Emerging companies thrive on data. Shouldn’t they use it to improve hiring decisions?

While emerging companies are often started by technically minded founders and funded by VCs for their data-driven approaches to product and growth, the irony is that these companies are often using less data and rigor when it comes to hiring talent than more traditional, less data-focused companies. The truth is, the way in which tech companies hire has been relatively untouched by disruption, with most still relying on resumes and conversational interviews for its highest-stake decisions.

The consequences of this is not only detrimental to building teams, but to the overall diversity of the startup space.

Data-driven hiring isn’t just about having the right funnel metrics in place to determine efficiency of process, it extends to the information we choose to collect (or not collect) and measure to determine if someone is a fit for a role. There’s a science to building teams, and therefore selecting talent to join teams. So, why is hiring in early-stage companies still not regarded as a data-driven activity?

Some argue that by nature, talent selection involves people and so can’t truly be scientific. People are unique, complex, emotional and unpredictable. Additionally, few people think they’re a bad judge of character and talent, most overconfidently hold the belief that they’ve got a superior instinct and “nose” for talent. Hiring talent is one of the few operational activities in business where formal training or decades of experience isn’t expected in order to be better than average.

Move away from gut-based evaluations

The impact of this outdated way of thinking is felt across the board — first and foremost when it comes to team dynamics. To first know if someone is qualified, you need to know what you’re assessing for. Companies that operate with a shallow understanding of what drives success in a role lack the vital information needed to build a strong system of selection. The output is a weak hiring process that is heavy on unstructured interviewing, light on predictive signals and relies on gut-based evaluations.

Chemistry, confidence and charisma are more likely to determine whether a candidate lands a role versus competence to do the job. As a result, almost half of new hires are estimated to fail and be ineffective, and weak teams are built. The lack of reliable data also means most companies suffer from a broken feedback loop between hiring and team performance, which stunts learning and improvement. How do you know if your selection process is efficiently assessing for the skills, traits and behaviors that drive top performance if you’re not connecting the dots?

The dangers of subjective approaches

More dangerously, a hiring process that’s not designed to collect and evaluate based on evidence almost always results in a lack of team diversity, which as we know stunts innovation and therefore limits company success.

Subjective approaches to talent selection and development create a revolving door of unconscious biases and exclusion, with a resounding impact on what now makes up the homogenous tech ecosystem. This is not helped by natural overreliance on networks as means to fill hiring pipelines in early-stage company building.

Lastly, for talent operators and people practitioners, it does no favors for the credibility of their profession. Recruiting and selecting talent will continue to be branded an unsophisticated, lesser back-office function, or as a “dark art” that is about as data-informed as looking into a crystal ball.

Taking an evidence-based approach

In bringing more objectivity to the hiring process, founders and their teams are served best when starting with a clear, evidence-based definition of what success markers look like in a role, and then putting structure around each stage of selection to assess for a specific skill or behavioral trait: What and when will you assess? What criteria will you evaluate the data based on? In other words, the objective is to get as close as possible to unearthing signals that are reliable enough to accurately predict that someone will perform in a role.

Up until recently, science-based talent assessment tools, which help hiring managers make more objective evaluations, have been largely used by bigger, more established firms that suffer from high-volumes of job applications — the luxury “Google” problem. However, three recent shifts suggest we’re about to see a trend in their adoption by earlier-stage startups as they scale their teams:

  1. Pressure to build diverse and inclusive teams. 2020 has pushed diversity and inclusion to the top of the agenda for most companies. Assessment tools used as part of team-building can help groups better identify where specific cognitive, personality and skill gaps exist, and therefore focus hiring for those missing ingredients. Candidate assessment also helps reduce unconscious bias that might creep into interviews by showing more objective information about someone’s strengths and weaknesses.

  2. The sharp rise in job applicants. The COVID-19 pandemic has had two significant effects on recruiting. First, companies have been forced to embrace hiring talent in remote roles, which has increased the size of the global talent pool for most jobs inside a tech firm. Second, the increase in available talent has meant that the average number of job applications has risen dramatically. This shift from a candidate-driven market to an employer-driven one means that selecting signal from noise is increasingly becoming a challenge even for early companies with a less-established talent brand.

