Another day, another tech industry layoff.
At least, that’s how it’s felt lately, with tech titans’ layoffs and hiring freezes dominating headlines. If you’re a startup watching this all happen, you may be wondering what this all means for your own growth and hiring — especially as the stock market falls and interest rates rise.
If you look beyond the headlines, though, the situation looks far less scary. Below, we dive into what the current economic environment means for startups, and how you can adjust your hiring depending on your own circumstances.
Today’s economic environment, beyond the headlines
Let’s start with the bad news. As the economic environment turns turbulent, money is getting harder to come by for startups. According to Elad Gil, valuations have dropped, fundraising cycles are stretching longer, and traditional VC funds are slowing their investing pace.
However, these challenges should be looked at in context. The last couple of years have actually been an anomaly in the tech world. In order to keep the economy afloat during pandemic lockdowns, governments pumped money into the economy and made it cheaper than ever to borrow. This, along with an increased need for software to support remote work, led to a huge tech boom in 2020-2021.
In many ways, the changes we’re seeing in the market now are pushing the environment back to the pre-pandemic markets of 2018 and 2019. These were still great years for startups, though — in fact, they were some of the best we saw before COVID.
So yes, money is getting harder to raise. But, on the bright side, investments aren’t going away:
- Venture capital firms are still raising money.
- There are millions of unfilled tech jobs in the United States alone, and 73% of recruiters say they’re still hiring for growth. Credit to Hung Lee from Recruiting Brainfood for this LinkedIn poll and stat.
Tech is continuing to permeate through different industries, and this won’t be slowing down anytime soon.
Things are still far from disastrous for startups today. However, over the next few months, we’ll definitely see VC funds and investors doubling down on company fundamentals. Whether you’re pausing hiring, slowing things down, or still recruiting full-speed, here are a few actions you can take to get your hiring shipshape during an economic slowdown.
Hiring & recruiting during turbulent times
Re-examine your hiring processes
Companies that have paused or slowed hiring can — and should — use the slowdown as an opportunity to rethink their hiring processes.
When you’re growing quickly, you often don’t have the time to analyze how you’re attracting, interviewing, and analyzing candidates. Yet a leaky funnel might mean that you’re losing promising candidates along the way, wasting both time and money in your approach.
Use this natural pause to audit your hiring process and ask:
- How can we improve diversity, equity, and inclusion throughout the hiring process?
- How can we make our funnel as tight as possible?
- Is our interview process as formalized as it could be?
- How are we screening and evaluating candidates?
- Do we have processes in place for negotiating salaries with candidates?
- Where can we use tech to help us scale our processes?
If you’re not sure where to start, try mapping the candidate journey. This will help you surface gaps and opportunities that you can tackle.
Trim down external hiring costs
Over the last couple of years, many startups have prioritized growth at all costs — and their recruitment processes have reflected that. To fill roles as quickly as possible, startups have invested heavily in hiring, with large fees going to external recruiters and job boards.
As capital becomes more expensive, though, your recruiting should become more strategic.
If you’re still hiring but you want to do so in a more capital-efficient way, consider switching from traditional inbound and outbound recruiting to network recruiting. Network recruiting draws on the power of connections by letting companies source candidates through their employees’, advisors’, and investors’ existing networks.
Moving to network recruiting can help cut down on your hiring costs in multiple ways:
- On average, companies save $7,500 per hired employee referral.
- Referred employees tend to have better retention rates compared to employees sourced using traditional inbound or outbound recruiting.
- It increases candidate quality, with referred candidates being 85 times more likely to be hired than job board candidates.
Cutting down on recruiting and retention costs will let you spend your money where it matters: on hiring, nurturing, and developing the best talent in the business.
Use the pause to invest in your team and culture
Don’t forget that your most valuable future employees are your current employees.
If you’re forced to slow hiring, use the opportunity to double down on your current teams. Start by asking yourself:
- Do my teams have all the resources they need?
- What kind of training would help teams level up?
- What actions can we take to improve retention?
There are tons of self-serve courses, activities, and resources out there that you can use to keep developing your A team even when you’re not actively hiring.
Nurture your network for the future
In 2020 and 2021, we saw tech startups collectively struggle with hiring; to outcompete one another, they improved their benefits, referral incentives, and salaries. Now, in 2022, many companies are firing together, with layoffs hitting headlines routinely.
But what goes down must come up.
Even if you’ve stopped hiring for now, expect the pendulum to swing the other way soon enough. Prepare for that today by planning out your hiring needs in six, 12, and 18 months. Then start nurturing future candidates for those roles today.
Identify high-potential candidates in your extended network, get introduced, and build a warm relationship with them over time. The goal here is to create a bench of warmed-up candidates, so that you’re not suddenly recruiting for 10 open roles justas every other startup switches on hiring again.
This also applies to your wider network of investors and advisors.
Over the last couple of years, founders have held a lot of the power in relationships with investors, and they’ve only approached them with occasional updates or asks. Now’s a good time to change that: build really human relationships with your entire network of investors and advisors, not just your lead investors.
Talk to other operators, founders, and investors to help round out your ecosystem in terms of skills, diversity, and connections. This will help you expand your network for future hiring, while also just making your company more resilient overall. After all, the more people you have invested in your success, the more easily you’ll succeed.
Let other startups’ loss be your gain
Despite stories about layoffs across the industry, most startups are still hiring.
If that includes you, now is a wonderful time to snap up top talent — for two key reasons.
- Some of the industry’s top startups are currently laying off employees. These are often experienced candidates who have both the hard and soft skills needed to help a startup scale.
- In today’s economic environment, equity at larger companies is no longer as valuable as it used to be. This can help earlier stage startups compete for talent more easily.
Keep in mind that there’s always fierce competition to snap up talent that have been laid off from top startups. This is where having strong referrals, a tight funnel, and a dialed-in interviewing process will pay dividends.
Leverage the power of networks with The Swarm
At The Swarm, we’ve built a platform to help startups harness the power of their networks to drive recruiting forward in a more efficient, human-centered, and inclusive way.
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