Q&A: Why senior and C-Suite recruitment needs Scale & Swing
Finfeed’s Megan Graham recently spoke to Luke Henningsen, founder of Scale and Swing — a recruitment firm purpose-built to serve the startup sector.
FF: What is it like to be a recruitment firm with a sole focus on startups?
Luke: It’s tricky working with startups, but it’s an exciting space to work in. These companies are disrupting legacy industries, and challenging the status quo. It’s a younger demographic and it's fun; I often get to work with visionary leaders who are having a go, building a business and doing something different.
I’ve been in Executive Search recruitment for a long time, about 20 years. I was doing this work at SHK Asia Pacific (a firm I co-founded in 2007). At SHK, it was more of a traditional executive search firm, across different industries, practices, mining, accounting, banking, CFOs, CEOs, COOs and so on.
When I exited in 2015, I became interested in early stage startups, and began investing as an angel investor. I was drawn into the startup ethos and lifestyle and trends! How people were building businesses around the globe.
Unlike the early days of the internet – the dot com era – there are now over 4 billion people around the world hooked up to the internet. It’s now a lot easier to start up a business, you can use infrastructure in the cloud, you don’t need to buy servers!
We see these startups pop up, and get to a decent level of revenue pretty quickly. The issues they suffer from are things like hiring great people. Every hire makes a big difference in a small business. What I found is they don’t have a lot of extra cash initially. They might be doing great things but can’t afford big industry fees for recruitment.
For me I realised there's a way to deliver what I do, what I’ve learned. Here’s a space where I can deliver it at a cost appropriate to these startups. I thought: that’s what I want to be involved in.
FF: What particular time and cost pressures do startup founders face, and how do you accommodate these pressures?
Luke: Startups are often building a business on a bootstrap budget, or have some funding but are burning through cash. Or they could be pre-revenue, or even operating at a loss for a period of time, until they build market share.
So the cash they have is critical to these firms and they have to be sensitive about how they allocate that. They need staff, but recruitment fees for executive search are usually big, lumpy, sums and they struggle to afford it. We deliver to their needs by keeping our overheads low. We run like a startup, we work out of WeWork (a collaborative work space) to keep costs down.
Our systems are all SaaS (software as a service) so basically, we are not paying for massive overheads along the way. We hire good people who have a passion for working in the startup sector.
I work with startups, invest in them, and I am also running one. So, that culture fit is really critical.
When I’m talking to candidates wanting to work for a ‘cool startup’, they are often attracted to that ‘change the world’ vision, and the exciting elements of being at a startup.
A lot of people don’t realise it’s hard work, you don’t have lots of resources, or layers of support like in a corporate role. We try to find the right fit from the candidates’ perspective, as well. They need resilience, drive, energy... and to be able to deal with the risks. Even promising businesses can run out of money, as we saw with Unlockd recently, which is a business I had invested in and which was run by excellent people.
So we inform candidates of all that.
FF: There’s also a lot of upside in being part of a successful startup, of course.
Luke: Imagine being one of the first employees at Facebook, Instagram, Google! Those early employees all had share options.
Lots of these early startups and emerging tech businesses are pre-IPO or are looking to go to the market quickly. These businesses grow a lot faster than traditional legacy businesses.
In the last 5-7 years we have seen the emergence of the unicorn; a term used to describe a tech startup that reaches a US market capitalisation of $1 billion as a privately owned company. Uber is a perfect example; Slack too. Then there’s the Australian unicorns such as Canva, Envato and Atlassian for example.
There are risks but there can also be huge reward in startups.
FF: Disruptive tech plays such a huge role in startups now. Do you need to have your ‘finger on the pulse’ constantly? What are the main trends you focus on?
Luke: It’s all about being immersed in the startup ecosystem — that’s the key. That ranges from local meetups in Sydney and Melbourne across different technologies and areas of interest within the entrepreneurial tech community. We keep up to speed by attending those meet-ups, taking a genuine interest in the people there and by networking.
I work at the senior level: CTOs, CEOs, CPOs, board directors and advisory board members for startups. That is a lot of the work I do, and it really keeps me in the loop.
And there are also senior execs out of the big banks for example who want to get involved in fintechs. We act like a bridge for people who want to step across to Startup World and can bring their networks as Advisory Board members.
We also connect people who can invest in a business, for example before it IPOs, or experienced founders who can mentor younger founders.
FF: How important is it in recruitment of startup personnel, to find a good cultural fit?
Luke: It’s not just good personality fit. The pressure on a startup, which is usually burning cash, wanting to scale and to create a global footprint is intense.
Seven years in normal corporate life equates to one year in a startup. It’s the new MBA! It’s the real world, and you need to work in an agile way. It requires people who can keep it together, bond with the team, but also who have the passion to drive them through those challenges.
There are so many startups doing so many interesting things; companies like Hatcher+ using AI and big data to democratise venture investing; or Socialsuite which enables NFP’s to measure and report on the social outcomes of their services or other’s like Power Ledger applying blockchain technology to disrupt the energy sector. There are startups harnessing solar power - connecting grids, working out how to solve issues with homelessness, all the way to disruption in banking. When it gets tough, it’s the passion for the cause and that lock-in commitment that will keep them there.
It’s all about finding the person who truly believes in the cause and who understands how to work in a resource-restricted environment, and amongst ambiguity.
FF: How did you build up such deep networks to leverage for clients, particularly at the executive level?
Luke: The key to access to talent in terms of people in startups, is being part of the startup culture and environment. Startup people can smell a tourist a mile away.
You need to be genuinely interested in startup culture, in emerging tech and understanding the issues founders face — it’s impossible to get it just looking from the outside, you need to feel it.
Being an angel investor in a number of startups helps, you’re proving that you put your money where your mouth is.
A lot of it comes out of San Francisco (Silicon Valley) it’s a ‘pay it forward’ mentality. You help other founders out, make connections, do introductions — you want to help and you’re part of the ecosystem. You want to see them succeed. What I’ve found is, that comes back to you. You help and people want to help you. It works both ways.
FF: What are the opportunities people should be aware of at the moment?
Luke: I see lots of startups that aren’t on anyone’s radars. So angel investors, venture capitalists come to me and say, ‘Hey Luke, if you come across something that looks interesting we want to know’.
With these businesses people don't have an opportunity to invest, they’re getting to $1 billion market cap and all that upside is captured by just a handful of VCs, typically out of Silicon Valley. What we’re seeing now is angel investors trying to get in when they’re valued at just $4 million. You blink and, the good ones, they’re $100 million. If you don’t get in early, you miss that upside.
I’m often contacted by startups looking for capital, they want smart money. Shareholders who can help — we have links into the market. I connect those people but I don’t charge for that. That’s a pay it forward thing. You connect the right people with each other because you want to help the ecosystem.