Raj Sheth, CEO & Co-Founder of RecruiterBox
No Funding, No Consultants, No Problem: The Co-Founder of RecruiterBox, Raj Sheth, Spills His Secrets
By refusing to buy-in to popular, quick-schemes for building a business, Raj Sheth and his co-founders have built a sustainable low-touch business without a single dime of funding.
The entrepreneurial spirit found its way into Raj Sheth very early in life. Before graduating from his college undergrad program Raj had already sold his first startup – a website that provided restaurant delivery for restaurants that did not have their own delivery service. After graduation, Raj took a job at Emc2 but after seven years of living in the United States, he decided that it was time to return to his roots – both personally and professionally. So in 2006 Raj returned to India and began working on two startups.
The first was an ecommerce site for luxury goods; the second was positioned to be the “Craigslist of India.” The classified ads site had worked well in the US and Raj thought the same could be true in India. While neither business survived long-term, there was some valuable learning in the process.
First, Raj assumed that because the classified ads site model had worked well in the US that it would also work well in India – he made this assumption without considering if or even how the site solved a specific problem in an Indian market. This type of investigation would have naturally led to a revenue model; however, since this aspect was missing, the business was ultimately unsustainable.
Second, Raj states that he “underestimated the ownership required for certain rules.” He learned that it is not wise to treat your main product as a commodity to be created or assembled by any freelancer. “The vision has to come from one of the founders or a key person involved in the business.” Without that sort of emotional investment, startups struggle to obtain long-term success.
3 Bootstrappers in Bangalore
After running out of money and closing up shop, Raj was on the lookout for his next venture when he met Girish Redekar and Rajguveer Kancheria in Bangalore. Each had recently graduated from the engineering program at the Indian Institute of Technology and together, the three decided to launch RecruiterBox. Raj notes that one aspect that ha contributed significantly to the success RecruiterBox is the complimentary skillset of the founding team, “we were self-sufficient.”
Drawing on the lessons he learned in this early days as an entrepreneur, Raj and his co-founders quickly defined a very specific problem for their solution to solve. As recent graduates, each had been on the receiving end of disorganized and often poorly executed recruitment efforts. Many companies were managing their entire recruiting process via email; which Raj likens to managing your entire customer base without a CRM.
While many solutions for managing the recruitment process already existed, RecruiterBox set itself apart by not copying what larger software companies had already introduced to the market. Instead, they created a solution based on their own insights – one that they could be passionate about and create in-house.
To date, RecruiterBox is 100% self-funded and based completely out of San Francisco. After four years in business, the company has 1500 customers and a forty-person team.
The company has sustained itself through the capital-light marketing activities of Raj who uses the company blog and front end activity to market the site. From the product-side, as a “low-touch business,” RecruiterBox is cost-effective to maintain. It is an affordable, self-service CRM for hiring which makes it easy for most clients to setup on their own. By offering a free demo, the RecruiterBox team eliminates the need for an in-house sales team and instead focuses on providing customer service and support around the clock to host demonstrations, participate in help chats and provide technical support.
Secret SEO Superhero
While Girish and Rajguveer were busy hashing out the technical details of developing RecruiterBox, Raj focused on becoming a secret SEO superhero. He dove head first into moz.com and started pumping out human readable content that was useful and void of trashy information and toxic links. As Raj puts it, “what we did do helped as much as what we didn’t do;” meaning that the team carefully curated valuable content and built their SEO status over time.
The RecruiterBox site is Google webmaster compliant and consistently appears on the first page of results when searching “recruiting software.” Organic search is one of the company’s largest customer acquisition channels accounting for 50% of their conversions. In addition to SEO, RecruiterBox relies on the Google Apps Marketplace and Chrome Marketplace to provide cost-effective customer acquisition. Because the company lives online, the location of the development work has never been an issue. As Raj puts it, “to our customers, we are not in San Francisco or in Bangalore – we are on the browser.”
The features pages of the site contain rich amounts of information which has led to linkbacks from other, high page rank sites, which only serves to further boost recruiterbox.com’s Google ranking. Steering clear of black hat methods, the team developed an SEO/content marketing strategy that included guest blogging, answering queries, posting to SlideShare and sharing documents on DocBox. By continuously providing valuable content, the RecruiterBox team has built a solid, consistent presence over the last three years.
The company site was built and is maintained by one of Raj’s co-founders who specifically developed the site to remain Google-friendly even as new pages are added. This effort has buoyed their marketing efforts which are also supported by one full-time resource producing two blog posts a week, writing case studies and creating guest blog posts.
