The world of HR Tech is changing very fast, and the new technology coming from startups is the main driving force of this change.
Nonetheless, many HR and TA teams struggle with the question of whether they should partner with startups when choosing new software. And, for good reason!
You'll run into startups during almost any procurement process. You may be sick of Taleo, and run into an ATS vendor that has <10 employees.
Perhaps your organization is prioritizing people analytics, employer branding, or AI much more than 98% of other companies out there. You will find that many of the vendors in these emerging fields are smaller companies.
Whether you are adding a core HR system like an HRIS or are going after more future of work-esque initiatives, the ability to partner with startups will be there.
For some organizations, this can be a truly game changing relationship that accelerates their business. For example, imagine you were the first company to adopt LinkedIn Recruiter, and your TA team was able to use this before hundreds of thousands of others were sending messages and diluting Inmail response rates.
This same opportunity exists today with hundreds of other vendors. But, the downside can be just as big as the upside. Imagine that your ATS vendor goes out of business and you need to switch to a new system in short order. Maybe some of the money you paid upfront for the year is also gone. This is a real and large risk.
What’s a startup
A friend in VC did a study of their portfolio. They found that once a B2B SaaS company got to >$1 mm in annual recurring revenues (ARR), they had a drastically higher chance of success vs more nascent companies.
Getting to the magical $1 million revenue number is a pretty good benchmark to understand whether or not a company is a “startup.” Of course, a solution that has three customers each paying $350k/yr is not as stable as one that has 3,000 customers each paying $250/yr. So, there is always nuance.
But, once a company has hundreds of SMB customers, or dozens of enterprise customers, it’s pretty safe to say they don’t have nearly as much risk as a startup anymore. They have product market fit. They've figured out how to implement and support.
It's for these reasons that we almost never list vendors on our site if they are <$1 million of revenues. They typically don’t have the infrastructure to support the average company (customer success, integrations, scaling, etc), and may not have found true product/market fit yet which implies a high change they will pivot in the future.
Working with startups
If you think differently than the average company, and do want to partner with startups, here are some thoughts:
Making a bet
Tips on collaboration
If you’re ready to move forward, here’s how to make the most of this partnership:
Overall, working with startups can be an incredible accelerator for your team. It means much better customer service than most vendors give you as the company needs your business. It also means a product that is molded to your use cases.
While working with startups is not for everyone, it’s a great way to be a part of the innovation economy while also helping your business.