  3. Better designed, more affordable products on the market. For a long time, talent assessment software has been largely inaccessible to noncorporate clients. Academic user interfaces and off-putting candidate experiences has meant that many scientifically robust tools simply haven’t been able to capture the attention of tech and product-obsessed buyers. Additionally, many tools that require add-on consultancy or specialist training to administer and interpret are simply out of range of early-stage budgets. With new entrants to the assessment market that have automation, product design and compliance at their core, scale-ups will be able to justify spending in this area and perceptions will change as they become essential SaaS products in their team’s operating toolkits.

As these outside factors continue to push hiring toward a more evidence-based approach, businesses must prioritize making these changes to their hiring practices. While unstructured interviews might feel most natural, they’re perilous for accurate talent selection and while the conversation might be nice, they create noise that does nothing for making smart, accurate decisions based on what really matters.

Instinctive feelings and “going with your gut” in hiring should be treated with caution and decisions should always be based on role-relevant evidence you pinpoint. Emerging companies looking to set a strong team foundation shouldn’t risk the redundancies and biases created by subjective hiring decisions.

Want to hire and retain high-quality developers? Give them stimulating work

Software developers are some of the most in-demand workers on the planet. Not only that, they’re complex creatures with unique demands in terms of how they define job fulfillment. With demand for developers on the rise (the number of jobs in the field is expected to grow by 22% over the next decade), companies are under pressure to do everything they can to attract and retain talent.

First and foremost — above salary — employers must ensure that product teams are made up of developers who feel creatively stimulated and intellectually challenged. Without work that they feel passionate about, high-quality programmers won’t just become bored and potentially seek opportunities elsewhere, the standard of work will inevitably drop. In one survey, 68% of developers said learning new things is the most important element of a job.

The worst thing for a developer to discover about a new job is that they’re the most experienced person in the room and there’s little room for their own growth.

Yet with only 32% of developers feeling “very satisfied” with their jobs, there’s scope for you to position yourself as a company that prioritizes the development of its developers, and attract and retain top talent. So, how exactly can you ensure that your team stays stimulated and creatively engaged?

Allow time for personal projects

78% of developers see coding as a hobby — and the best developers are the ones who have a true passion for software development, in and out of the workplace. This means they often have their own personal passions within the space, be it working with specific languages or platforms, or building certain kinds of applications.

Back in their 2004 IPO letter, Google founders Sergey Brin and Larry Page wrote:

We encourage our employees, in addition to their regular projects, to spend 20% of their time working on what they think will most benefit Google. [This] empowers them to be more creative and innovative. Many of our significant advances have happened in this manner.

At DevSquad, we’ve adopted a similar approach. We have an “open Friday” policy where developers are able to learn and enhance their skills through personal projects. As long as the skills being gained contribute to work we are doing in other areas, the developers can devote that time to whatever they please, whether that’s contributing to open-source projects or building a personal product. In fact, 65% of professional developers on Stack Overflow contribute to open-source projects once a year or more, so it’s likely that this is a keen interest within your development team too.

Not only does this provide a creative outlet for developers, the company also gains from the continuously expanding skillset that comes as a result.

Provide opportunities to learn and teach

One of the most demotivating things for software developers is work that’s either too difficult or too easy. Too easy, and developers get bored; too hard, and morale can dip as a project seems insurmountable. Within our team, we remain hyperaware of the difficulty levels of the project or task at hand and the level of experience of the developers involved.

Neo’s Ali Partovi on best practices for hiring early-stage startup engineers

On day one of TechCrunch’s Early Stage virtual conference, Ali Partovi joined us to discuss best practices for startups looking to hire engineers.

It’s a subject that’s near and dear to his heart: Partovi is co-founder and CEO of Neo, a venture aimed at including young engineers in a community alongside seasoned industry vets. The fund includes top executives from a slew of different industry titans, including Amazon, Airbnb, Dropbox, Facebook, Google, Microsoft and Stripe.

Partovi is probably best known in the Valley for co-founding Code.org with twin brother, Hadi. The nonprofit launched in 2013 with a high-profile video featuring Mark Zuckerberg, Bill Gates and Jack Dorsey, along with a mission to make coding education more accessible to the masses.

It was a two-summer internship at Microsoft while studying at Harvard that gave Partovi an entrée into the world of tech. And while it was clearly a formative experience for the college student, he advises against prospective startup founders looking to large corporations as career launch pads.

