The Exchanges

Q Sorry, I don't understand. If a client has an active role, but they're not using you, what does, do you consider that role?

A Because, you know, companies will go through phases of, hey, they just don't, they're not hiring right now. So if you imagine a small startup, they might do a first hiring of four to six hires, then they might just stop because they don't want to hire anyone. And so they're not using you actively. That's not really churn. They just don't need to hire right now. If they have an open role, they're hiring actively, they're just not using you. That's the real definition of churn in this, in this space. I'm guessing your next question is going to be what does turn look like for us? You know, typically over the last couple of years, our churn has been anywhere from two to three percent.

AI assessment note: “they're just not using you. That's the real definition of churn in this”

Q So do you, I mean, is any of this truly SaaS or you've basically just made the traditional recruiting process and business model, you know, tech enabled essentially?

A You know, so what I would say is that it can be SaaS for the people who want to have it that way, right? And so the difference is that many people, so for the people who want to pay that way, they can get all of our services on a monthly fixed price saying they don't need to pay us any dime extra if they hire or don't hire the person, right? And we have some clients who are doing that too, right? We have some small startups who like that predictability. If you're thinking back to SaaS, what does SaaS really mean? SaaS is Hey, I'm getting this. It's predictable. I know how much I'm paying. I can start at any time. I can stop at any time, right? And I'm paying a monthly fee. Um, and we have some clients to do that. I think the challenge for many people has been that they don't know if it's going to work out or not, and so they prefer to pay on performance. So we think of it more as innovating on the go-to-market model than anything else, right? It's the same thing if you think about Atrium's evolution. For the longest time, they've had to go out and do the same thing as billing you on a per-engagement basis, Because until they've proven themselves, that's what people want to buy. And then over time, you know, I just saw that email from HMIT was last week or the week before introducing their monthly subscription plans, right? Because now that they've proven themselves to clients, …

AI assessment note: “it can be SaaS for the people who want to have it that way”

Q Yeah. Yeah, that's right. Okay, good. And then look, you're looking potentially at a Q four, maybe Q one, 20, 20 kind of raise. You've done this before. You've been through the kicker. You raised 2.9 million bucks. What are you comfortable? I mean, what can you sleep at night in terms of what you're, you're comfortable burning per month to grow this thing?

A So we're basically cashflow positive already. So, um, you know, I think we think about it as, uh, what ends up being difficult in this business is actually receivable. So, you know, I have something like, uh, you know, uh, net contracts are net 30, but payments end up being sort of net 60, net 90. So the biggest thing I'm financing is actually my receivables. Um, the second piece that I'm sort of, uh, financing is new office expansions. And typically it takes a recruiter Anywhere from three to six months before they start paying off. I think the way I think about net burn is that I'm happy at any point looking at, Hey, can I get back to cashflow positive in six to nine months?

AI assessment note: “can I get back to cashflow positive in six to nine months?”

Q And how much total have you raised in the company to date? It is the 2.9. Okay. Yeah. Um, so, I mean, what's the right amount for your next raise? You said you wanted to raise now.

A Um, we're probably going to target towards the end of the year. I think the raise, uh, it's all about what we use the money for, which is to open new offices. So we've, uh, for the last two and a half years, you know, we've had our offices. So we just opened up our Las Vegas location. So we're going to work with companies like Caesars and GM, uh, all of the gaming companies and real gaming casino companies as well. Um, and so the next step in the company is just opening up more offices. I think we're going to target somewhere from seven to ten million in the next round, but, uh, it all depends on the market conditions.

AI assessment note: “we're going to target somewhere from seven to ten million in the next round”

Q Yep. And so walk me through how folks are paying. Is it a pure play SaaS model?

A It's not. It's sort of a combination. I think, um, you know, it spans the gamut. There are some people who want that pure play SaaS model. I would say they're actually in the minority in this business because they're very, very afraid of all the bad players that are out there. You know, you think about your recruiting, typical recruiting agency, it's only right below Comcast in terms of negative or low LPS scores, right? You know, I think it's not quite as bad as your cable provider, but, but not, not that far off, right? And so historically, there's been a great sort of Desire to align how much you pay with kind of performance, and so that's kind of, you know, in the pure play SaaS model, you just get some sourcing, you get some candidates, that's great, you pay a monthly fee, but most of what our clients are interested in are actually kind of performance-oriented models or now even retained models. The difference is just, you know, if you hire a typical recruiting agency, they're not going to have any engineers on staff. They're not going to have any people who have actually done the role themselves, right? I've done product management for 1015 years. My co-founder has done marketing and growth for an equivalent amount of time. Our CEO has done sort of, ah, technology for the last 20 years. And so, we're able to train our recruiters given that experience, which most agencies …

AI assessment note: “It's not. It's sort of a combination. I think, um, you know, it spans the gamut.”

Q think, obviously, if you break six and maybe get a little bit more juice on that six and a half, seven-ish, if you go raise seven to ten million, I mean, do you think you can only sell maybe 10 to 15% of the company, or do you think it's gonna look more like, you know, it's, you know, 80, ninety million dollar pre-money valuation if you can get better?

A You know, I, I think it may not be the right way to think about it. We don't think about it as much as a matter of dilution as we think about the right partner, and here's the reason why. In a normal SaaS business, the metrics and kind of the, you know, if you look at social capital's eight ball or whatever, they're different methodologies. You get a very good sense of sort of valuation based on current revenue and growth metrics. Our model is different, and so the thing we care most about is having the right partner who understands that model. We've seen too many companies in this space fall flat, you know, whether you look at Hired or others, Where things stall because they don't have the right partner and the right partner pushes that into an operating model that doesn't work for this industry. So I would say.

AI assessment note: “We don't think about it as much as a matter of dilution”