Gem | Searching with Purpose

Hi, everyone. Welcome to Grey Matter, the podcast from Greylock, where we share stories from company builders and business leaders. I'm Heather Mack, head of editorial and content at Greylock. Today I'm talking with Steve Bartel and Nick Bushak, the co founders of gym. At a time when competition for talent is higher than ever, companies simply can't wait for prospective employees to come to them. So Steve and Nick founded GYM in 201720 to address a need that had gone unmet for way too long. A tool that helps hiring managers and recruiters to proactively pursue and manage relationships with passive candidates. Jim's software has been instrumental in helping companies update their hiring practices for the modern working environment. Today, they work with more than 800 companies across multiple industries. Jim just announced $100 million in Series C funding, which now values the company at $1.2 billion. The Greylock team is proud to be among Jim's investors and and has been partnered with the company since 2020. Jim has accomplished a lot in just four years, but the past year in particular was especially busy. The company tripled their annual recurring revenue, doubled their customer base, and boosted average enterprise deal sizes by 70%. We're going to talk today about the product development and strategy that has allowed Jim to meet demand, the origins of the company, the current talent recruitment landscape, and how the company is positioning itself for what's next. Steve, Nick, thanks so much for being here with me today, and welcome to Gray Matter.

It's great to be here.

Thanks for having us, Heather.

And first, congratulations on all your progress. It's been a big year for you guys. And before we get into what's going on with present day Jim, let's talk a little bit about how the company was able to get to this stage. The product is resonating in the market so strongly, it doesn't seem like you had to convince people there was a problem with the old way of recruiting and tracking job candidates. But what did that problem look like?

Zooming out here, recruiting changed in a fundamental way. Companies realized they just can't hire enough of the right people by sitting around and waiting for them to apply. And along with that, the competition for talent has just become harder than ever. So what's happened is recruiting has started to look a lot more like sales and marketing, where companies are taking a more proactive approach and engaging with passive talent rather than waiting for candidates to come to them. It's very much in the same way that sales and marketing teams engage with prospective customers rather than waiting for those customers to come to them. And this more modern approach is one that a lot of companies on the cutting edge have been using. Companies like Lyft, Shopify, Dropbox and a ton of others. They've been taking this approach for years now, even before they became GEM customers. And I think the other fundamental piece of the problem is when you layer on the long overdue emphasis on diversity, equity and inclusion by companies everywhere. And by the way, that was accelerated so quickly last year by things like Black Lives Matter, Companies are realizing that their inbound application pool just isn't as diverse as it needs to be, which has further driven the need to engage with passive talent so they can build a more diverse pipeline of candidates if they want any shot at building a diverse organization. Now, the problem is when you look at the HR tech landscape, it points to a really big gap. On the one hand, companies have LinkedIn, which is a great place to find passive talent that could be a good fit. On the other hand, companies have things like workday, and workday helps you track and manage your employees. The problem here is that there just isn't a great way to capture and track everyone a company wants to hire to manage the recruiting. Today, most companies have what's called an applicant tracking system. But as that name suggests, applicant tracking system software was designed for that old way of recruiting where you wait for candidates to apply. And while they do a great job of tracking the interview process, applicant tracking systems don't help companies track all the work that happens before candidates apply. And that's where the real challenge is and where recruiting teams are spending the most time, energy and money these days. To get one great candidate to an on site. Recruiting teams are sending hundreds of cold recruiting emails. They're going on campus, they're nurturing passive referrals, they're hosting recruiting events, they're running branded email campaigns, spending money on ads, all in. Companies are spending hundreds of billions of dollars engaging with passive talent. But there just isn't a great system to manage and track all of this work. So that's the problem we're solving. And that's why we started GEM and.

At a high level, how did this problem become so pervasive?