It comes as no surprise that Raj advises novice stage entrepreneurs to keep their SEO marketing efforts in-house. He believes in training current resources or founders and in continuously iterating until you get it right. However, he does have some quick tips for selecting an SEO consultant, if it is absolutely necessary:
- Ask your potential SEO consultant to describe the exact equation they use to determine which marketing activities to pursue.
- How does he or she know that their selected configuration of activities will be fruitful?
- Remember that no one knows what is going on inside of Google so in order for your consultant to be effective, he or she must have some hypothesis that is based on experience, tracking and results.
While RecruiterBox is proud of its bootstrap roots, Raj notes that the team is open to exploring the role capital will play in 2016. In the early days, the team did not want fundraising efforts to distract them from product development; now, with the product established and the beta phase behind them it is time to re-examine growth goals and work backwards to determine if the current revenue stream can support those goals. With 25 of the last 40 employees joining RecruiterBox in the last 8 months, the team is mindful of the bottleneck-effect money can have on business growth.
Raj hopes to increase the conversions that result from sign-ups for the solution’s free demo by at least 10% this year. The competition in the space is fierce; at least 3 to 4 well-funded competitors have launched in the last five months. However, the lack of a clear market leader gives the guys at RecruiterBox confidence.
To handle the doubts that inevitably creep-up, Raj ignores all those that are based purely on emotion and focuses on those that are backed by data. Since everyone who signs-up for the free demo of RecruiterBox interacts with a member of the support team they are able to gain helpful insight on the marketplace and their competitors. While it is tempting to react to every piece of feedback, the RecruiterBox team chooses to implement only those changes that align with their vision.
From Raj’s perspective, the decision to develop a product using the talent and skills of the founders and to then fund a business based on the capital generated from the product is one that he would make again and again. It has provided him with a sustainable business that is bolstered by the passion each of the founders has for the success of the company.
- Bootstrapping 101: How to start a software business on a tight budget
- The importance of having a well-rounded founding team
- Do’s and don’ts of building any kind of software product
- Top strategies on how to utilise SEO with the right kind of content
- What to do to get your name out there and have top-level influencers and companies use your platform
Full Transcript of the Podcast with Raj Sheth
Nathan: Hey guys. Welcome to another episode of the Foundr Podcast. Thank you so much for taking the time and sharing your ear buds with me. And as always we’ve got another awesome guest for you today. His name is Raj Sheth and he’s the co-founder of a company called Recruiterbox. And he’s based out of the Bay Area but also they have offices in Bangalore. And he must be born in India and a really, really cool guy. We had a really interesting conversation and we really broke down something I’ve never spoken to people about before and that’s around, you know, when you wanna raise capital how much do you work out how much you need to raise. And we actually played around with some numbers and he was really transparent with like the troubles…not really the troubles but the challenges he’s having with his business.
But also he’s crashing it, like they’re doing some cool stuff with SEOs. We talked about some cool stuff they’re doing with SEO and it was a really great interview, great conversation. So I think you’re gonna get a ton from this one. Really…kind of really switch the scenes up with Raj. It was awesome.
Anyways, look, guys, if you are enjoying these episodes please, please, please do take the time to leave a review. Do check out the magazine. It is the fruits of our labor. You can go to foundrmag.com/app, F-O-U-N-D-R mag.com/app, A-P-P, and you can download the magazine from the iTunes Store or the Google Play Store. And it’s a monthly publication about entrepreneurship.
All right guys. That’s it for me. Now let’s come to the show. So the first question I’m gonna ask you and that’s what I ask every one of our guests that come on is how did you get your job?
Raj: Absolutely. So I’ll give you a quick 30-second story which will, you know, set a lot of context. So I’m originally from India and I went to the U.S. for my undergrad to Babson for four years which is where I started my first little Internet company, a student business which was a website that delivered food from restaurants that did not deliver themselves. And then after college…and that’s a student business that I actually sold to yet another student right before graduating because I was gonna graduate and I got a job at EMC Squared which was my first job. And I worked there for three years.
And after seven years in the U.S. I actually moved back home to India. And pretty much between 2006 and 2010 I attempted and worked on two web startups. One was a classifieds portal like Craigslist for the Indian market. And the second one was an e-commerce site for luxury goods. But what happened is I made a lot of mistakes with both those companies and I learned a lot of lessons. And at the end of 2010 I actually met, you know, these two guys in Bangalore. They were also about to start their own company. They were engineers from, you know, the Indian Institute of Technology which is a great engineering school. And that was one of the reasons…one of the big lessons that I had learned in my previous startup attempts that unless you have a well-rounded founding team, the going gets very tough when you don’t have the right team for whatever goal you have selected.