“I spend a lot of time mentoring college students, that’s a big part of what I do at Neo,” Partovi said.

“And for anyone who wants to be a founder of a company, there’s a spectrum, from giant companies like Microsoft or Google to early-stage startups. And I would say, find the smallest point on that spectrum that you’re comfortable with, and start your career there. Maybe that’s a 100-person company or maybe for you, it’s a 500-person company. But if you start at Microsoft, it’ll be a long time before you feel comfortable doing your own startup. The skills you gain at a giant company are very valuable for getting promoted and succeeding in giant companies. They’re not often as translatable to being your own founder.”

A look at tech salaries and how they could change as more employees go remote

Each year, the hiring platform Hired produces a look at tech salaries based on the data it says it gleans from hundreds of thousands of interview requests and job offers. This year, as in past years, it looked at salaries around the globe for software engineers, product managers, DevOps engineers, designers, and data scientists.

Of course, this year is a very funky year, one that, owing to the pandemic, looks to see an accelerated shift toward more remote work. So this year, Hired split its findings its two parts — pre COVID-19 and post. It published data about who was being paid what in 2019, but also how those numbers might change going forward, particularly if more companies adopt localized compensation as Facebook has said it will do with its own employees.

First, a look at the world before the coronavirus swept through and upended so much.

From San Francisco to London, everyone working in tech was seeing steady gains leading into 2020, according to Hired. San Francisco salaries jumped 7% last year, with the average tech worker pulling down $155,000 annually, followed closely by New York, where the average tech worker’s salary was $143,000 (up 8% from 2018); Seattle, where pay hit $142,000 (up 3%); and L.A. and Austin, where workers averaged $137,000. (In L.A, that represented an 8% bump from 2018; in Austin, it was 10%.)

In the U.S., project managers were paid the most, averaging $154,000. Software engineers were meanwhile paid on average $146,000; data scientists were paid $139,000; and designers were paid $134,000.

A question being asked increasingly in 2020 is how those numbers change if these same workers leave behind pricey cities like San Francisco and head to more affordable spots. Hired has answer that question specific to the Bay Area, and the unsurprising news that local workers’ wages — assuming they go unchanged — go a lot further elsewhere.

For example, making $155,000 in the Bay Area is akin to making $224,000 in Austin, thanks to its lower cost of living. In Denver, it would be like making $202,000.

Still, the calculations won’t be so easy for companies wanting to hang onto top talent. Based on a survey of 2,300 tech workers, Hired says that nearly one-third of respondents said they’d be willing to accept a reduced salary if their employer made work from home permanent (while more than half said they would not); 53% said permanent work from home would make them “likely” or “very likely” to move to a city with a lower cost of living; and half said they’d want to return to their office “at least once a week” post-COVID.

It’s headache inducing. The only crystal clear finding is that almost no one wants to land back at the office Monday through Friday. Specifically, just 7% of respondents said they wanted to head into work every day.

Of course, how flexible tech workers really are about whether they live and what they are paid depends very much on their job stability or how they perceive it. Perhaps in a sign of the times, there is little consensus on this front, too, shows Hired’s survey.

Of the thousands of tech workers surveyed, 42% said they were concerned about being laid off in the next six months, and 39% said they agreed with the statement: “I want to leave my current job but am afraid to do so because I’m worried about finding another job.”

In both cases, more respondents said that they aren’t concerned about being laid off or their ability to find another role elsewhere.

Going forward, Hired CEO Mehul Patel tells us the company will be tracking closely how the rise of remote work impacts those expectations, including around salary.

For now, he says he hopes that just publishing metrics around how localized salaries are computed will help put job seekers — and job holders — at ease during turbulent times. “It’s a big part of the reason we do this research and publish these kinds of reports,” he says.

What recruiters are saying about the tech job market right now

Given the endless drumbeat of layoff announcements — with deep cuts by Airbnb and Uber garnering much of the industry’s attention this week — it’s reasonable to wonder: what happens to all of the talent that’s being laid off? How does the changing supply and demand balance impact pay? Is anyone safe in this market?

Because the questions are top of mind for practically everyone everywhere right now, we reached out to recruiters in the one industry that we know — tech — to ask what they are seeing and what they predict will happen over the next three to six months. Unsurprisingly, they told us they’ve seen a steep drop-off in job searches and loads of salary cuts, but they also say there are silver linings in these turbulent times.