Yeah, so two other trends worth calling out. First, more and more companies are relying on people and technology to differentiate their businesses. This trend has been underway for a while, but Covid has greatly accelerated it. For example, two major fast food chains recently became GEM customers to help fuel their tech hiring, to improve their apps, data science platforms and other core operating systems. Similarly, healthcare has been a very Fast growing industry for us due to similar shifts towards technology. The other thing to call out is that most people aren't happy with their jobs and everyone's hiring and it's creating a reshuffling that someone coined the great attraction, which I think is spot on. In this environment, smart companies are looking for an edge to attract top talent. So they're using GEM as a way to reach out to people and build relationships and as well as to monitor and forecast toward their hiring goals. A great example is our customer Shopify who recently spoke at our conference. They're hiring over 2000 engineers this year alone and they're using Gem to make it happen.

Can you give me some figures of what that looks like? What are the numbers here?

Almost every month for the past six months, there's been a new record for the number of job openings. And meanwhile, over 55% of people say they're open to new opportunities. So, yeah, you know, in this environment, smart companies are, you know, looking for an edge.

Let's talk a little bit more about this idea of passive talent. Why is it so important for companies to tap into this pool versus those who are actively looking?

Every company is of course, you know, looking through their inbound applications. They're using all of the traditional ways of hiring. But what companies are finding is that it's just not enough in this new world and this new knowledge based economy, because, you know, a lot of the best talent just isn't looking for their next role when, when they were approached for their current role. And if you really want to have an edge in the knowledge based economy, you know, your people are your biggest assets. And so in order to hire the very best talent, you actually have to go out there and find them. Because most certainly some people will come to you. In a lot of cases, they won't.

Just to put some numbers behind that, 2019 was the first year where more than half of knowledge workers didn't apply for a job, meaning a company came and found them. And that's just how pervasive this has become.

But even with some big problems like we're talking about here, some companies are still hesitant to take on new technology. How did you know for sure that they'd be willing to try out yet another platform?

In the early days of gem, we were actually looking at a completely different idea, one in the sales space. And we spent a few months trying our best to get that off the ground. And in doing so, we went and talked to almost 100 organizations about how they run their inside sales Teams. And what we learned there is that sales and marketing are just so similar to recruiting. And we also got exposure to all of the great technology that sales teams had. And we thought, huh, you know, I had spent five years at Dropbox during hypergrowth from 25 people to 1500, and we were trying everything we could to recruit candidates. And Dropbox was already adopting this more modern approach of recruiting, looking a lot more like sales and marketing. So it helped us connect the dots there. And then what we did is we went and talked to 50 organizations before starting JAM to make sure that Dropbox's more modern approach was the same approach that many companies were using to attract talent. Right. And what we found is, sure enough, almost all of them were taking that same approach as Dropbox. But the really interesting thing that gave us so much confidence is that the top 10% of companies were adopting sales solutions for their recruiting. And that was the big aha moment for us. That gave us a lot of conviction that they would be willing to try out something that was specific, custom built for the recruiting space.

We saw a few different data points like that. So, you know, I spent a bunch of time at Facebook before starting gem, and yeah, you know, Facebook, you know, was using Salesforce to power their own sort of internally built CRM with at the time that I was there, they had a significant number of software engineers just building internal recruiting software, which was just, yeah, such a great data point on how big of a problem this is for a huge company like Facebook.

Wow. And once you knew the TAM was there, how did you identify the right approach to building a solution and how did you know you could do it differently than the others?

One of the things that we noticed that was a real aha moment to us was that the recruiters that we were talking to, maybe 10% of them were essentially trying to use a sales automation solution, but for something that wasn't designed for, for a recruiting use case. And that just really convinced us that these problems are really similar.

And.

But we thought that a recruiting specific solution would just be much better. You know, there's a lot of integrations in terms of integrating with recruiting systems, integrating with different type of funnel sources that are, you know, a little bit different than in the world of sales. The way that we started here is, is once we were convinced that, that this was a problem that we wanted to solve, we started by just actually just building like a very small chrome extension in two weeks, which is the very first MVP. And we gave that Chrome extension to those 10% of recruiters that we had met who were actually using sales automation solutions. And then these are Chrome Extension, which integrated a little bit better with some recruiting systems to hook into their sales automation solution. And yeah, I think in just that two weeks of coding, we started having recruiting sourcers using that Chrome extension all day, every day as part of their work and they love it. I think I remember us getting some really happy emails saying, this is just like saving me so much time. It's cutting out all the tedious and manual work that I have to do day to day. We used that MVP and then went and actually built out the proper first version of gem. And I think those value props that we started with are actually a lot of the same ones that we're trying to drive today, but at a bigger scale. And you know, those are essentially cutting out a lot of the tedious and manual work recruiters have to do day to day and allowing to do them to do strategic things like adding a little bit of personalization to their cold outreach instead of just copying and pasting data between five different tabs. And you know, we've since evolved that to layer on analytics on top of that and work for different type of funnel use cases. But yeah, that was, that was the very beginning and kind of the core value that we drove from day one.