So anyway, with these two other co-founders we launched Recruiterbox which is essentially also on the Internet. It’s an Internet venture but it’s a B2B one which is it’s a software for other small businesses and growing businesses to manage their hiring on, right? So that’s how I got this job. Of course, I can get into why did we pick Recruiterbox and how we got started and so on but that’s the short background as to how I got this job and we’ve been now doing it for five years…four and a half years and we have over 1500 customers, more than half of them in the U.S. And we are now a team of 40 people. So still keeping my job and loving it and that’s a quick little background.
Nathan: Wow. Awesome. This is interesting. There’s a lot I’d like to unpack here, Raj. So I guess the first thing I’d like to start with before we delve a bit deeper into Recruiterbox is, you know, you said you’ve tried a few other…you had a few other web startups, you know. You made some critical mistakes. What were some of those mistakes?
Raj: Sure. So the first mistake was…I’ll tell you the first example. You know, I picked something where…you know, I kind of jumped into…I had seen something in the U.S. and I figured that it would work in India as well, right, which was the classifieds model. It’s an assumption that people need a place to, you know, trade and buy and sell secondhand goods. However, I replicated a solution but I did not define the problem statement like what was the problem that I was solving for the Indian market. To be honest, I realized that many many years after only when I was doing Recruiterbox. That was the first mistake, that I wasn’t…I didn’t define the problem that I was solving.
If I had defined the problem, obviously I could have led myself into other problems like what was going to be the revenue model, etc., like how… Once we solve the problem, how are we gonna, you know, sustain it, how are we gonna make money out of it? The second huge mistake I would say is I sort of underestimated the ownership required for different roles. So what I mean by that is if you’re building, you know, a web application or a software product or any kind of a website on a marketplace, I don’t think it’s wise to, you know, treat your main platform or your main product as something which is a commodity that a freelancer can put together.
Especially since…you know, let’s say I was…let’s say I was selling bananas and it’s an e-commerce site and I’m just selling fruit. Then the website is not my product, the bananas are the products obviously. But if the site or the software application itself was the product, that is not something that you can, you know, simply outsource. That has…that vision, that creation has to come from one of the founders or, you know, one of the key people involved. So I would say that was our second big mistake. Obviously, the list is long but I think that’s the highest, these two mistakes.
Nathan: I see. And how did you know when to give up on these two web startups and move on to the next thing? Because for some people that’s really difficult.
Raj: You know, to be very honest with you and I’ll give you like a more fresh start answer, but the truth is that the money…I didn’t have money. So that’s the truth, like it wasn’t… So I’ll contrast that with another example. Sometimes there are people that take the company to some extent, okay, and they are making some money out of it. They might even be making handsome money out of it and they are at least getting a salary. And then those dilemmas come in, you know, how do I know when to give up, how do I know if, you know, I’m going to just float along in a rot, etc. etc.?
In my case, unfortunately or fortunately, it was more drastic. I abruptly came to certain dead ends. Money was gone. I had a little more support and hence more motivation to try something different because maybe, you know, there was certain capital or a partner available for the next one. So that’s…that was a tough one, you know. And many times it was a gut call, right, whether, hey, I should hang in there for six more months. By the way, I would also qualify this as a mistake though because, you know, there are at least two ways of looking at something and one could say that, you know, if I’d been internally persistent then I would just have fixed all the mistakes of that first thing and kept doing it. So that’s another way of looking at it.
Nathan: So what was different for Recruiterbox that kept you going? Like, you know, I’m on your website now and you’ve got some amazing super impressive companies. And we’ll talk about that in terms of business development standpoint. But like what was different for Recruiterbox? Did you notice, you know…you mentioned also around the founding team, you found that to be a lot more solid. Did you start Recruiterbox in Bangalore?
Raj: Yes. Yes. We started in Bangalore. So to answer your question, there were two three things that were very different which sort of led us here. The first was the founding team. So my two co-founders not only do…between the three of us we had a very complimentary skill set, you know. One is a back-end engineer, the other one is a product designer who also wrote all the code. So between the two of them the entire product was launched.
In fact, for the first 12 months we didn’t even have a fourth person, it was just the three of us. We didn’t have any other employee. And I was working on all marketing sales, growth, customer support related functions. So what was different was the founding team. So we were self-sufficient, right? That was…I would say that was the biggest reason.
The second biggest reason is we defined the specific problem. So we said that, you know, lots of hundreds of thousands or small companies in all over the world and U.S. and elsewhere are using an email address to manage their hiring process, to manage their incoming job applications. And this ought to be very difficult.
Imagine managing all your sales leads without a CRM, right? It’s the same thing. We are a hiring CRM. Imagine managing 500 resumes just out of your email box. It is almost I would say impossible to do. It depends on your volume of hiring. It depends on how you need to collaborate with other team members on interview feedback, etc. So it was a very definite problem statement in that sense.
