Among the casualties of the mass tech layoffs are people who helped get their co-workers hired in the first place. Paraform, a startup that wants to change how the recruiting industry works by taking a marketplace approach, is giving professional recruiters a new way to find work by going freelance.
Today, Paraform announced that it has raised $1.4 million in pre-seed funding led by Primer Sazze Partners with participation from Twitch co-founders, including Kevin Lin, and leaders at Scale AI and Founders, Inc.
Paraform works by enabling tech companies to post bounties for open roles. Anyone can get it if they refer a successful candidate. They don’t have to be a professional recruiter, but 90% of Paraform’s user base are (it also plans to expand to all professionals, including software engineers, designers and account executives, in the future).
The founders of Paraform, John Kim and Jeffrey Li, said this gives potential employers access to wider talent networks and also lets recruiters work without having to start their own recruitment agencies. So far, the platform has been used by startups like token-based crypto company management solution Magna, AI-generated art and search engine Lexica and cloud-enabled DevOps platform Zeet to find employees.
Before co-founding Paraform, CEO Kim launched and sold a recruiting startup called RulerNetwork. It was acquired by edtech Crimson Education, where Kim worked as the director of product for a careers and recruiting-related product. CTO Li, meanwhile, was a software engineer at Cruise before quitting after he started a successful NFT project and decided to look into the concept of a decentralized personalized network.
The two were interested in web3, but didn’t see strong applications of blockchain in the recruiting space, so instead they worked on a Twitter candidate sourcing tool (Kim describes it as “the LinkedIn for web3”). It let people get Twitter users’ email, GitHub, LinkedIn and other public information by inputting their profile and was used by startups to find founding engineers.
At first they got professionals to connect friends and colleagues to earn bounties, but realized quickly that professional recruiters were the best initial users.
In addition to giving recruiters a source of freelance work, Paraform is also keen to solve hiring challenges for tech companies. For example, early-stage tech startups (Paraform’s target clients are seed to Series B companies) usually rely on outbound instead of inbound recruiting, because they don’t have the brand recognition of larger companies. But outbound recruiting eats up a lot of time, which founders lack, along with the funds to hire a recruiting agency.
As a result, many rely on referrals within personal networks, but “those only work well if your company reaches a certain size,” said Kim. Paraform’s marketplace format lets them recruit more efficiently in terms of time and money spent. It can also be faster. Kim said Paraform’s average time to hire is one month, compared to an industry average of two to three months.
When asked how the ongoing tech layoffs are affecting Paraform’s direction, Kim said “this is an unprecedented time where there’s a lot of people who are really good at what they do, looking for something to do,” including recruiters, engineers and product managers.
“I wouldn’t say the tech layoffs are the reason why we started Paraform,” Kim said, noting it launched before the layoffs began. “But it gave us a good opportunity and the right market to disrupt recruiting. This new world we’re envisioning is much more plausible in a reality where there are a lot of recruiters looking for alternative ways to earn money, rather than being restricted at one company.”
He added that many tech companies hire too many recruiters at first, but lay them off when the stop growing. “I’ve come across hundreds of recruiters who had to move jobs every six months going contract to contract.” Kim believes a better solution is engaging recruiters only when they are needed, and paying them more for each hire.
Of course, working freelance has some disadvantages, like no full-time benefits. But Kim said Paraform has several selling points for professional recruiters. For example, recruiters make between $2,000 to $3,000 per hire if they work full-time at a company or an agency. In comparison, the average earning per hire on Paraform is $10,000 to $15,000. The platform also pays recruiters upfront each time they get a candidate past a first-round interview, so placing a candidate in a job isn’t their sole chance to earn money.
Flexibility is another bonus, Kim added. “We believe recruiters are much more efficient when they work with multiple companies. It is very common for full-time in house recruiters having to turn down candidates if the company they work for does not have an opening. At Paraform, this is not the case.”
Startups in the same space include passive candidate recruitment platform Pallet and recruitment sourcing startup Dover. Paraform is also up against traditional players like recruitment agencies, staffing firms and embedded talent solutions.
Kim said Paraform differentiates because of its marketplace format, built with a network of recruiters who have constantly expanding networks. “We are able to mobilize recruiters as a gig workforce for companies, who can simply post their open roles and offer a bounty to turn anyone into their recruiter and efficiently access a huge network of candidates.”
In a statement about the funding, Twitch co-founder Kevin Lin said, “When you look at the greater impact of these tech layoffs, an entire industry of people are at a loss. John and Jeff stumbled upon a need and developed a solution to help provide jobs and shake up a traditional industry. We believe in the power of the Paraform marketplace and the network it’s creating, and are proud to back the company and its positive impact on recruiters and companies alike.”