Where startups are deploying their cash to find the best talent
Recruiting is often among the most challenging tasks for any startup — or any company. Attracting and retaining talent is key to the success of any business. That need alone has led to a startup ecosystem, with many sprouting up trying to address this exact need: matching the best talent with the right companies.
Recruiting isn’t just a space where startups are finding ways to create new ways to find talent. It’s one that’s attracted hundreds of millions of dollars in venture funding and a considerable amount of M&A activity. Greenhouse and Hired have both raised more than $100 million, while Glassdoor was acquired by Recruit Holdings for $1.2 billion around a year ago. And of course, there’s the elephant in the room: LinkedIn, which Microsoft acquired for $26.2 billion in 2016.
Brex examined startup spend on recruiting and hiring products to see where startups are deploying their capital when it comes to talent acquisition. Brex’s customer base is predominantly startups. As such, we were able to get a good snapshot of spending among startups that might be willing to try more nonlinear hiring approaches as they compete with tech giants like Google and Facebook for talent. We also have visibility into the spending habits of our growing ecommerce customer base following the launch of our ecommerce product in February this year.
First, we’ll take a step back from LinkedIn to get what we consider a more accurate snapshot of Brex customer spend.
Focusing on the smaller companies
Many hiring and recruitment companies came into existence in the past decade. While Indeed was among the earliest (founded in 2004), we’ve seen a proliferation of new attempts at candidate search and discovery. AngelList serves as an important hub for entrepreneurs and talent, while Greenhouse and Glassdoor have looked to figure out what should sit on top of just the job board process. Glassdoor makes available a wealth of information like salary data and company reviews, for example.
It is worth noting that there are a variety of products and services available in addition to job boards. Triplebyte, for example, focuses on targeted engineering recruiting starting with a test for an engineer’s general knowledge. Indeed meanwhile is a more traditional job board that, as we will see, is one of the top options for startups looking to find talent.
Much like when we examined the Facebook-Google advertising duopoly, hiring tools are also more top-heavy when it comes to startup spend. Whether a result of inertia — and potential hires just sticking with their first option — or one product being better than the other, Indeed is where startups are investing most of their money beyond LinkedIn.
Of course, when you include LinkedIn in the discussion, Indeed becomes far from the leader in the space. Next, we’ll take a look at where LinkedIn stands based on Brex customer spend data.
Examining LinkedIn’s dominance in recruiting
Brex data does not specifically distinguish spend on LinkedIn’s recruiting products that fall within its Talent Solutions segment (which itself is broadly aligned with recruiting). This makes it a little more difficult for us to see the exact presence LinkedIn has among recruiting tools in the startup community. However, we decided to try to get at least a broad look at how LinkedIn fits among the startup recruiting world. As you’d expect, it’s LinkedIn’s world and we’re all just living in it.
Our rough estimate is derived from total startup spend on LinkedIn, including on its advertising products. LinkedIn’s revenue in 2018 also “primarily consisted of revenue from Talent Solutions,” according to the 10-K filing with Microsoft’s 2018 fiscal year results. While Microsoft does not break out LinkedIn’s Talent Solutions revenue, we can go back to LinkedIn’s last 10-Q filing in September 2016 before Microsoft closed its acquisition for some information. There we can see that its hiring products accounted for a whopping 58% of the company’s revenue in the first 9 months of 2016. That share of revenue fell slightly from the first 9 months of 2015 when it accounted for 60% of revenue.
For our spending distribution, we included half of all LinkedIn spend to include wiggle room for other products to grow into more significant portions of its revenue over the years since LinkedIn stopped filing disclosure as a public company. With even half of total LinkedIn spend, we can see that LinkedIn pretty much rules over startup spend when it comes to hiring and recruiting. While Indeed occupies the next-largest share, many of the startups that were gaining traction among the previous group become outliers in the group, including LinkedIn.
The talent wins in the end
From all this, we can see that there is still a wide array of different products startups use to recruit the right people. As competition for talent continues to heat up, these tools only help benefit candidates and empower them to make the best decisions about where to work.
Recruiting is a bit of a matching game to find the best recruits that will be the best fit for a specific company's culture. Startups are certainly willing to spend their capital on products that make that process more effective or efficient.
Still, many of these tools serve as a filter at the very top of the recruiting funnel. Headhunters and recruiters can screen for the best candidates and can probably do a much better job of finding the right recruits using these tools today. The wrong hires can be very costly for a startup, and there still isn't a tool or service that can mimic the interview process quite yet.
And perhaps there never will be! Building companies with a positive culture, smart individuals, and a deep level of customer empathy is fundamentally a problem for humans, not machines.
Brex examined customer spend data on recruiting products for the fourth quarter of 2018, first quarter of 2019, and April 2019 to get a snapshot of the ecosystem. Share of spend is defined as the amount of money Brex customers spent on a single product over the sum of all spend across all recruiting products. As part of the calculations, we did not include Hired as the customer base was too small to give a meaningful snapshot of usage.
LinkedIn recruiting spend is defined as 50% the overall spend on LinkedIn products, including ads, in a given time period by Brex customers. We chose this as an estimate as hiring products constituted 58% of LinkedIn’s total revenue for the first three quarters of 2016, when Microsoft formally acquired the company, according to its final 10-Q filing with the United States Securities and Exchange Commission. LinkedIn’s revenue in 2018 also “primarily consisted of revenue from Talent Solutions,” according to the 10-K filing with Microsoft’s 2018 fiscal year results
As part of its underwriting process, Brex maintains visibility into the spending of companies that use its products. Companies who asked that their data not to be shared were not used, and any company that does not wish to share its data for future aggregated analysis may request to exclude it from being shared in the aggregate.