And then our product was a point of view that, hey, for those people using email this is how a hiring software should be. So we didn’t try to make a very…we didn’t try to copy like a little or a tiny or a very large software. We had our own point of view on how a hiring software ought to be. So that also served us very well because it was an original point of view, right?
And the current thing that was different is it was a product that we didn’t need a lot of capital to market it to be honest because, you know, once I had it on Google Apps Marketplace and Chrome Web Store, and once we of course did a lot of SEO activities around our front website and the blog. If you notice if you go to Google and type in recruiting software or recruitment software or applicant tracking system, you’re going to see a Recruiterbox come up in the top three or four results which to date remains our largest source of traffic to the site.
Raj: And once that traffic comes to the site they just sign up for the free plan and it is largely a self-serve product. So we didn’t even need a sales team because it was a small affordable product, people could…you know, more than 70% of the people that actually converted and paid could figure out the product themselves. So yes we did have like a 24-hour online support, an email support and chat support. And yes we also provide them more training and we get on screen shares with all our customers from all over the world. But we could go a lot further as a self-sufficient company, the three of us, and then start re-investing in hiring people and employees and improving the product and investing in marketing, etc.
Nathan: Interesting. That customer acquisition channel around SEO, that sounds gold, man. Like are you able to give us some insight around how you did that?
Raj: Absolutely. So to be honest we… It’s not like we knew too much about SEO. And it’s not like we were experts. Even now it’s not like we are experts. But there were two or three basic things that we started with. So the first thing we said is…you know, we read up a lot of stuff on seomoz.com which now I think it’s only called moz.com. And what we figured out is, you know, we tried to make the site very Google webmaster compliant, right? So if you see our front site it’s not just…we haven’t prepared our words randomly. We specifically talk about recruiting software and recruitment software and applicant tracking system and the advantages of it right on the homepage.
I agree and I understand that the homepage looks a little heavy but the funny thing is we’re sort of scared to change it now because it does so well in Google. And what we did is we didn’t have a lot of content or a lot of pages actually. We had human readable content which Google sort of, you know, gave us points for that, hey, this is like useful information. It’s human readable. There is not a lot of trashy information or toxic links, etc. So funnily, you know, a lot of things that we did not do helped just as much as all the things that we didn’t do on the front site. But that is just 40% of it.
The other 10 to 20% I would say is the other pages of the website, all our features pages. So there is a lot of information there on essentially what, you know, a recruiting software ought to do. And the site has like rich, you know, amount of information. But more than 50% of what leads to your linking in my understanding is all these other very good websites link into Recruiterbox. So again this was not done by some, you know, black hats strategy or we didn’t hire a team or a person or we didn’t go about just putting links elsewhere. These were actually all one by one organic links. So for example, if you got an article on New York Times or Washington Post or, you know, Business Insider or any number of sites, we had a constant process where we would either guest blog for some of the sites or in some cases those sites happen to write about us and we had sort of, you know, answered some queries, etc.
And essentially over a very long period, again, this was not overnight, it took I think more than three plus years for very good websites, I think what Google calls, you know, high PageRank websites, to link back to Recruiterbox which in turn also helps our ranking. So these were some of the activities that we did. We also continuously over the last four years put out like, you know, slide decks which we share on, you know, Slideshare.com, etc., or we come up with documents which we share on Docstoc and other places. We come up with constant…do blogs on our own blogging site.
So our SEO is related to a lot of content that we’ve come up with over four years. In fact, we’ve only started to do content for marketing. That’s all we did because we’ve been…till today we have not taken any venture capital.
Raj: So even today we remain a completely revenue funded, self-funded company with, you know, whatever, these 1500 companies and growing. And now they’re growing at a slightly faster rate so which is great.
Nathan: Wow. That’s exciting. And I’m curious, you know, are you based out of Bangalore right now or…because I thought you were from San Fran originally? Like are you in between…like where are you based?
Raj: No. I’m based out of San Francisco completely actually for almost two years now…18 months. We have seven full-time employees in the U.S. and we have 33 employees in Bangalore. So we are 40 people. I come to Bangalore twice a year for two weeks each, two weeks in June and two weeks in December. So I am completely based out of San Francisco.
Nathan: I see. And, you know, I’m curious, you guys have got some links. When you come to your website, you know, on the homepage, the first thing I noticed was, you know, what you guys are about but then also you’ve got some big, big well-known companies using your software Recruiterbox. So straightaway I’m like, boom, that’s impressive. These guys are legit. I trust them. Well, if Groupon are using them…if Groupon is using this, Crunchbase, Olak, Al Maida, like these are big companies, well, this software must be good. It must be legit.
I’m curious around, you know, did you have any challenges? Because it sounds like your co-founder was from Bangalore, majority of your team is in Bangalore. Did you have any difficulties with I guess doing business development or getting some of these clients on? Like, I’m really curious around that.
