5 Reasons VC Firms Love Recruiting Technology in 2012 #HRTech

While I love working with the established ERP vendors innovating the talent acquisition portion of their suite – there is something satisfying about working with a start up or early stage company and really being able to have a behind the scenes view of their success – eventually selling out to the big guys or becoming one themselves.   More than any other segment of the HR Tech industry, the innovations, drive and risk taking in the TA world is amazing – although as a former recruiting pro, I could be biased.

Even more fun than the Vendor calls, are the various VC firms trying gauge what has happened the 3 months and why it was happening “all of a sudden”.  The funding and acquisitions of tools like Jobs2Web, Rypple, and Smart Recruiter has made them do a double take in terms of Talent Acquisition the last few months.  As SmartRecruiter Founder & CEO Jerome Ternynck points out  “Recruiting is $400bn problem that affects every business in the world. I guess that makes it attractive to both entrepreneurs and VCs.”

If the 400bn isn’t enough – here are 5 more reasons why Venture Capital Firms are interested in Recruiting technology

  1. Talent Acquisition is not HR.  It has a different personality, consumer and most importantly for VC firms – Budget. In organizations where HR Technology is slow to change or adopt or smb’s that still use Excel – you’ll often find innovative technology in play in hiring.  It could be the gov’t regulations, the small teams trying to do more than before or the demand from candidates – but its true.  For VC firms this means money to spend if your product can show ROI.
  2. Recruiters Like to Talk.  On twitter, on a blog, on the phone, on the plane, to themselves and even on stage at one of the more than 50+ Recruiting focused national conferences that are held each year.  For VC Firms – Those talking become evangelists making (good) products go viral relatively quickly.
  3. Recruiters Like New Stuff.   Call it the ohh shineys, call it ADD or just call it “innovative mindset” – the reality is talented recruiters are always looking for the next big thing and advantage over the competition doing it the same old way.  For VC firms, this means a built in set of early adopters that can take a product from concept to F100 in a flash.
  4. The “Integrated Talent Management Suite” pushed by analysts and “experts” the last few years has created A LOT of unhappy users.  Unhappy users that have continued to use their integrated suites then bought supplemental tools that allow them to work better.  For VC Firms this means – No need to compete with the big guys if you can sit in front, next to, or around them in workflow (ie Faster Sales Cycle)  Sidenote: This will be an entire post of its own in 2 weeks.
  5. There is a lot of room to innovate.  Products still aren’t consumerized, very few offer good metrics and most were built on outdated platforms that don’t transfer well to a mobile environment. Poor UX and Implementations are part of why I’m still getting asked to speak about “Why Everyone Hates their ATS”.  For VC Firms – Buyers in this space (particularly non enterprise level) buy on ease of use (experience) which means innovative ux/ui means easier sales cycle when up against things that look like lotus notes.

This year is going to be even more active in terms of investments, start ups and growth in the space – being led by the recruitment marketing, video interviewing and recruiting CRM marketplace.   But, VC’s and Vendors need to remember to stay out of Silicon Valley Mode and assume that the rest of the country hires and recruits like you do.  They don’t.   Newspapers are still used very successfully in some markets.  Some people don’t use twitter or face book.  Most people don’t have smart phones.

Yes, there are many reasons beyond these five (six) why VC firms will continue to seek out opportunities in the HR Technology space.  The continued government regulations on hiring and high unemployment rate will continue to be factors on why the technology is necessary and all organizational sizes.  The good vendors and VC’s will flourish with industry understanding and a keen eye out on all trends – not just falling for everything that includes “social.”

If you made it to the end, you’ll know what could have been a #6 – its where you get your $$ back.  It seems recruiting technology is getting bought and acquired at a faster rate than other segments of this marketplace and has for the last few years.   The investment entry is lower because its typically a complementary solution.  Lower investments mean quicker buy out options by industry Goliath’s that would rather be seen making a big move vs just building something themselves.

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