News: carat, a Seattle-based startup that helps companies conduct technical interviews, raised a $ 110 million Series C round with a valuation of $ 1.1 billion. It is the latest Seattle tech company to achieve a billion dollar valuation, or “unicorn” status, after Amperity, Highspot, Zenoti and Rec Room.
The technology: The startup uses a network of vetted interviewers who conduct the interviews via video conferencing, using a question format and scoring rubric based on research and analysis conducted by Karat. Companies receive feedback on top-rated applicants, based on Karat’s diligence, as well as information about their hiring process. The idea is to help companies select more candidates while relieving their own employees of interview responsibilities, in the middle of a ongoing battle for tech talent.
The metrics: Karat is more than doubling the revenue and the number of clients year after year. He has eight companies that spend more than $ 1 million per year. The startup has the capacity to carry out 50,000 hours of interviews per month. Earn money with subscriptions and with total consumption.
The clients: Karat’s software is used not only by tech companies like Compass, Intuit, and Indeed, but also by others like Ford, American Express, and Bank of America who need help interviewing engineers.
People: Karat is run by Mo Bhende, former head of Xbox at Microsoft and co-founder Jeff spector, who was previously Melinda Gates’ chief of staff at the Bill & Melinda Gates Foundation. The company has about 200 employees.
Sponsors: Tiger Global led the round and also led the Series B round in 2019. The firm has endorsed other recruitment-related companies such as LinkedIn and Workday. Norwest Venture Partners, 8VC, Exor, Base Partners and Sempervirens Fund also invested in the Series C round.
The take: Karat has multiple tailwinds, including some driven by the pandemic:
- The shift to telecommuting: companies are hiring in more locations, beyond their physical offices.
- Accelerating digital transformation: “Every company hires software engineers,” Bhende noted.
- Most attention to diversity with hiring: Karat says it removes interview bias, for example.
- The “Great Resignation”: more people are quitting their jobs than ever. That means companies must replace more roles. And they don’t want their current employees to spend time on interviews, Bhende said. “Most people are not promoted or rewarded for their interview skills,” he said.
Another trend that should help drive growth: Employment of software developers, quality assurance analysts and evaluators is projected to grow 22% between 2020 and 2030, “much faster than the average for all occupations,” according to the Bureau of Labor Statistics.
Karat says her model is better for job candidates, too. It allows them to be interviewed on weekends, for example, and offers a “redo” feature that gives candidates a second chance – 20% use it.
And for interviewers, who are contractors, gigs can be lucrative. Some earn more than $ 250,000 a year conducting interviews at Karat.
Karat remains focused on technical interviews, but could easily replicate his system for other types of roles. Bhende said he is working on additional products that “follow the entire life cycle of the engineer,” which includes how they find a job and how they grow at their job.
There are several other companies in the talent acquisition and hiring industry that have raised cash recently, including Seattle-area startups SeekOut, Textio, and Humanly.
The phrase: “Just as Amazon Web Services revolutionized private data centers, we are doing the same with do-it-yourself interviews,” said Bhende, noting how AWS enabled companies to rent computing capacity rather than build their own. He added: “For us, every sales process is build versus buy. It’s not that different from eight years ago when people were probably thinking, ‘How much of my workload do I give to Azure or AWS compared to doing it myself?’ That has obviously changed over the years. “