I think one of the really cool things about that approach of getting to our first customer within two weeks of building is it allowed us to be super customer focused and work hand in hand with them. And that actually uncovered a bunch of things about how we could differentiate GEM as a recruiting specific solution from the rest of the sales technology. For example, Nick mentioned personalization. I think it really reinforced the importance of personalizing outreach in recruiting compared to sales organizations where they might send mass email and kind of spray and pray. Right. I think the other thing, it reinforces the importance between recruiter and sourcer collaboration with hiring managers. Right. The world of sales and marketing just doesn't have this concept of a hiring manager. So we were able to double down and focus on workflows that improve that collaboration. But it all came back to getting those, those first customers very quickly so that we could work hand in hand with them to design something that was custom built for the recruiting industry.

Right. And from those early days four years ago to today, you're working with more than 800 customers who are some of them. And what are you hearing about how they're using, Jim?

Yeah, it's been quite the journey and I'm so grateful to get to work with so Many incredible customers these days. These customers span so many different industries. I think in the early days we were laser focused on building out a product that tech companies could adapt. But now we have so many different verticals and types of customers. You know, of course we have a lot of the biggest consumer tech companies like Pinterest, Peloton, Lyft, also a lot of the biggest B2B SaaS. Companies like Stripe, Twilio, Cisco, Meraki, all use GEM to power their recruiting. But then we have healthcare companies that's really started to grow a lot as a vertical. Companies like Hinge Health, Banfield Pet Hospital, and then financial services companies like Robinhood and Plaid. We've also started to see some really interesting traction with large enterprises. For example, two of the biggest fast food restaurants signed on with GEM over the past year. But all in, we're working with some of the best companies out there. Over 100 unicorns use GEM. Companies like Gusto, Sift, Cockroach Labs, and half of the biggest IPOs this year were all GEM customers, which is really exciting to see. One of the data points I always like to look to and track and make sure that we're doing a good job of is G2 Crowd. G2 Crowd is kind of like the Yelp for B2B software. And we're really proud to have a 4.9 out of 5 star rating on G2 Crowd, which is amongst the highest in the industry.

Yeah. In terms of what we were hearing, one is that we make reaching out cold to talent five times faster by cutting out the tedious and manual work in the process, freeing up recruiters to focus on strategic things like adding personalization. We are also helping companies operationalize their recruiting teams with analytics because for the first time they actually have visibility into the work the recruiters are doing day to day. And that allows them to run a more effective recruiting organization, actually make progress on diversity initiatives and be better partners to the C suite and to hiring managers in their organizations. Because now they actually sort of have the data to back up their communication with these teams.

I recently spoke with our executive talent partner, Holly Rose Faith, about her recruiting playbook. And the consistent theme was the need for a repeatable scalable process, but that it's always going to vary depending on the company's size, stage, resources, who they're looking for. And how does Jim do this, specifically with different company stages and sizes?

Yeah. So every company out there sources whether they're big or small. Right. Ranging from really small startups who don't have any talent. Brand and need to find a way to get the word out there all the way to large enterprises who are hiring for such a large volume of roles, but also specialty roles that they need to source.

What were the early hiring days like at gem when you were still building your minimum viable product? Was it just you two or who did it?

So yeah, it was Steve and I applying to Y Combinator together. But actually midway we started working with a classmate of ours from mit, Drew. And Drew started contracting with us Halftime he had some extra time on his hands and he ended up becoming our first full time engineer after we raised our seed round. Interestingly, the second engineer we hired we used GEM for, which was then called Zen Sourcer. So Steve, I believe did some reach outs to some of our network from mit. And yeah, Jet replied and mentioned the timing was actually interesting for him and he was starting to think about what's next.