Raj: Sure. So see, funnily, and that’s…you’re right, that’s the most interesting point but if you…if you go back to the whole thing about Google and SEO that I was just describing over the last few minutes, that is exactly why we could actually do it from Bangalore. And let me give you more color into that. We are a very low touch…we have low touch business development, right? So for example, we didn’t reach out to or know someone or call someone at Groupon or Crunchbase or Olak or , right? They either 50% of them found us through either a Google search or our organic content, okay, on Twitter or on Google. And the other 50% we were recommended to them by their recruiting coordinators or recruiters or their peers, etc., okay?
Raj: Now to them if you think about it, we are not really in San Francisco or in Bangalore, we are on the browser. So we have customers in 42 countries. So the physical location does not really…did not really play up much and it continues to not play up in our case because we have 24/7 support and sales, first of all. So we have two to three support folks in the U.S. and one support person in India so we can cover the entire 24 hours. And we even have like certain departments in the Australian government, by the way, certain teams that are our customers. And regardless of the person’s time zone we are always available to give them support response within 5 or 10 minutes or jump on a screen, share training within three or four hours. We would schedule it with them and it goes on 24 hours a day.
So we actually take advantage of being in these two different time zones. And we largely…this is, you know, this is a couple of hundred dollars a month product, so if we were selling a million dollar license then you are right. It would be impossible to do it unless we were physically all sitting where the customers are sitting.
Nathan: Okay. This is really interesting because, like, I come here and I’m thinking I wouldn’t pick that predominately. You have a big team in India. You know, like this is amazing. So, I’m curious and this is something I’m going through right now. In terms of SEO, do you think you need a consultant to help or do you guys have a full-time SEO person? Like this is something that I’m actually considering right now within Foundr. I’m curious. Like what are your thoughts on that?
Raj: Sure. Absolutely. So we also made a couple of mistakes there by the way. So I think an SEO consultant would be great if they are the right one, if they actually…
Nathan: It’s so difficult to find someone good, right?
Raj: Yes. Even when I’m giving you this answer I’m thinking in my head that this is not really a helpful answer but it’s the true one. The truth is that you will talk to a lot of people and their SEO consultants are fine but you don’t really know what you’re getting. So, actually here is a tangible point. So we did have a firm for a period in the middle who was helping us. And I’ll tell you the best way to pick an SEO consultant or a firm, etc., if you don’t have that expertise in-house or at least if you don’t have somebody internally who can take some time out to keep learning and operating things.
So by the way, that would be my first suggestion that the startup founders or the entrepreneurs, whether they themselves between their team or one other…one or two other people in their own team, even if they are not experts they should work on this themselves and keep learning and, you know, keep reading seomoz.com or, you know, other…there is a lot of material out there. Like, you know, it’s great how much is available right there, right? And you are also putting out material. You’re putting out this interview, etc. So that would be my first preference.
The second preference is if you have to go out, if you have to get a firm or a freelancer etc., you should have them describe to you the exact equation based on which they pick their activities. So if somebody tells you that these are the activities, this is what I’m going to do, I’m going to put 75 links here or I’m going to write this and share it in these five places, so I think it is helpful to ask them why they think this configuration of activities will lead to something because what you’re looking for there is if that person has…see, it’s not like any of them intrinsically know what’s going on inside of Google. None of us do actually.
But if they have done it several times before, they will at least have some hypothesis that, okay, if I do these four things this seems to happen, if I do these five things this seems to go wrong, etc.So that is what you need. The problem is if you have people blindly doing the activities, that they’re like, “Oh, I’m a SEO consultant. I know I could just, you know…I’ll put out these blogs and these links and these things,” and if they’ll never track what happens based on doing that and why that is done, that is a problem. So it’s just something to be cautious about.
Nathan: I see. So do you guys have right now like an in-house person or a consultant you use or not at all?
Raj: Not at all actually. The funny thing is I’ll tell you how it is split up. So, my other co-founder was the person who made the front site. He did a lot of research about, you know, a year and a half, two and a half years ago, and he got the front site in very good shape in terms of SEO. And he sort of built it in such a way that even if he added pages etcetera it would help overall but that was the one big thing.
And the second thing that helps is we were constantly putting out content. So we, we just realized that after seven months of doing that we came on the first page, after another six months we came right on the top. And it was a combination of all the links that we had built one by one, not any spammy links, and our website, and the structure of our website.
So if you see the homepage there are like literal blocks of things there. You know, we go through why you should use a recruitment software, need more reasons, check out all our features, etcetera. If you just keep scrolling down you’ll see that all of that is in some shape or form helpful information.
