Earlier this year, we sent out the first installment of what we hope will become a regular (and brief) survey to capture the pulse of the most important members of the entrepreneurial ecosystem, the entrepreneurs.
In each survey we will ask questions on the topics that are top of mind for CEOs running a startup, focused on a particular theme each time. The first survey focuses on hiring and recruiting. We would like to share those responses with the community so that you can compare your feelings and experiences with those of your peers. Thank you all for participating in this survey, and we hope the insights are helpful.
Survey respondents are mostly early stage, B2B software companies on the East Coast, which is very reflective of the Osage Venture Partners (OVP) strategy. Highlights from the analysis include:
When analyzed by demographic groups, very few differences emerged across the various cohorts, and thus that analysis is withheld below.
Overall, the survey respondents are very reflective of the OVP strategy, and thus offer a highly relevant cohort for early stage, B2B software companies on the East Coast. Among all the companies surveyed, 83% are located in the Mid-Atlantic region, 81% have fewer than 50 employees, and 84% have less than $10M of revenue, and 81% have raised less than $10M of total capital. The two largest industries represented are B2B software and Healthcare IT.
Respondents indicated an increased optimism about current hiring plans relative to past headcount growth, as 74% of companies surveyed are currently hiring, compared to just 61% that increased headcount in the past 12 months. Encouragingly, none of the respondents have current plans to reduce headcount – a surprising finding even despite the typical optimism of early stage technology CEOs and the fact that 10% of respondents reduced headcount over the past twelve months.
Investigating current hiring plans by demographic groups reveals takeaways that are in line with intuition. For example, the larger a company’s size, the more aggressively its current hiring plans. Further analysis across various cohorts indicates that these trends remained consistent over the past 12 months.
When making hiring decisions, companies consider a wide range of characteristics, with technical skills leading the way as the most important, followed closely by raw talent and cultural fit, suggested by the score below. Interestingly, past experience is much less important, while details around compensation and location were deemed less crucial.
Corresponding with the results above, respondents find development / engineering leadership to be the hardest to recruit for (with one equating to a role that is more difficult to hire), followed by developers / engineers.
Overall, respondents are more satisfied with their own ability to hire versus that of their direct reports. 64% of the respondents rate themselves above average, whereas only 39% thinks their direct reports’ ability to hire is above average.
The pie chart below suggest that the biggest challenge companies face in recruiting is finding qualified candidates.
When asked to identify the three most important recruiting channels, respondents far and away highlighted the importance of personal networks in recruiting, which scored nearly two times higher than any other category. Interestingly given the size of respondents (and the often related reluctance to spend money), external recruiters were identified as the second most important channel, with job boards not far behind. Despite the growing role LinkedIn plays in recruiting, both LinkedIn Ads and LinkedIn Proactive Outreach are ranked in the bottom half among all recruiting channels.
76% of the respondents do not have a dedicated head of HR, and 57% use outside recruiters. Interestly, only 47% of the respondents with no head of HR use outside recruiters, whereas 90% of the respondents with a head of HR also use outside recruiters. This may be because respondents with dedicated Heads of HR are more likely to allocate resources to outside recruiters and to other recruiting methods given the maturity of the HR function.
As indicated by earlier respones, engineering leadership, developers / engineers, and sales leadership are the top 3 hardest roles to recruit for. The data below show that these three are also the top 3 roles for which the respondents engage outside recruiters.
Just 55% of the respondents utilize methods other than a traditional interview as part of their hiring process. The most frequently used method is testing. The test can be in different forms including case studies, coding, writing, and presentations. One respondent also mentioned using the Harrison Test, a personality assessment. Other qualitative methods include having the candidate meet the team and perform reference checks and social media checks on the candidate.
Somewhat surprisingly given the importance of team and culture to success of an early stage software company, finding talent rates as only the fourth most important challenge to the overall business faced by respondents. The top rated challenge was finding new customers.
When analyzed by industry, finding new customers was the largest challenge identified by both Healthcare IT companies and B2B Software companies. However, Healthcare IT companies cited securing capital as a close second, while finding capital was not one of the top 3 biggest challenges for B2B Software companies.
We thank all participants for the time to fill out the survey, and hope that the results provide some interesting data related to hiring and recruiting trends for early stage, B2B software companies on the East Coast. Given we intend this series to reflect the top issues on the minds of CEOs, we will let the data speak and explore the challenges associated with finding new customers in the next survey.
New England: CT, ME, MA, NH, RI, VT; Mid-Atlantic: NJ, NY, PA, DE, MD, VA, DC; Midwest: IL, IN, MI, OH, WI, IA, KS, MN, MO, NE, ND, SD; South: FL, GA, NC, SC, VA, WV, AL, KY, MS, TN, AR, LA, OK, TX; West: AZ, CO, ID, MT, NV, NM, UT, WY, AK, CA, HI, OR, WA
Question 1: Is your company currently? 5. Aggressively Hiring 4. Modestly Hiring 3. Remaining About The Same Size 2. Modestly Reducing Headcount 1. Aggressively Reducing Headcount
Question 2: Compared with 12 months ago, has the number of employees (measured as full time equivalents) at your company? 5. Increased Significantly 4. Modestly Increased 3. Remained About The Same Size 2. Modestly Decreased, 1. Decreased Significantly
To analyze the data from questions in which the respondents are asked to rank their top 3 choices, a score is calculated for each choice by assigning 3 points to a top 1 vote, 2 points to a top 2 vote, and 1 point to a top 3 vote, then normalized by setting the highest score to equal 100
Other includes passion, intelligence, and factors that predict performances
Other includes Angellist, Great hiring executives, and Board of directors / investors