At a time when competition for talent is higher than ever, companies simply can’t wait for prospective employees to come to them.
But finding the best candidates – many of whom are already employed and not actively searching for new jobs – too often means long, tedious and inefficient tasks such as scouring websites, compiling spreadsheets, and sending thousands of emails. While sales and marketing teams have long had access to sophisticated software that codifies processes, automates the repetitive tasks, and analyzes metrics, recruiters have been stuck cobbling together systems not tailored for them.
Steve Bartel and Nick Bushak experienced the pain firsthand when scaling teams at Dropbox and Facebook, respectively. So in 2017 they founded Gem: a CRM-like platform that enables hiring managers and recruiters to proactively pursue and manage relationships with passive candidates. They also provide valuable pipeline analytics that give companies visibility into a diverse pool of candidates, helping them build teams representative of the communities they serve.
Gem’s software has been instrumental in helping companies update their hiring practices for the modern working environment, and today they work with more than 800 companies across all industries. Customers include Shopify, Twilio, Lyft, and two of the country’s largest fast-food changes. In 2021, half of the biggest IPOs were from Gem customers.
Gem just announced $100 million in Series C funding that values the company at $1.2 billion. The Greylock team is proud to be among Gem’s investors and has been partnered with the company since 2020.
Gem 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%.
Steve and Nick joined Greylock head of content and editorial Heather Mack on the Greymatter podcast to discuss how Gem has tapped into an unmet need; how they were able to meet surging demand; the current talent recruitment landscape; and how the company is positioning itself for what’s next.
You can listen to the podcast here:
Steve, Nick, thanks so much for being here with me today and welcome to Greymatter.
It’s great to be here.
Thanks For having us, Heather.
First off, congratulations on all your progress. It’s been a big year for you guys.
Before we get into what’s going on with present-day Gem, 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?
Yeah. 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.
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.
I think the other fundamental piece of the problem is when you layer on the long overdue emphasis on diversity, equity and inclusion – which 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. That has further driven the need to engage with passive talent so that 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 recruiting today, most companies have what’s called an applicant tracking system. But as that name suggests, applicant tracking system software was 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 apply, onsite 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,etc.
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, 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 2,000 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?
Yeah. So 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 in this environment, the smart companies are 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 looking through their inbound applications, they’re using all of the sort of traditional ways of hiring. But what companies are finding is that it’s just not enough in this new world and in this new knowledge-based economy, because a lot of the best talent just isn’t looking for their next role when they are approached for their current role.
“If you really want to have an edge in the knowledge-based economy, your people are your biggest assets. And in order to hire the very best talent, you actually have to go out there and find them.”
While 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.
Wow. I didn’t know that.
Even with some big problem 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. In doing so, we went and talked to almost a hundred organizations about how they run their inside sales teams.
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.”
I had spent five years at Dropbox during high hyper growth, from 25 people to 1,500. And we were trying everything we could to recruit candidates. And Dropbox was already adopting this more modern approach of recruiting [that was] looking a lot more like sales and marketing. So it helped us connect the dots there.
Then, we went and talked to 50 organizations before starting Gem, to make sure that Dropbox’s more modern approach was the same approach that many companies were using to attract talent. 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 “A-ha!” 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.
Yeah. And we saw a few different data points like that.
So I spent a bunch of time at Facebook before starting Gem, and Facebook was using Salesforce to power their own sort of internally built CRM. At the time that I was there, they had a significant number of software engineers just building internal recruiting software, which was just 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?
As Steve mentioned, one of the things that we noticed that was a real “A-ha” moment to us was that of the recruiters that we were talking to, maybe 10% of them were essentially trying a sales automation solution, but for something that wasn’t designed for a recruiting use case. And that just really convinced us that these problems are really similar, but we thought that a recruiting specific solution would just be much better. There’s a lot of integrations in terms of integrating with recruiting systems, integrating with different top of funnel sources that are a little bit different and in the world of sales.
So once we were convinced that this was a problem that we wanted to solve, we started by actually just building 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. They used our Chrome extension, which integrated a little bit better with some recruiting systems to hook into their sales automation solution. And 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 loved it.
I remember us getting some really happy emails saying, “This is just saving me so much time. It’s cutting out all the tedious and manual work that I have to do day to day.” And we used that MVP and then went and actually built out the proper first version of Gem.
Those value props that we started with are actually a lot of the same ones that we’re trying to try today, but at a bigger scale, and those are essentially cutting out a lot of the tedious and manual work recruiters have to do day to day and allowing 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.
We’ve since evolved that to layer on analytics on top of that, and work for different top of funnel use cases. But that was the very beginning and 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 that it allowed us to be super customer-focused and work hand in hand with them. 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.
I think the other thing that reinforced is the importance between recruiter and sourcer collaboration with hiring managers. 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 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 Gem?