First the bad news, and for the moment, it’s mostly bad news.

Sales and marketing positions — particularly at consumer-facing startups — have been hard hit, and they aren’t coming back any time soon, possibly not even in 2020. Carolyn Betts, the founder of the national recruiting firm Betts Recruiting, says when the “coronavirus hit and shelter-in-place notices came out, we saw 80% of our business freeze. And then it went down from there.”

Betts’s bootstrapped recruiting company — which fills sales, marketing and people operations roles — was forced to conduct its own layoffs because of the lost business, shedding 30 percent of its staff and cutting remaining employees’ pay by 20%, although though Betts says a PPP loan has allowed the company to adjust pay upward again by 10%.

In the meantime, she has had a front row to the nearly overnight switch from an employee market where rising salaries and signing bonuses had become routine, to an employer-driven market where candidates get what they get. “There’s so much talent in the market that there are backup candidates for backup candidates.” Indeed, her advice to job candidates right now is to recognize the game has changed and that if pushed, the hiring company might “just move on to the next candidate. Everyone is going to hire within their budgets right now, and they aren’t going to make exceptions for the most part.”

Top tier

Executive searches are also, predictably, largely frozen right now. So suggests Teri McFadden, a VP of recruiting at the venture firm Norwest Venture Partners, where for nearly 12 years she has helped the firm’s portfolio companies fill key positions.

Before COVID-19 struck the U.S., the firm was staring at roughly “160 open active executive level searches in our portfolio — clearly more than my team at Norwest could handle,” says McFadden. (Like most venture firms, Norwest sometimes retains outside search firms.) Now, that number has fallen by more than half. Some, she says, are “full cancellations,” while “other people are just putting searches on pause to see what happens in the next couple of quarters.”

In the meantime, certain roles have been harder hit than others, says McFadden, who specifically cites marketing groups. She also notes that executive pay at companies that have been impacted most negatively by the coronavirus are coming down, an observation the public has seen play out in company announcement after company announcement in recent weeks. Generally speaking, she suggests, C-suite executives take a 20% reduction in salary while the next level of management takes a 10% pay cut and “anyone below a certain salary level” sees no pay cut. But it varies from company to company.

Even engineers in today’s climate aren’t being spared, suggests Sam Wholley, a longtime partner with the Silicon Valley recruitment firm Riviera Partners, which specializes in engineering, product and design leadership. While new jobs are paying roughly what they did two months ago, both Wholley and McFadden expect the market to soften in the coming months, with pay dropping 10 to 20 percent. (Wholley says pay for engineers was trending this way even before the virus sent everyone running for cover.)

Push-pull

A bigger problem is simple demand and supply. For the first time in more than a decade, the supply of engineering talent may exceed the need for it — or, at least, the ability to pay for it. Asked, for example, whether the younger companies continuing to receive funded might be able to absorb the engineers who’ve been let go by bigger companies, Wholley says that, “unfortunately, I don’t think so, and I don’t think it will be that for a while.” While new companies are always being created, he continues, “It could be up to a year to find that right match.” It might also mean “looking in a different industry or possibly a different geography than they have” looked in the past.

But wait! As promised, the news is not all terrible.

Because much of the tech sector is holding up better than elsewhere, there is still some movement on the hiring front. For her part, Betts says she’s beginning to see companies “up level” their teams, meaning parting ways with “bottom performers and replacing them with talent that has entered the market.” This is particularly the case with industries that “sell into the government, in security, that sell collaboration software, and in healthcare,” she observes.

Betts also notes that some customers in places like Texas where people are re-entering public spaces are “opening up” and starting to strategize about who they want to hire or re-hire.

“A lot of people have received some relief regarding their growth plans,” says Betts, “but it’s May. When things get back [to a more normal state of affairs], [management teams] will be expected to put their foot on the gas to make up for lost time, and no one wants to be caught flat-footed. If you start hiring when everyone says ‘go,’ you missed your head start.”

McFadden and Wholly echoes the point, with Wholley saying that “strong hands are continuing to hire” and McFadden offering separately that Norwest is seeing two categories of companies that are “poised to do well long term,” including younger startups focused on product development (with fewer mouths to feed), and those finding even more demand for their products right now, like software tools made expressly for remote teams and even direct-to-consumer hair colorant companies.