I'm pretty confident that actually the first 30 people we hired were all passive talent. Not a single one of them applied.

And I imagine if you talk to a lot of other startups, the situation is pretty similar. Again, I feel like I may not be doing my job if I don't mention this, but we also have a Free for Startups program, so we actually get pretty good feedback from founders. Because when you think about the very early days of startup hiring, a lot of it is just reaching out to talent in your network and getting coffees and telling them about your company.

Absolutely.

Outside of that, as companies scale, they start to develop more operational rigor and they start to lean more and more on analytics and being data driven. Just a few examples of operational excellence and rigor that companies add as they scale. I'd say the first is rules of engagement. And in a nutshell, what rules of engagement are is a set of rules that determine whether it's okay for a sourcer or recruiter to engage with or reach out to a passive candidate. Right. And the goal here is to prevent multiple recruiters from the same company reaching out to the same person in the same month. Right. Something as simple as that though, has been an unsolved problem in the in the world of recruiting until Jem came along and could codify those roles and actually have a single source of truth to track all of those relationships and touch points. And as a company scales, they can develop more and more complex rules, but usually they start with something pretty simple there. I think another great example is companies start to operationalize passing off a set of talent relationships when a recruiter moves on to a new role within the organization or when they leave the organization. Historically, what used to happen is all of this was tracked in spreadsheets, right? So each recruiter had their own spreadsheet of passive talent relationships, and when they left, that spreadsheet would leave with them. But just like in the world of sales, if a sales rep leaves, we want to pass over their book of business, right? So companies will use GEM to figure out, well, who are all the relationships that this recruiter owned? And then when they move on to a new role within the organization, how can I very quickly ramp somebody else up on those relationships so that they don't have to start from scratch? Right. And so that the company can keep that relationship with that person over many, many years and not be tied to that specific recruiter owning it. On top of that, they start to implement more and more rigor around data and analytics. And actually a lot of these use cases are very similar to the world of sales as well. Right. So companies start to track their entire recruiting pipeline and they look at pass through rates to debug and see where problems are. They start to forecast based on the health of their pipeline and how many people are each stage and their model of how long it takes people to pass through the pipeline. Are they on track to hit their goals for the quarter or for the year? Then they also start to look at all of these things from the lens of diversity and breaking out their funnel by gender and race ethnicity. So they can see for different steps of the funnel, how is diverse or underrepresented groups, how are they passing through, are they passing through at different rates and are there places in the funnel where they need to double click on and debug and make sure that the interviews themselves are not biased and long term, what a lot of companies move towards is using data to understand the return on investment, the ROI of all of their different recruiting efforts. It's kind of crazy. Again, companies are spending hundreds of billions of dollars at the top of the funnel across events, branded emails, ads, sourcing teams, campus recruiting. But very few have any pulse on which of those efforts are actually leading to hires and driving the right kind of roi. It would be as if we were running our marketing team and spending without any knowledge of what's converting into close one deals or revenue. Right. And every team wants to do this, they just don't yet have the right technology to support that.

You guys have learned a lot, obviously in the last few years since you've been doing this. I'm curious about how is that driving your Product development pipeline. How do you prioritize what is worth leaning into and developing further?

Yeah, so I can give a few examples of some of the new product directions that we moved in since the early days. We started with sourcing automation, which I had talked about earlier. And so we realized beyond just helping recruiters be more efficient and cutting out the tedious work involved in their day to day jobs, there's also this huge gap in terms of the talent software landscape for companies. There just wasn't sort of a source of truth with essentially prospect records. So that's what you know, led us to build out. You know, the beginnings of a recruiting CRM in those early days, which, you know, included prospect records, allowed you to organize your passive talent into talent pools. And yeah, that was, that was like one of the big sort of new products in the early days that we're continuing to invest in. But one of the things that we realized is now that companies actually have a source of truth for this information, it means they will kind of for the first time have visibility into the full recruiting funnel from Reach out all the way to offer app. And so we started investing in an analytics solution that gave teams sort of unparalleled visibility into what was going on in their recruiting teams day to day. And that enabled them to essentially run a well run recruiting team and also communicate much better with stakeholders as well as helping them hit their targets. And not only in terms of number of hires needed by the business, but also hitting targets on diversity initiatives. Because for the first time you have visibility into what's going on in your recruiting funnel.