Nathan: I see. And I’m curious like when it comes to your team, how many people do you have doing content full time and how much content do you produce on a weekly basis?
Raj: So we have one person doing content full time and we produce two blocks per week. But at different points in history we had also picked a content agency or an HR expert that could specifically write about certain hiring practices, certain recruiting practices and so on. But internally we have one dedicated person who owns the entire blog who adds case studies.
So if you go to our homepage and you look at case studies on the top she talks to our customers and she constantly adds case studies. And basically any other additional changes to the front site she also does including now putting out other guests posts and posts on LinkedIn, etcetera. So right now we have one dedicated person.
Nathan: Got you. I see. So from the sound of things things are going well Raj. You know, you’re self-funded, you guys are doing well, you’ve got some great customers, you’ve got proven software product. What’s next and what are your biggest challenges?
Raj: Wow. We have lots of challenges actually but I would say one that’s immediately a very big one on our mind is, so we get a lot of people signing up on the website but now we’re trying to increase obviously but we’re trying to increase the number of conversations from the people that sign up.
So I’ll give you an example. We are fairly transparent about our numbers but we get close to…we get between 1500 and 1800 people, companies signing up on the site every month from all over the world. And some are companies, some may not be companies, you know, they may be what we call astray signup.
But the point is we think that for our kind of sass business software product, we think that if we get to a 10% conversation, so if I have 1500 signups so I should have 150 companies using it well and converting and paying for the product.
Raj: Right now…right now I’m at 100. So it needs to go to 150. So this is a very big challenge I feel because to be honest internally we have neither had the expertise nor the resources in terms of people who are focused on looking at this problem but now we finally have that. So I’m very excited about the next six months.
We’re doing…we have broken down a lot of things and, you know, we’re going to go after how to onboard people well onto the product, what should the screens be, you know, who should we offer a demo to, who should we not, what should be the emails that are sent in the first 14 days. We are now revamping all of that in September. So I’m very confident that we will be on our way to 150. That’s our one big challenge.
Second challenge is…and it would be silly to ignore this but we are also in a very very competitive space, you know. In the four and a half years we’ve been there, there is probably a new competitor every month that comes up, or every two three months, so.
Raj: Maybe, maybe one…maybe like three or four competitors in the last five years are also very very well-funded so it remains to be seen how they’re going to approach this over the next few years. But it’s a challenge but it’s not a worry because it’s a very vast and open market and there is no clear leader, there is no market leader yet so we feel pretty confident about our position.
Nathan: I’m curious like when it comes to, you know, knowing that all these other companies are popping up with, you know, obviously not the same exact service offering as you but, you know, trying to tackle the same problem, how does that make you feel? Like, you know, I know you said you’re not that concerned but like, you know, what goes through your mind man?
Raj: So there are two…there are two levels or parts or two levels of concerns. One…one I would call rational database concern, one is irrational. So irrational worries we all have. I think we all have insecurities that oh what if this happen, what if this doesn’t happen, or there is all this money and what if some big changes and something happens to our funding and all of that.
So to be honest, I just ignore that. I don’t know…I don’t know. That’s the honest answer. There is no sugarcoating that. I actually just ignore that. I don’t really spend my time thinking about it or I don’t worry about it at night.
But the rational database concern, that is…I’ll tell you what that is. So we have a lot…all our signups, whether they convert to customers or not, interact very heavily with our support team, right? And with our onboarding team which is like a sales team but we call it onboarding because they’re not going outboard, but whoever signs up, they help them. You know, they pitch the product, they show them how to set it up, etc.
Now, through this interaction we learn a lot about what the market is looking at, how are they looking at our competitors. Somebody will tell us that, “Oh, you know, in this competitor I can do it this way and, you know, it seems like that’s a handicap on your product.” So those things, it’s very easy for us to act on if we believe that it’s part of our product vision, if we believe that is something our product ought to do. We don’t react to all feedback universally. But now, and that’s what the 33 people in Bangalore helps support by the way because they are the people who are working very fast on the product, all the product and engineering is here.
So if you notice we have a very heavy product engineering team. We have far less people on the marketing customer-facing side because you can make a lot of tweak by focusing on the product, right? So we take that feedback and then this answers your question, you know, about competitors because there is some…that is data and ignoring that would not be good business sense, right? So we don’t ignore that but just worrying about the marketing generally is not productive.
Nathan: I see. Okay. Because like I was going to ask, you know, do you have a decent size team? So you have a big focus on product?
Raj: Exactly. Exactly.
Nathan: And in terms of… Sorry. Go on.