While that’s still a comparatively small pool of potential employers, “I think in general,” says McFadden, “companies are beginning to think about what does life look like after COVID-19, and it’s not all doom and gloom.”

This early Facebook investor wants to find smart students a job at the next Facebook

For many college seniors, school is a time for self-exploration, considering options, leisurely contemplating the future.

Yet that’s rarely the case for computer engineering students who either attend the world’s best universities or rise to the very top of their classes. Almost immediately after choosing their courses during the first week of school, they typically find themselves at their college career fair, wondering if they should interview with the likes of Google or Facebook . More, when they do, they often receive an offer with a signing bonus and often with a 48-hour exploding deadline.

The perception is that saying no means becoming forever blacklisted by that outfit. But serial founder turned investor Ali Partovi — who has enjoyed success over his career with, and alongside, twin brother Hadi  — insists it’s smoke and mirrors. “There are only so many great students graduating, and there are way, way, way more jobs to be filled than there are CS graduates. Like, the students should be giving the companies deadlines.”

To get out that message — that students have options and needn’t allow big tech companies to narrow these prematurely — Partovi is organizing something new. Through his four-year-old networking organization, Neo, and its associated venture fund, he is staging a kind of virtual matchmaking extravaganza on August 8 that introduces students to an entirely different kind of opportunity.

Called Neo Startup Connect, the idea is to introduce students who Neo has itself vetted to fast-growing — but stable — companies like the design software Figma, which just announced $50 million in Series D funding last week.

Partovi thinks there are opportunities to learn a wider number of things at companies like have closer to 100 people than 45,000 (Facebook) or even 120,000 (Google). He also maintains that there’s a world of startups that students might find more aligned with their interests, if only they knew more about them.

“Every day, I’ll be talking to a someone who is a top student from, let’s say, Princeton, and this person tells me that she’s passionate about health care and machine learning, and she has a job offer to join Goldman Sachs. And I’ll be like, ‘Why would you go join a bank or a hedge fund?'”

Partovi says he’s worried that not enough students are “doing something that’s adventurous or maximizing their potential and instead going the safe route.” Connecting them to earlier-stage companies is his way of countering the trend.

Of course, it’s in Partovi’s interests to foster all of these connections. In fact, Neo Startup Connect is a natural offshoot of what Neo has been working on in recent years, which is trying to identify the most talented engineering talent coming out of schools and promising to invest in anything the students might launch later on based on the belief that they’ll invariably become successful. The approach that has become more widespread throughout Silicon Valley, but it means playing the long game. With Neo Startup Connect, Partovi can have a more immediate impact on someone’s future, as well as strengthen Neo’s relationships to companies that Neo has either backed in the past or might like to back in the future.

In addition to Figma, some companies participating in the event include Forethought, a past TechCrunch Battlefield winner whose AI systems boost customer support productivity; and Notion, a buzzy maker of collaboration software that announced $50 million in funding at the start of the month and counts famed angel investor Ram Shriram as an early backer. None are backed by Neo.

Other participants that have received funding from Neo include the on-demand trucking platform Convoy, which closed on $400 million in Series D funding late last year; Bubble, a no-code point-and-click programming tool that has disclosed just $6.25 million in seed funding to date; and the AI chip company Luminous, which last year raised $9 million in seed funding, including from Microsoft cofounder Bill Gates, Uber cofounder Travis Kalanick, and current Uber CEO Dara Khosrowshahi (who happens to be Partovi’s first cousin).

As for the advantage to the students themselves, Neo is promising to not only widen their eyes and their opportunity set, but to make the application process easier by first screening them itself using a coding assessment program used by Quora and other companies, as well as through in-person interviews. (These will be conducted by Partovi, along with a “mix of seasoned veterans from the Neo community,” he says.)

Whether that screening process fully satisfies participating companies is a question mark. For example, Kris Rasmussen, the vice president of engineering at Figma, says via email that while Neo “does a great job of surfacing highly qualified candidates for us from their community,” he adds that “all Figma candidates go through the same technical interview process.”

In other words, there are no shortcuts.

Neo’s definitely endorsement counts for something. Partovi is highly networked. He has cofounded numerous companies, including LinkExchange, which sold to Microsoft for roughly $250 million in stock in the late ’90s. He also a solid track record of investing in talented founders, including Mark Zuckerberg and Drew Houston of Dropbox.

