The $150,000 Hiring Mistake Founders Keep Making

Hey y’all — recruiting is broken.

Unless you have an extensive personal network or big audience, hiring the right people for your startup is either time-consuming or wildly expensive.

Your options?

1. Figure out how to drive traffic to a hiring page, sift through a mountain of applications, and hope you’re picking the right people to interview

2. Work with a recruiting firm, pay tens of thousands of dollars per hire, and deal with misaligned incentives that often lead to bad fits

The latter sounds like a time-saver, but traditional firms have every incentive to push candidates to inflate salary demands — plus you’ll likely be working with a recruiter who’s never actually seen the inside of a high-growth startup.

So this week I sat down with my friend Joe Walsh, co-founder of The Mural Group. We worked together at Uber and, after seeing hypergrowth first-hand, he set out to build a better, founder-friendly model for recruiting.

Here’s the shift that’s happening (and how to avoid getting scammed):

The $150k Hiring Mistake Founders Make

Search Firms are Broken

I started thinking about this topic after seeing another founder friend post on LinkedIn offering $20,000 for an introduction to the right engineer, for up to 5 engineers.

The post went viral because, well, on the surface it seems insane.

$20,000 per engineer, and for 5 engineers total (not just 1)?

But here’s the thing: he’s actually saving money. Traditional search firms can charge as much as 2-3x that for the same hires and, by making the offer public and achieving virality he’s likely gotten access to a large pool of high-quality talent faster and cheaper.

Traditional recruiting firms are bloated, and they have to cover those bloated costs. This means you end up footing the bill for things you probably don’t need.

Here’s an example:

Imagine your startup just raised a Series B. It’s a trajectory-changing moment, and you want to use that capital to bring some execs onto the team to own different areas of the business.

Traditional firms will reach out, talking about their network of great candidates (who they’re likely shopping around to other startups as well) while literally charging you six figures per exec hire.

Even if your Series B was big enough where you can afford it, why are you paying for an entire recruiting assembly line? They’re charging that much because you’re covering the salaries of their entire team — a partner, researcher, sourcer, and others.

Do you really think you need all that? Especially if their network is as extensive as they claim?

The other model is that they’d charge a percentage of the eventual hire’s base salary. This means they are actually financially incentivized to drive up the final salary by either pushing more expensive candidates on you, or getting multiple offers for their candidate at the same time — neither of which is in your best interest.

They’ll claim they don’t act on this, but the model is hard to trust.

Lastly, most big-firm recruiters have never actually worked inside a fast-growing startup before. All they have is pattern matching with other hires they’ve made, and how you describe the role to them.

The Better Way

At the peak of the pandemic there were a ton of layoffs. And a lot of people who got let go at that time started companies (myself included).

Some of the top recruiters who got let go, like Joe, fell into that bucket too. He quickly realized that there was a better way for an outside recruiting partner to help a startup hire the right people.

His firm, The Mural Group, embeds a recruiter with actual hypergrowth experience within a startup’s team for a fixed and transparent monthly cost. It’s more like a SaaS subscription than a per-placement fee or commission structure with questionable incentives.

Joe and his team join your Slack channels, help with compensation benchmarking, build your interview interview processes for you using best practices, and basically operate like an internal team within your startup.

It’s an actual way for founders to offload the ops around hiring to a recruiter with relevant experience (aka someone they might have otherwise considered hiring themselves), rather than just get candidates thrown in their face by an external firm.

What I like most about Joe’s model, though, is that it opens up top-tier recruiting for earlier stage startups too. While you never want to hire too much too early, knowing you have the option to bring in a done-for-you hiring process by a pro who isn’t trying to extract maximum value from the engagement at any cost makes hiring more approachable.

It’s not surprising that Joe’s model is gaining popularity.

After we raised our Series A for Launch House, we brought on a firm to help us find some key hires. The firm even came recommended by one of our VCs.

My co-founder and I each worked extensively to make sure they had all the info they needed but, if memory serves, we never brought someone on that they introduced us to and ended up having to do the work ourselves anyway.

The Future of Search

I also asked Joe about where he sees recruiting going — will an omniscient AI recruiter make search firms unnecessary?

Neither of us thinks so.

While AI can help or even replace a lot of the early-stage assessment process by potentially automating interviews, delivering optimal clients after scraping the web and more, relationships and trust will always matter.

As a founder, especially as you grow, you need a partner who understands the business needs of your startup, and can translate those into a hiring strategy.

The smartest founders are already shifting away from legacy search firms. The ones who find recruiting partners like The Mural Group that act like partners rather than vendors, will win.

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