our interview, Matt stated that they would be expanding to more cities this year. Seattle, Chicago, and Austin seem to be the obvious choices.

However, Matt also stated in the interview that Hired would become a “career marketplace for workers in the world.” Thus, we predict that by the end of 2014 Hired will become sufficiently successful in technical recruiting to begin expanding to additional industries, such as science, design, and manufacturing. To accomplish this, we expect Hired to raise a Series A round near the end of 2014 to fund a horizontal expansion into new industries at a pre-money valuation of approximately $70 million.

Competitive Landscape

Whitetruffle

Founded in August 2011, Whitetruffle provides a similar as Hired but adds some automation features. Although both services require candidates to fill out an online profile, Whitetruffle does not have an approval process. It uses a proprietary algorithm to match candidates with employers. Employers may browse through candidates anonymously and, like Hired, express their interest in candidates in their marketplace. Additionally, if the Whitetruffle algorithm finds an applicant to be a good match for a listed opening, both the employer and the candidate are notified. If both parties show interest, contact information is automatically exchanged to enable direct conversation. Whitetruffle claims to have over 2,000 employers and more than 30,000 candidates in their database. Unlike Hired, Whitetruffle does not use a timed auction. Thus, all candidates remain in the system and a new employer may find a compatible match in an older candidate. It seems that poor candidates will always remain in the system, requiring more manual sifting, however the algorithm may overcome this tediousness. Hired’s approach to selective candidate filtering, weekly auctions, and candidate freshness provides a system that may be more reliable and sustainable. Whitetruffle claims they can save about 30-40% of the time needed to source talent, but that efficiency could decrease with a crowded marketplace should the company scale. According to Pando Daily, companies subscribe for a monthly subscription that starts at nearly $8,000 per year; it is unclear what type of hiring fee is demanded.

ZLemma

ZLemma is a Series A-funded startup that was founded in late 2012. ZLemma differs from Hired in that it is not a direct recruiting agency and offers no manual curation. ZLemma provides a service that uses extensive mathematical algorithms and modeling to give science, technology, engineering, and mathematics professionals a score to indicate how suited they are for a given opening. The service is free for potential candidates, while employers are charged to have candidates scored against their openings. It is unclear if ZLemma receives additional compensation for successful placement. While Hired specifically focuses on recruiting for technology companies, ZLemma aims to cater to any industry with demands for STEM talent.

Bright

Like ZLemma, Bright also applies data science techniques to help candidates discover which position is most suitable for their skills. The company was founded in early 2011 and today has over 50 employees. The Bright marketplace is more mature than that of ZLemma and is able to assist professionals in any field. The service is free to all job seekers, but companies must pay for a subscription service that starts at $219 per month for a single posting plan. In their three year history, Bright received $20 million in funding in Series A and B rounds, and was acquired by LinkedIn in February 2014.

CyberCoders

Founded in 1999 and today with around 250 employees, CyberCoders is a company that acts as digital jobs board with staff recruiters. Companies have a job opening posted, and anyone can browse through the site to see current listings and apply. A CyberCoder recruiter screens all applicants and then makes arrangements for an interview to begin if the fit is appropriate. CyberCoder recruiters also work like ordinary recruiters and will manually screen its database for job seekers that fit an open position. The company has focused on the technology industry, but there are also many listings for non-technical positions such as marketing.

LinkedIn

LinkedIn remains the elephant in the room for recruiting startups. The publicly traded company has a market capitalization of over $20 billion and provides the world’s largest database of job seekers. For access to this information, professional recruiters pay a per-recruiter annual fee about $8,000.

LinkedIn is used heavily for technical recruiting, but any startup attempting to enter the recruiting industry should seek to address the inefficiencies in the LinkedIn business model. For technical recruiting specifically, job leads through LinkedIn tend to be generic and impersonal. Not all candidates are actively seeking a new position. Salary information is not often disclosed. Thus, startups seek to provide better matches between candidates and companies by using proprietary algorithms or personal services that the LinkedIn system does not provide.

Traditional Recruiting Agency

Traditional recruiting agencies, such as Riviera Partners, work to connect job candidates to companies. Due to dynamic nature of the field, maintaining relationships with both job seekers and companies is difficult. Agencies attempt to keep personal information of candidates away from hiring companies for as long a possible to prevent candidates and companies from circumnavigating the agency. For both candidates and companies, this leads to frustrating generic conversations where only vague information may be presented.

Comparable Exits

LinkedIn IPO

In May 2011, LinkedIn went public and saw its share price double on the first day of trading. The LinkedIn platform revolutionized the recruiting industry and helped to transition the industry to relying on internet-based services. LinkedIn has demonstrated the viability of making money in recruiting using technology, and continues to perform well despite many noted inefficiencies.

CyberCoders

In December 2013, CyberCoders was purchased by On Assignment, Inc. (NYSE: ASGN), an international consulting recruiting agency, for $105 million in cash and performance-hinged equity.

Bright

In February 2014, LinkedIn announced they would be purchasing Bright for $120 million. The deal is split with 73 percent stock and 27 percent in cash.

