When Ian Siegel and his co-founders began to build ZipRecruiter in 2010, the goal was a lifestyle business. Today, after four years of bootstrapping the business to profitability and what by any measure would be described as astonishing growth, the SaaS SMB recruiting company announced its first ever outside funding: a massive $63 million Series A round.
The round was led by Institutional Venture Partners (IVP) and included participation from Basepoint Ventures, and Industry Ventures. IVP principal Eric Liaw will become the company’s first and only external director, alongside Siegel and his three co-founders, Joe Edmonds, Willis Redd, and Ward Poulos. The round included some secondary liquidity for founders and early employees, although the company declined to reveal further details.
The decision to raise capital didn’t come easily, according to Siegel, ZipRecruiter’s CEO, who said the company first “dipped its toe in the water” this January after fielding plenty of inbound interest in prior years. But when the company’s first quarter performance outpaced even its own lofty internal expectations, fundraising was again put on hold with the thought that profit might be enough to fund the next level of growth.
“The reality is that the market has just so fully embraced our product that we feel that we have to be a good steward of that product and not sacrifice quality and customer experience because we’re capital constrained,” Siegel says. “We need to be building our product not for tens of thousands of users, but for hundreds of thousands. Bootstrapping leads to scrappiness, but it often means you’re building an MVP solution at every turn. We started to feel some strain based on the velocity of our growth.”
ZipRecruiter helps small- and mid-sized businesses (SMBs) compete with Fortune 500s in the recruiting sphere by automating job posts distribution across 50 online job boards and offering a back-end candidate tracking and management solutions. The company has “tens of thousands of customers” and says that it’s on pace to exceed 100 percent revenue growth this year, a rate that will put it close to if not over a $100 million run rate by year’s end. On the other side of its marketplace, ZipRecruiter boasts 4 million active job seekers and sends out more than 14 million job alerts per day, matched algorithmically based on geography, category of interest, and skill set.
The problem, however, has been that ZipRecruiter has a number of high-performing marketing channels that it can’t fully address due to capital constraints, Siegel says. With new customers comes additional customer support staff and related infrastructure, forcing short-term trade-offs based on cash flow constraints.
“No matter how much we increased marketing it returned phenomenally,” Siegel said. “Eventually we were forced to examine the choice between that and hiring. We always go back to, ‘do what’s best for the customer,’ which in this case meant bringing on outside capital.”
Siegel describes the company as spoiled for choice when it came to venture firms. But the decision to go with IVP came down to style and experience. “IVP is stylistically so great of a match for us, and they have real acumen in high growth SaaS businesses,” he says. Basepoint, on the other hand, was a more of a personal relationship. The newly formed seed stage fund was founded by former Rustic Canyon Partners partners Nate Redmond and David Travers, both of which were “around the kitchen table” when the ZipRecruiter idea was first taking shape, Siegel explains.
Unlike most high growth technology firms, ZipRecruiter has been profitable for the majority of its existence, wildly so, in Siegel’s words. More rare is that the company anticipates maintaining this status going forward, even as it invests in continued growth. The company has 140 employees today and plans to grow that headcount considerably, with nearly all new hires taking place in the Santa Monica area. The company is in the process of moving into new office space along the city’s 3rd Street Promenade, an all too familiar occurrence in recent years amid the torrid growth.
“It’s rare you see a business reach the scale, growth and profitability of ZipRecruiter and the company’s success to date is a testament to the entire organization,” says IVP’s Liaw in a statement today. He later adds, “With 28 million SMBs estimated to employ approximately 50% of the US workforce, we believe the market opportunity for ZipRecruiter is enormous.”
Recruiting is not a terribly sexy category and the SMB market has been the bane of many startups’ existence. Add to this that ZipRecruiter’s competition is household names like the notoriously inexpensive, but no frills Craigslist and Monster.com and it’s hardly a sure bet that the company will be able to sustain its early momentum. The company’s founders and investors, however, don’t appear very worried.
“We expect this funding to amplify approach we already have,” Siegel says. “A lot of what we’ll do now is plan for scale, and put more people and systems in place to make that transition to the next level smoothly. We’ll also begin to think more thoughtfully about build versus buy or partner. The truth is we’ve really built a great product and customer satisfaction is really high. The next challenge is really increasing awareness. Nobody is in a rush to achieve liquidity. We’re all on board to maximize this opportunity we have in front of us.”