“I’ve come to trust that when Ali has vetted someone, they’re going to be world-class in terms of both IQ and EQ,” says Deon Nicholas, the CEO of Forethought, whose participation in the August event is a “no-brainer.” The “only hard part is to make sure [the participating students] don’t take offers from Google,” he adds.

It raises the question of whether it’s so terrible to start a career with a tech giant in the first place.

Partovi himself interned at Microsoft as a Harvard student, then bounced between Oracle and a tech startup after graduating. Nicholas worked for some sizable companies, too, including Dropbox and Pure Storage.

Not to put too fine a point on things, but Rasmussen also worked for Microsoft straight out of college, though he spent less than a year with the corporate behemoth. Asked over email if he regretted logging time with the company before heading into the startup world and eventually to Figma, he skipped over the question.

Is it possible — we ask Partovi —  that freshly minted college graduates can learn a lot from inside a big company, including how that company works with startups? Is it possible the credential boosts their earning potential? Gives them more options?

Partovi says he “won’t argue” with any of these questions. “Different paths are right for different individuals — from a corporate job, to joining a startup, to starting your own.”

Unfortunately,” he continues, “even for the most entrepreneurial, top-performing students, the startup path has systemic impediments. It’s unmapped, unguided, intimidating, and has structural obstacles.” If Neo can help remove these obstacles, he’ll have succeeded.

In a world where big companies continue to absorb the best talent — often via exploding offer letters — some might argue that society might also benefit from a little intervention in the way things currently work.

It might not be such a gamble, in any case. According to one former recruiter for Google, most candidates who turn down the company stay on its radar.

In some cases, it will keep trying to hire them for the rest of their lives.

(Note: If you’re a student who is interested in participating in Neo Startup Connect, the outfit opened registration today and will be screening candidates through the end of June. Partovi says the plan is to accept and try place roughly 150 individuals.)

Placement is the much-needed talent agent for jobseekers

“We’re giving away money to strangers on the internet” is a pretty cavalier pitch for a new startup. But the more I learned about Placement, the smarter it sounded. In exchange for 10% of your income for 18 to 36 months, Placement will find you a much higher paying job, prep you for the interview and help you move to your new city of employment.

Actors, athletes and musicians have talent agents. Why shouldn’t office workers? That’s co-founder and CEO Sean Linehan’s vision for Placement. The former VP of product at Flexport thinks he can consistently get people a 30% raise on their cost of living-adjusted income if they’re willing to relocate from either their sleepy hometown or an overpriced metropolis.

“We think you can transform your life without becoming an engineer. You just have to be in the right place,” says Linehan. Not everyone is going to learn to code, and Placement isn’t a school. “We’re not in the business of training people to do jobs. We’re in training people to get jobs.”

Placement sits at the lucrative center of a slew of megatrends. People switching jobs more often. The desperate need to pay off crushing student loan debt. The rise of mid-size cities as rent gets out of control in San Francisco and New York. Social apps keeping people in touch from afar. The search for deeper fulfillment going mainstream.

Placement co-founder and CEO Sean Linehan

Through the normalization of income sharing agreements, Placement has found a way to powerfully monetize these societal shifts. That potential has attracted a $3 million seed round led by Founders Fund and backed by Coatue’s new seed fund, XYZ Ventures, The House Fund, plus angels like Flexport CEO Ryan Petersen, Eventbrite founders Julia and Kevin Hartz, DoorDash CEO Tony Xu, 137 Ventures MD Elizabeth Weil and her husband Facebook Calibra VP of Product Kevin.

With the cash to build out its jobseeker’s software toolkit, Placement could grow far beyond the Jerry Maguire-style boutique talent agency into a scalable way to put millions on a better career track. “The number one problem that I see in the American economy right now is the lack of income mobility,” Linehan says. “There are so many services for making rich people get richer, but what about services to help low-income people to get to the middle, or help those in the middle to improve?”

“If I stayed home, there’s just no way”

The CEO’s own rise was “a tried and true American tale,” he tells me. “I grew up in a pretty low-income neighborhood in San Bernardino . . . below the poverty line.” But a chance to attend UC Berkeley brought him to Silicon Valley, and the economic powerhouse city of San Francisco (before the housing crisis made it so expensive). “I don’t think I could have been as successful if I went to another place. If I had stayed in my home town, there’s just no way.”

