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Investment as a recruiting strategy.

Recently at Outright.com we were approached by the CEO of a failed startup looking to help his soon to be unemployed engineers find positions at a successful startup. This got me to thinking: What if companies used the budget they normally spend on recruiters and instead applied it to seed funding smart engineer/entrepreneurs? A skilled engineer can often cost up to $30k in recruiting fees from a top talent firm. Instead you could take the same amount and invest it in a 2 person startup as seed money with a simple premise; if your idea doesn’t work out, come work for us!

This would have a lot of benefits over the traditional hiring process:

  • Applicants are going to put a LOT more effort into the interview and technology demonstrations.
  • You could host the seedling startup in your office space, contributing to the culture (the founders would be working long hours, demoing cool stuff, and generally inspiring employees).
  • If the startup succeeds and you’ve invested in the form of a convertible note you can be bought out in the next round of funding thereby multiplying your “recruitment” budget and keeping your company out of the VC space.
  • As a future opportunity for existing engineers: you’d generate an incredible amount of goodwill by acknowledging your current employees may want to explore an idea in the future. Rather than feeling betrayed when they decide to leave, they could apply and participate in your seed fund, returning to work for the main company if things don’t work out.

Incubators like Ycombinator may already be doing this unofficially and routing talented engineers from failed seeds to their successful portfolio companies. 

I’d love to hear thoughts/criticisms on challenges this approach would face in a web company (optimizing for skill base improvement) vs. incubators (optimizing for investment return).¬†

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