That's great because it really helps to dispel this myth that there's a pipeline problem that everyone always talks about now is an actual tool that gives you so much visibility. That's really one wonderful the sheer number and range of industries included in Jim's customer base. I mean I love that pet hospital1 and the healthcare workers. That's so great. That in and of itself is very impressive. But your last year and some changes is even more remarkable. So even though we've talked about it before, I do want to drill down a little bit more into that.

Yeah, it's been so exciting. I would say over the past year and a half we've really hit this inflection point with the company and just within the last year alone we've tripled our annual recurring revenue and we've doubled the number of customers we serve, which is really fast for a company of our scale. And the other thing that started to happen is the enterprise segment really started to click for us. So ACV's annual contract value rose 70% there, meaning that out of the gate, every new enterprise customer we signed was starting to pay close to double what they were previously. And then the other thing we saw is that those customers over time had more than 120% net dollar retention. And that's really exciting to us because what that means is for every dollar that a customer is paying us in year one, they're paying us a dollar and 20 cents in year two. And that just compounds over time as customers start to pay Jem more and more and more as they're getting more and more value out of the platform. And it's a sign of a really healthy business. So what we've done is we've doubled down on hiring in the first six months of this year to keep up. So we have actually doubled our team to now about 160 people in just six months. And of course, with all of this really exciting growth and with this new round of funding, we're looking to grow even faster through the end of this year and next year. And I would be doing my job here if I didn't put in a quick plug for Jem.com careers. We would absolutely love to hear from you.

Always be recruiting.

That's right.

So you guys have been doing great, but let's wallow in the stress of 2020 for just a moment. When, like the early days when the pandemic hit, a lot of companies stopped in their tracks and had to get their bearings. And pretty much everyone from the smallest startups to Google were, you know, they instituted hiring freezes, but at the foundational level, these were still companies that were growing and needed to expand their teams. And so while they couldn't hire at the moment, they were still technically carrying out hiring activities. And you were helping them. How were you doing that?

Yeah. Wow. I'm just putting myself back in the shoes of earlier. When the pandemic hit, it was a tough time. It was a hard time for every company out there, I think. Not only did every company have to adapt and find out how to shift their teams and their culture to remote, but also a lot of people were nervous about the broader economy. And like you mentioned, a lot of companies from startups to large enterprises instituted hiring freezes or at least slowed down hiring. And that was scary for a company like Jem operating in the hiring space, the recruiting space. But what we found is it wasn't actually as bad as we thought it would be. So while a lot of companies were taking a more conservative approach. There were actually some that benefited from tailwinds, Companies that were in the online collaboration space, for example, companies like Zoom just exploded when the pandemic hit. Healthcare was another really interesting industry where hiring for nurses and doctors, that demand was just never before seen. So we saw a lot of companies in the online collaboration space, a lot of companies in the healthcare space starting to use gem and they were using GEM to hire for doctors and for nurses, which was really, really cool to be a part of. So in spite of the pandemic, we were still able to grow, we were still able to have a really healthy business, and we still doubled our revenue last year in the midst of one of the biggest recessions in a long, long time. But one of the really cool things was we saw both our customers, but also prospects, folks that were looking to bring on GEM getting creative with how they were using the platform. And the first thing that we saw was actually that source of truth that Nick mentioned, that source of truth value being really, really important. So even if a company slowed down hiring or paused it altogether, they needed and wanted to keep GEM because GEM was their database of passive talent relationships. And they knew that as things started to clear up and become better, of course they would go back to hiring and they wouldn't want to give up all of those relationships. So a lot of our customers doubled down on GEM and continued to pay for GEM and use it. In fact, we were a little bit nervous about our renewal numbers. For example, would folks churn out from gem. And what we saw is that GEM was actually much more in line with with standard B2B SaaS, metrics and benchmarks from that time, as opposed to most of the other players in the recruiting space, which was really, really cool to see and something I'm super grateful for. I think the other thing we saw is that as hiring picked back up, more and more companies started to hire for remote, but they didn't actually have brands talent brand in these new markets and these cities that they were hiring for. So they looked to GEM and sourcing and engaging with passive talent as a way to get the word out there and start to build up their brand in these new cities that they'd never hired in before.