Technology

The Hired website is available at hired.com. The website is hosted on Amazon Web Services, and the architecture lies behind elastic load balancers. The back-end is a Ruby on Rails API, and the front-end uses the Angular JavaScript framework. In addition, the site uses Optimizely for conversion optimization, Marketo for lead capture, New Relic for response time tracking, Mixpanel for funnel analytics, and AddThis for social integration.

Recruiters we spoke with who use the Hired platform had concerns about the security of the system. Specifically, companies on the Hired system were victims of a phishing attack sent by a Hired email address. The malicious email reportedly appeared to be an invoice from Hired.com hosted on Google Drive. However, the link led to a phishing page that stole the recruiters’ Google Account login information.

During our interview with Co-Founder Matt Mickiewicz, he had the following to say about the incident:

So one of our employees had their GMail account hacked. So, some phishing emails were sent from her personal email address to our employers. But it wasn’t a data breach. No one gained database access to the application or the marketplace itself.

Based on this information, we conclude that there is not an obvious security vulnerability in the Hired system. Enforcing a security policy with two-step verification on Google accounts would prevent similar opportunistic attacks in the future.

Opinions

Philip

When I started looking for an engineering job in San Francisco as I graduated from college, my mantra became “startups suck at hiring.” From badly-run interviews to out-of-date job descriptions to recruiters that didn’t answer emails, the hiring process at most companies did not reflect the innovation and success of current employees. The Hired marketplace brings a refreshing approach to a broken industry, but success will be determined by expanding this model to new industries.

While researching Hired, I found insight for the recruiting industry through the book Smart People Build Things by Venture for America founder Andrew Yang. The book discusses the barriers for entry to the startup world, and how the consulting industry has optimized its recruiting funnel. I saw many successful characteristics of consultant recruiting in Hired. Candidates meet somebody from the company that serves as an advocate. Applying for the role resembles a familiar “common application” for colleges. The process feels familiar, and it creates two-way feedback between companies and applicants early in the process. Per their success thus far, Hired fixes technical recruiting.

To justify a Series A round, Hired needs to broaden its scope without sacrificing efficacy. The current technical recruiting process functions in its broken state because it is so lucrative. The transparent recruiting process of Hired has been successful for technical roles where the applicants tend to be more data-driven and rational. The true marker for the success of Hired is whether they may maintain a high candidate offer acceptance rate in other industries where emotions, name recognition, and a bond with the company will become more important to candidates as they accept offers. If the conversion rate from candidate to placed employee can be maintained in other industries, then Hired could be a $500 million worldwide recruiting company in 5 years.

Hired fixed a broken industry, but it has not yet proven itself to be a “career marketplace for workers in the world.” In the technology industry, startups suck at recruiting. However, other industries thrive on efficient, honed strategies to obtain the best candidates. To scale from a boutique business to a recruiting cornerstone, Hired will have to prove that its transparent model can unseat entrenched businesses and recruiting mindsets.

Andrew

I first came across Hired through LinkedIn advertising and checked out their service. Being a recent grad and currently looking for engineering positions, I applied and was quickly accepted for the next upcoming auction. Hired recruiters assisted me in perfecting my profile and made sure I understood exactly how the process worked. The auction began on a Monday and within the first day I had 5 preliminary offers. A few of the companies looked interesting to me and I accepted them, declining the other two. Hired provides an email-integrated messaging service that makes it a little easier to communicate with the companies and schedule calls. For the rest of the week I fielded calls, Google Hangouts, and remote coding interviews. Of the three companies, I realized I was not interested in one, was mildly intrigued by another, and started to get serious with the third. After reaching out to me on Monday, I had a verbal commitment to a real offer on Friday. Unfortunately, the other co-founder at the company decided they weren't going to make an exception to their five years of experience requirement. Although I ultimately did not receive an offer through Hired, I can say it was a far better experience than I have had anywhere else. The process moves quickly, the Hired recruiters are very supportive, and companies are great with communication.

During my auction, I noticed that Hired deliberately uses the word “offer” with a double meaning. Their home page features real-time stats for the percentage of candidates who received an offer, but that only indicates the desire for an interview, which isn’t very useful. The percentage of candidates accepting offers - the only source of revenue for Hired - has to be far lower than their promotional material. In our interview, Matt indicated that the New York office is already profitable, but he declined to disclose any information regarding true offers of employment or profitability for the rest of Hired. In October 2013, investor Semil Shah revealed that Hired is in fact profitable.

The Telegraph Research financial model makes very few estimates and our goal was to piece together all the bits of information that we found across the Internet. According to our model, Hired has the ability to make around $2.7mm in profits for 2014 after being negative in 2012 and 2013. I think Hired has an opportunity to continue thriving in this space as they have a system that is becoming very lucrative with both talent and employers seeming to like the process more than existing alternatives. The company can certainly continue to grow organically, but I think a Series A round might be in the plans for late 2014. News articles and our interview make me think Hired will be interested in expanding beyond the tech industry and into other sectors. A broader spectrum of STEM positions will probably be the first step, but there are a lot of options after that. Trying to add cities and broaden the product will take more capital than what remains on their Seed round and incoming profits.