Yet after college, when friends moved away and he broke up with his girlfriend, Linehan found himself living in a bunkbed by himself with extra space. “I called a friend back home working a minimum wage job, still living at home, and said ‘Your life kinda sucks. Come crash with me!,’ ” Linehan recalls. “He was super smart — smarter than most of the people I went to Berkeley with, but he never got on the train out of town.”

In the following years, Linehan coached his friend through becoming a professional and navigating interviews. “Now he’s tripled his income on a cost of living adjusted basis. He went from minimum wage to $70,000 to $80,000.” That ignited the idea for Placement. “How do you take that process of tapping people who are special and just need economic opportunity, and bring it to more people?” But Linehan needed a co-founder who could execute on getting these up-and-comers jobs.

That’s where Katie Kent came in. Also from the product team at Flexport, Kent had helped start Zipfian Academy as the first data science bootcamp in America. The 12-week crash course had been placing 93% of graduates into full-time roles when Zipfian was acquired by Galvanize, where Kent became director of outcomes with the mandate to get students great jobs. The right idea, experience and the track record of turning Flexport into a $3.2 billion freight forwarding unicorn led investors to jump at the chance to fund Placement.

Share me the money

So how exactly do Placement’s income sharing agreements work? “They only pay us if they make more money on a cost of living adjusted basis” Linehan explains.

First, the startup recruits through targeted advertising and word of mouth referrals, which the company says 100% of clients have provided. Primarily, it’s seeking business professionals with a skill mismatched to their city, such as sales, human resources or operations in a place without companies competing to hire for those roles. They might have never left their hometown or returned after school at a mid-tier college, suppressing their earning potential. But lack of knowledge about jobseeking, fears of leaving their support network or a lack of funds to finance a move keep them stuck there.

“There are two moments when society puts a gentle hand on your shoulder saying its okay to move away: when you go to college and when you graduate college,” says Linehan. “We’re trying to engineer a third moment. We give people the permission and space to have that conversation with their family by providing that forcing function.” Placement serves the same utility the CEO did for his friend, revealing that if they seize the opportunity of moving to a growing but still affordable city like Denver, Austin, Raleigh or Seattle, “people’s lives would be so much better.”

The other demographic Placement seeks is the 10 million-plus workers who’ve gotten in over their heads in some of the country’s priciest cities. “If you’re ambitious and talented but not an engineer in SF, this is a hard life. The costs are exceeding the benefits at this point.” Placement looks for cheaper cities where their skills are still relevant and they might even earn the same or a little less, but they can fetch a huge increase in income on a cost of living-adjusted basis and they have a path to buying a house. Linehan declares that “Our controversial opinion is that more important than reskilling people is getting them to the right place where the work is happening in the first place.”

Placement then evaluates the prospective client in what is currently an extremely selective process to determine if they’re undervalued based on their skills, qualifications, shortfalls and redflags. If they’re already being adequately or overpaid, it won’t accept them. Those eligible are offered access to Placement’s research on all the optimal salary and location/hirer pairs for their role, which most people wouldn’t or couldn’t do themselves. Linehan says, “We run their job search for them. We’re kind of like a concierge.”

Once they’ve selected some targets, Placement quarterbacks their preparation process, helping them to improve their LinkedIn and resume, practice telling their story and offering mock interviews with experts in their field. As they progress through interviews Placement sets up and requires hirers offer remotely, it teaches clients to negotiate to get their best possible compensation.

“If you’re a normal person who didn’t go to an elite institution or are a couple years out of school, there’s no resources,” Linehan laments. While some top coding schools and other bootcamps place graduates, and some startups like Pathrise are also working on interview prep, most seeking a new employer end up relying on mediocre job hunting tips they find online. That’s in part because it was hard to get people to fork over significant cash in exchange for instruction that wasn’t guaranteed to help.

How Placement income sharing agreements work

The Placement income sharing agreement is designed to align incentives, though. It’s vested in getting clients not only the best job and salary, but one they’ll want to stick with. As long as the startup nets them a higher adjusted income, clients pay 10% of their earnings. That lasts for 18 months, or 36 months if they receive Placement’s $5,000 relocation stipend and human support. There are also caps on the total Placement can get paid back, and the agreement dissolves after five years so clients aren’t locked in if things don’t work out.