Yeah, there are a few interesting things that we noticed in terms of customers using GEM during the pandemic. So one of the things, when you don't have a lot of roles open, we noticed that a lot of our customers were using that as an opportunity to essentially build diverse pipeline in Terms of actually proactively reaching out to folks and building relationships so that way when they are ready to hire, they have those relationships ready to go. So on your career site, when you actually don't have any roles open, almost really didn't realize this until we started seeing customers ask for it. But if you have no roles open in your career site, it's actually there's no place to collect actively interested talent. So that way you can reach out to them when the roles do open up. So one of our pieces of functionality that we call our talent community product, which essentially allows you to collect passive talent on your career site, ended up exploding in usage over the pandemic because these weren't active applications. They were essentially like passive expressions of interest and these folks would go into gem so that way they could be re engaged with when their roles actually opened up. And that was pretty interesting. Another thing that I noticed is a lot of companies, you know, actually use that time of lower volume to upgrade their systems and their recruiting platforms and you know, the software to essentially, you know, prepare for the recovery because they suspected that things would start to get really busy and so they wanted to make sure that they were prepared for that by, you know, having the best software and tech in place, which was kind of interesting to see.

Very cool. It reminds me of when I talk with Glenn Evans, who's head of core talent here at Greylock, and he's always talking about having this culture of recruiting and how teams should think less of hiring as this transactional experience and more of an ongoing process that you're always engaged with. So it's 2021 almost over. It's a good ish time, but it's still uncertain. How are you thinking about the future in terms of product development and experience expansion?

We're actually pretty optimistic about 2021 and the state of hiring. We've noticed that the recovery from COVID is accelerating some of the trends we talked about earlier. It's more competitive than ever to hire the best talent. Companies are taking diversity more seriously than ever before. And companies are realizing that a well run talent acquisition team isn't a cost center. It's a strategic advantage in the new knowledge and tech based economy. In terms of our future product development and expansion, we're focusing on a few different directions. First, we're continuing to expand beyond just sourcing and cold outreach. There are lots of things companies do at the top of the funnel beyond sourcing, like events, telemarketing and ads, referrals and beyond. And in the long term, all of these activities will be tracked. In general, we're also investing in expanding into enterprise.

I would say the two new markets that we're focusing on as we expand is one doubling down on enterprise, where we've already seen so much traction over the past year and a half. As I, as I mentioned before, with ACVs rising, net retention looking really healthy and a lot of these large enterprises realizing that in order to transform their businesses to become much more like tech companies, they need the right talent. They need the tech talent. And now they're realizing also that they're competing globally for all of the companies out there for that same talent. So they're realizing they need to start hiring a lot more like cutting edge Silicon Valley tech companies. And again, that's why we're seeing two of the largest fast food chains pick up and adopt gem. The other new market we're focused on is international expansion, very likely starting with emea. And the cool thing is we already have so many companies using GEM globally and what that's allowed us to do is learn a lot about these different markets around the world and figure out which ones to prioritize first. And, and we have so much conviction that GEM is already a great fit for English speaking countries in Europe. So that's probably where we start and we'll continue to build from there.

Steve Nick, thank you so much for joining us today on Gray Matter. I learned a lot. I hope our listeners did. And as they said, Jim is actively looking for more people to join their team. So please reach out to them or they'll find you. And thanks again for joining us.

Thanks Heather.

Thanks for having us, Heather.

That concludes this episode of Gray Matter. Please subscribe to us on SoundCloud, Spotify, or wherever you get your podcasts. You can also find episodes and other content on the Greylock website greylock.com blog and you can follow us on Twitter reylockvc. I'm Heather Mack and thanks for listening.