Advice to recruiters-turned-HR-tech founders

by | Jul 2021 | Early-Stage Capital

When we started DQventures we made a commitment to help everyone we could – not just those we invest in. When two successful recruiters came to DQ for help launching their HR tech platform, we told them what we really thought. Our hope was that it would help them either reshape their idea, or save a lot of heartache, time, and money spent on something that we believed was fundamentally flawed.

This is what we sent them:


Good to speak with you this morning, and apologies for the hurried end to the meeting.

Rather than leaving it there, I wanted to be completely honest with you, in the hope of potentially helping you reduce the risk of losing your hard-earned cash…

I told you that this isn’t a good fit for DQventures because of the stage you’re at, but there are two other reasons I don’t think we can help:

Firstly, there doesn’t appear to be a clear enough differentiation between what you’re planning and what’s already out there. I know you say you want to focus on finding hiring companies high-quality candidates, but in reality, this is something all freelancer / gig economy platforms are focused on doing, including those with hundreds of millions in funding, and with powerful, in-house AI capabilities.

Secondly, it’s about unfair advantage. When investors look at startups, they’re thinking two things – what’s special about this business, and why are these guys the best people to win this fight? To me, it’s not clear what makes this business truly unique. But more importantly, while I don’t doubt you are extremely good at what you do, there are some big knowledge gaps when it comes to building a world-beating technology platform.

What you say is your key differentiator – a stronger ability to match quality candidates to roles – is something you have no experience of doing, with tech. Yes, you’re good recruiters, and your gut feel has probably helped you be successful in the analogue world, but you don’t have experience of automating that gut feel. This is the golden goose, but in reality, this is a technology/data/deep learning challenge, not a recruitment challenge.

I’m sure this isn’t what you want to hear, but the truth is that it’s not easy telling people that their chances of success are slim. When people like me give you a half-hearted reason for not wanting to invest in/work for/be involved in your startup, what they’re really telling you is that they don’t think it can succeed.

My advice (which you are clearly at liberty to ignore!) would be to stop spending money until you are 99% convinced, in your heart of hearts, that this will succeed. Do not sign that software development contract – at least not yet. It’s easy to get carried away with excitement, and to be confident; but ask yourselves, deep down, how confident you truly are. If you are even 10% uncertain about this, I would encourage you to pause, and then to do whatever it takes to reduce that 10% to 1% before you continue. Trust me on this, it is too easy to lose money. Even if you can raise money from outsiders (in fact especially in that case) I would advise you not to spend any more money if you still have doubts. Losing other people’s money is a lot worse than losing your own.

So, enough about what you should NOT do. What would I do if I were in your shoes?

I would take some of the money you’re about to spend with the tech provider, and use it to validate the main assumptions you’re making about this business, such as:

  1. Can you sign up 5 customers? (No, you don’t need a platform to do this – just show them your screen shots and tell them it’s launching soon.)
  2. Can you sign up 50 candidates using your existing networks? (All you need is a one-page sign-up page, which is easy with something like Unbounce
  3. Can you get candidates / customers to sign up for your service without talking with them? For example, can you create a strong enough message to get people to see an advert, click it, then sign up on your web page? (There’s no harm in getting people to go through this process and then showing them a message like: “thank you, we have stored your details and will contact you as soon as we’re live in your city…”)
  4. Crucially, can you create a repeatable, digital process for successfully differentiating quality candidates from average ones?
  5. Can you use this quality data to successfully match candidates to vacancies, without speaking with them?

Yes, the above will cost you money (a simple web page, a few ads, some email marketing, some time spent speaking with customers, etc), but it’s money you’re going to have to spend anyway, at some point. This is just about the order in which you do things.

If you do the above, there are two potential outcomes:

EITHER: you will see that it’s actually a lot harder than you anticipated, and you may decide not to continue. If so, it will prove to be an expensive experiment, but at least you tried, and it could be a lot less expensive than developing the full product and THEN running these tests (fail fast, etc).

OR: the results will be encouraging. In that case, you’ll have a lot more proof to show potential investors, and you’ll feel a lot more confident about spending more of your own money to move this forwards/develop the platform.

I hope reading the above is useful and not too annoying. Over the last 10 years, I’ve seen a lot of people fail (including me) because of doing these things too late. I believe the above could help you de-risk the next few months, and reduce the risk of you losing your children’s inheritances!

Whatever you decide, I genuinely wish you the very best of luck. If you ever want a chat in the future, just let me know. If you want someone to help you through this, you could do a lot worse than get Annie Luu involved, if she’s up for it. She’s awesome.

(Cover photo by Photoholgic on Unsplash.)

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