For example, Placement aims to help someone earning $40,000 per year pre-taxes reach $52,000 on a cost of living adjusted basis. They’d end up paying Placement $7,794 over the course of 18 months, or $433 per month. After the bill, they’d still be earning $3,900 per month, or $567 more than they used to. If they take the $5,000 relocation stipend and extra assistance, their ISA extends to 36 months and they’ll end up paying back $15,588 total, including the stipend.

Clients are likely to keep growing their compensation after their Placement ISA ends, so they’ll start reaping all the added proceeds. The startup has worked with fewer than 1,000 clients to date, but is supposedly growing quickly.

Eventually, Placement could move into working with programmers and designers, but it sees a big gap in assistance for business roles. Linehan notes that “We’re providing an option that will be available to a lot more people than a Lambda School or Galvanize coding bootcamp. Not everyone’s going to be software engineers.”

Making America anti-fragile

The biggest hurdle for Placement will be scaling what can be quite a hands-on, relationship-driven process of matching clients with the right hirers. “It’s one thing to get one person a job. It’s another to get 10,000 people a job,” Linehan admits. But he conquered the same problem at Flexport, which was moving 1,000 shipping containers across the ocean but had to figure out “how the hell do you move 1 million?”

Placement co-founders (from left): Katie Kent and Sean Linehan

That requires Placement to pour product know-how into building tools that equip clients to take more initiative to match themselves with hirers and teach themselves interview skills. It also must automate more of its marketing outreach, client screening and connections to recruiters while retaining a human element worth a four to five-figure price.

Right now, the startup’s team numbers just four, and though it will expand to seven soon, it may need to raise a bunch more to chase this dream. Some investors have been understandably skeptical about the whole “handing out $5,000” model without onerous ISAs.

For comparison, the one-year MissionU school for business and data jobs that was acquired and shut down by WeWork asked for 15% of income for three years without a relocation stipend, or $23,400 on a $52,000 per year job. ISAs for General Assembly’s tech job education cost 10% for 48 months, even if students don’t earn more than in their old job. Pathrise’s slimmer offering costs just 7% for one year. Colleges are jumping on the trend too, with some working with startup Leif to run their ISAs.

Placement has plans to cover prickly edge cases. If someone gets laid off from their new job, the startup will help them find another. “We’re on the hook to make sure they’re successful,” Linehan insists. It only won’t step in if an employee is fired for an ethical problem like sexual harassment or committing fraud. And if someone simply gets lonely in their unfamiliar city, they’re not required to stay, though moving home could hurt their earnings and Placement’s take. That’s why the startup is working to help its clients find community, even amongst each other, so they don’t feel isolated, and prefers sending workers to cities where they know someone.

Meanwhile, Placement must resist the temptation to become a hiring agency paid by employers and instead work fully on behalf of its clients. “When you’re aligned economically with the employer, you’re just chasing dollars from bigger and bigger whales of companies, and at one point you figure out you’re a recruiting firm for the Gap,” Linehan says with a shudder. The complexity of dealing with the U.S. Internal Revenue Service is enough hassle, so Placement doesn’t intend to work with jobseekers abroad or those that need visas, as “it’s not good for startups if you’re at the mercy of the government.”

Luckily, U.S. salaries total $8.6 trillion per year, Linehan claims, so it’s got enough of a domestic market. “The American economy is so huge that I don’t see other people tackling problems like that being competitive.” Placement does have potential to use its data to recommend and teach specific skills. “If you just make this change, if you learn Excel, you could totally get this job in a different industry that pays more and that you’ll like more,” Linehan says. He also dreams of one day improving urban planning by suggesting cities build music venues or parks that jobseekers say would soften the landing of moving there.

Zooming out, there’s also chance for Placement make the country more stable and resistant to strong-man populism promising financial security. “A two-tier society is fragile. I don’t want to live in a democracy where there’s a bunch of hay waiting for a matchstick to set it on fire,” Linehan concludes. “There doesn’t have to be a have and a have-not class, and you don’t need the government to do forced redistribituion to make everything fair. You just need people that care about getting on the right track, and that to me is a worthy cause to dedicate a life to.”

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