Raj: No. I’m saying that in fact even the way we’re looking at marketing going forward is going to be enabled by the product, right? Instead of saying hey, we’re going to do a whole bunch of PR and public relation, a lot of digital ads, our solution our strategy is always to tweak things in what happens when the person signs up. Right? So we’re going to make a lot of tweaks there so, you know, more people will complete the onboarding, know how the product can help them, etcetera. So it’s all product based marketing that we’re focused on.
Nathan: Got you. Got you. That’s a low hanging fruit by the sounds of it.
Raj: Exactly. Exactly.
Nathan: Got you. I was going to ask, you know, when it comes to, you know…you said some other companies in your industry are funded in terms of scale. Like have you guys considered looking to raise capital to fuel growth and how come you have not? Like what are your thoughts on that?
Raj: Yeah. Got it. So the thoughts are that we are going to… We wanted… There are two things here. The short answer is we are going to look at capital and the role the capital is going to play in a further growth in 2016. So by the second quarter of 2016 which is like about three to four months from now, we are going to start thinking about it.
The reason we haven’t thought about it in the last year and a half, I mean before that I think we were too small and we were like already making good revenue so that an angel round did not make sense but I think we were still not ready for a Series A. So this is about a year and a half, two years ago.
In the last year and a half we felt that we needed to learn a lot of things, improve a lot of things on the product, we needed to tweak a lot of things. And we had certain bets about, you know, other problems that we wanted to explore in hiring that Recruiterbox can solve and we wanted to test whether this is solving enough of our problem. And we needed to build our product team.
So by the way, I don’t know if I mentioned this but I keep telling you we are 40 people but 25 of them were hired just in the last eight months. So we were only 15 people at the beginning of 2015, right?
Raj: So…and revenue was coming and we re-invested all the revenue in basically hiring people. So the point is the way we were looking at it is, if we had gotten distracted by the whole fundraising activity and actually gotten an investor a year ago, then a lot of things may have gotten hijacked and it would look like a very different company. At least that is what we thought. So we wanted to first set out and do all the things which we already knew we had to do deliberately.
And as long as…like I explained all our marketing activities we don’t really pay a lot of money to acquire customers, we don’t need a very large sales team, right? So we need to now look at, you know, the pros and cons of where specifically money is going to be a bottleneck and then react accordingly. And if money is going to be a bottleneck to growth then sure then we would have to raise money.
Nathan: I see. So, when it comes to like, you know, you said you guys are looking to do a Series A, how do you work out how much you need and stuff like that? And how much do you…how do you work out how much of your company you want to give up?
Raj: So let’s speak some numbers. Let’s say next year I’m at $5 million in revenue per year. Let’s say that’s our rate. Right? Roughly 5 or 6…let’s say $6 million. I’m at $6 million and that means I’m doing…are a recurring revenue business, right? All our customers their cards get charged every month. So annual recurring revenue ARR would be $6 million which means that monthly recurring revenue would be $500,000 a month, right?
And obviously I will have a plan that deploys a little less than $500,000 on my entire expense side, the team, the team in the US, the team in India, marketing, product, everything, technology. And essentially that is a moving break-even point.
Now, if I were to say that for our next plan, let’s say for our 2017 plan, we don’t need to spend $500,000 a month, we need to spend $2 million per month, like literally 4X.
Raj: Or we need to spend $1.5 million a month. Then we know that we are going to look at something around 20 to $25 million….to raise 20 to $25 million because we would already be at a rate of $5 million and we want to quadruple by spending by 4X. And plus we need to have a runway of at least 12 to eight months. Right?
Now, again, there are a lot of assumptions but just for the sake of giving the listeners something to touch and feel, we’re going through an example, otherwise it would be too vague. But I still would start at whether that $2 million spending per month is required and what is that going to get us in 2017 and ’18.
But let’s say if we did say this and we decided we wanted 20 to $25 million and we would put up a plan around that as to we need to spend 4X because we are going to have a growth by 8X let’s say compared to whatever we had forecasted initially or whatever we grew from 2015 to ’16.
Now everything would need to be calculated from that, you know, what the valuation would be or how much we would give up, etcetera. But I don’t think even for whatever said amount we would probably, you know, give up more than, you know, I don’t know, 20 to 25% of the company.
But again I’m throwing out a lot of numbers here, it would really depend on the specific thing. Maybe we would give out less and maybe we would take less money and maybe the plan… It would all be derived from what the plan is, the operation plan.
Nathan: I see. And where will you try to get it raised, will you try to get it raised in India or in the States?
Raj: So our market is in the US and we are a registered parent company of the US so any raise we do, any capital we do will only be in the US.
Nathan: I see.
Raj: That’s where we collect revenue. Whether the customer is in US, UK or India they are paying our US Company, so the US parent and the Indian company is like a subsidiary of the US Company.