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. In the early days, we were laser-focused on building out a product that tech companies could adopt. But now we have so many different verticals and types of customers. Of course we have a lot of the biggest consumer tech companies like Pinterest, Peloton, Lyft, and also, a lot of the biggest B2B SaaS companies like Stripe, Twilio, and Cisco Meraki all use Gem to power their recruiting.
But then we also have healthcare companies, and 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 a hundred 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 Yelp for B2B software. And we’re really proud to have a 4.9 out a five star rating on G2 Crowd, which is amongst the highest in the industry.
Yeah. In terms of what we’re 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’re 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, and 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’s always going to vary depending on the company’s size, stage, resources, and who they’re looking for. How does Gem do this specifically with different company stages and sizes?
So every company out there sources, whether they’re big or small. 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?
Steve and I applied to YCombinator together, but actually midway, we started working with this classmate of ours from MIT, Drew Registky. 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. And interestingly, the second engineer we hired, we used Gem which was then called Zen Sourcer. So Steve, I believe, did some reach outs to some of our network from MIT, and Jet Zhou 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.
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. Very cool.
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 that 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 a recruiter to engage with or reach out to a passive candidate. The goal here is to prevent multiple recruiters from the same company, reaching out to the same person in the same month.
Something as simple as that though has been an unsolved problem in the world of recruiting until Gem came along and could codify those rules and actually have a single source of truth to track all of those relationships and touchpoints. 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. 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. 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 in the organization, how can I very quickly ramp somebody else up on those relationships so that they don’t have to start from scratch? 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. 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 company, how many people are at 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?
They also start to look at all of these things from the lens of diversity, and break out their funnel by gender and race, ethnicity. So they can see for different steps of the funnel, How are 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?
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 –
“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 spend without any knowledge of what’s converting into closing deals or revenue. And every team wants to do this. They just don’t yet have the right technology to support that.
Wow. You guys have learned a lot, obviously, in the last few years of you’ve been doing this. But I’m curious: how is that driving your product development pipeline? How do you prioritize what’s worth leaning into and developing further?
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 and 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.
That’s what led us to essentially build out the beginnings of a recruiting CRM in those early days, which included prospect records, which allowed you to organize your passive talent into talent pools. That was one of the big new products in the early days that we’re continuing to invest in.
One of the things that we realize now is that if companies actually have a source of truth for this information, it means they will, for the first time, have visibility into the full recruiting funnel from reach-out all the way to offer out. And so we started investing in an analytics solution that gave teams sort of unparalleled visibility into what was going on in their recruiting team day to day.
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 the 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 the myth that there’s a pipeline problem that everyone always talks about. Now there’s an actual tool that gives you so much visibility. That’s really wonderful.
The sheer number and range of industries included in Gem’s customer base – I mean, I love that pet hospital one and the healthcare workers – that in and of itself is very impressive, but your last year and some changes are 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. 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.
The other thing that started to happen is the enterprise segment really started to click for us. So ACVs (annual contract value) rose 70%. Meaning that out of the gate, every new enterprise customer we signed was starting to pay close to double what they previously were.
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’s paying us in year one, they’re paying us a dollar and 20 cents in year two. That just compounds over time, as customers start to pay Gem 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 we’ve doubled down on hiring in the first six months of this year to keep up. 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 wouldn’t be doing my job here. If I didn’t put in a quick plug for Gem.com/careers. We would absolutely love to hear from you.
Always be recruiting.
So you guys have been doing great, but let’s wallow in the stress of 2020 for just a moment. Like the early day 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 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 Gem 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 of 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 or 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 (and also prospects, folks that were looking to bring on Gem) getting creative with how they were using the platform. The first thing that we saw was actually that source of truth that Nick mentioned. That source of truth value is really, really important.
So even if a company slowed down hiring or paused it all together, 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 was that Gem was actually much more in line with stand 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.
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 brands) in these new markets and these cities that they were hiring for. So they looked to Gem for 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 were a few interesting things that we noticed in terms of customers using Gem during the pandemic. One of the things comes from 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 a 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.
I almost didn’t realize this until we started seeing customers ask for it, but if you have no roles open on your career site, there’s no place to collect actively interested talent.
But [with Gem], you have a way you can reach out to them when the roles do open up. 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 passive expressions of interest and these folks would go into Gem so that way they could be reengaged with them when the roles actually opened up.
Another thing that I noticed is a lot of companies actually used that time of lower volume to upgrade their systems and their recruiting platforms and the software to prepare for the recovery. They suspected that things would start to get really busy, and so they wanted to make sure that they were prepared for that by 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 Glen Evans, who’s head of a core talent here at Greylock, and he’s always talking about having this culture 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. It’s 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 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.
“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 Gem. We’re also investing in expanding into enterprise.
Yeah, absolutely. 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 mentioned before, with ACVs rising, net retention looking really healthy, a lot of these large enterprises are 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. 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. 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 Greymatter. I learned a lot. I hope our listeners did. And as they said, Gem 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 for having us, Heather.