Nathan: Got you. Got you. Okay. Awesome. Wow. That was really interesting and I’m sure our audience will get a lot of value from that, just that quick little breakdown. I guess…look, we have to work towards wrapping up Raj. This has been great.
Raj: I’m glad.
Nathan: Are there any, any last, you know, final words of wisdom that you’d like to finish off on? Like do you have any actionable items for our audience? There was a lot to take away from this conversation but is there anything else you’d like to finish up on?
Raj:We talked a lot about, you know, our strategy and numbers and all these things, hopefully some of it was useful. But when you use the word wisdom what comes to mind is, and I know this might sound too generic for people especially when they’re getting started, people are very tactical and they’re excited and they are ambitious which is all great. But I think the one thought that I would leave people with is they should pick something that they want to spend doing for the next 5 to 10 years. They should pick something that they love, right, because it becomes very difficult to say that I want to make X money or I think this will sell well or this seems a very good idea and you get started with it but almost always it’s going to take many, many years for that to actually manifest.
So the only thing that would keep you going is if you actually love the problem that you’re trying to solve or all the things, all the hoops that you’re going through. We hear a lot of people say it like in different speeches and all but I think it’s definitely not, you know, bullshit. I think it’s very relevant. I think I would only pick something I’m going to love doing because life is too short and all of this is a gamble anyway, like people make it. People don’t make it. But I think it’s important to do what you love.
Nathan: I agree 100%. Just on that, like how did you know that you’d fall in love with creating recruiting software?
Raj: So, again, the honest answer is I did not. I always wanted to do…my primary excitement factor was having some sort of Internet property like an Internet website. And that’s why specifically I worked on the marketing problem. The recruiting software problem excited me later when I was discussing it with, you know, my co-founders five years ago because I felt that, wow. And all three of us had worked in large companies before where we were pulled into interviews by HR, like we were conducting interviews, and we remembered how messy it was to just do it by email back and forth. And I thought it would be so powerful if we could reach out to, you know, a hundred thousand companies and with just a couple of clicks and login in the browser they could have a beautiful process.
That is what was very exciting to me. And having this Internet site which, you know, people all over the world could use, that is what was very exciting to me. So I think that was my… And, you know, whenever we got bus of traffic or whenever the SEO worked out or different things were happening, those things were very exciting to me. So it wasn’t clear at the beginning but it was, you know, just through with the recruiting but it sort of all came together once we decided on a problem.
Nathan: Awesome. Well, look, last question, Raj. This has been an awesome conversation. Where is the best place that audience can find you?
Raj: So my Twitter handle is @whoisraj but if they want to send me a personal note they can go to [email protected] which is R-A-J. And, again, if they go to recruiterbox.com/prepare that’s the book that I’ve written on, you know, how to hire early employees for a startup. So that’s like just a hundred page guidebook for other startup founders.
Nathan: Wow. That’s awesome. I have to ask you about that book just like 30, you know, 30 seconds or 2 minutes, you know. How is the best way, you know…what’s the best way to hire that you found for early stage startups?
Raj: I think the mistakes that we were making is I think I was not very good at evaluating because we… Let’s say, for example we said that let’s hire a customer support person and then we got into an interview and we started asking him questions. However, I thought that basically a structured process in your hiring helps a lot. And then you don’t even have to historically be good at hiring. And what I mean by structured is now we follow four steps, like we call it the PARE Process. The first is a problem. We first decide in one line what is the business problem that this role is going to solve, right?
And the reason…if we say that this person is going to essentially, you know, ensure that all customers paying or otherwise are, you know, happy and satisfied, I’m just taking an example. The book goes into a lot of detail on this. Based on that statement, I’ll come up with the activities of the role which is the recurring activities that the person does every day or every month or every week to achieve that business problem that they want to solve, right? So it’s the activities. Based on the activities we come up with the requirements. Like to do these activities what are the skills and characteristics that person will need. Like what are the troubleshooting skills or what are the soft skills like empathy that that person would need?
And once you get the requirements you can get have an evaluation which only evaluates the person against those requirements, right? Instead of just doing something in the air which is subjective, you have an evaluation which is evaluating the empathy, evaluating the troubleshooting skills, evaluating those things. And I talk about, you know, evaluation both in interviews through questions and as simple tests, whether they are on the application form or they could just be a question or an exercise. And I found that very…it made my hiring very predictable and I started making much fewer mistakes.
Nathan: That’s awesome. That’s gold, man. Well, thank you so much. Good.
Raj: That’s good.
Nathan: So recruiterbox.com and the place to find the book was?
Raj: recruiterbox.com/prepare. P-R-E-P-A-R-E.
Nathan: Awesome. Awesome. Awesome. Well, look, Raj, thank you so much for your time. This has been awesome and we really appreciate your time.
Raj: It’s a pleasure.
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