{"id":294438,"date":"2023-10-26T06:17:10","date_gmt":"2023-10-26T13:17:10","guid":{"rendered":"https:\/\/www.saastr.com\/?p=294438"},"modified":"2023-11-08T05:50:17","modified_gmt":"2023-11-08T13:50:17","slug":"whats-new-at-greenhouse-200m-arr-ai-in-the-real-world-getting-bought-by-pe","status":"publish","type":"post","link":"https:\/\/www.saastr.com\/whats-new-at-greenhouse-200m-arr-ai-in-the-real-world-getting-bought-by-pe\/","title":{"rendered":"What\u2019s New at Greenhouse: $200M ARR, AI in the Real World, Going Big with PE, and More"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Co-founder and CEO at Greenhouse, Daniel Chait, sits down with SaaStr CEO and Founder Jason Lemkin to share what\u2019s new at Greenhouse, a successful recruiting software company at $200M in ARR today.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When Greenhouse started, it was at a time when the market was growing up, and there weren\u2019t any playbooks. You could do vanilla 101 SaaS practices and succeed.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Could something like the Greenhouse of 2015 even make it to market today?\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Who knows. Getting off the ground is one thing \u2014 an easy pitch of being an HR tech startup focused on improving hiring.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But today, it\u2019s not that easy anymore.\u00a0<\/span><\/p>\n<p><iframe title=\"What&#039;s New at Greenhouse!  $200m ARR, AI in the Real World, Getting Bought by PE, More\" width=\"1080\" height=\"608\" data-src=\"https:\/\/www.youtube.com\/embed\/dTdSjvbRsQ8?feature=oembed\"  allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" class=\"lazyload\" data-load-mode=\"1\"><\/iframe><\/p>\n<h1><span style=\"font-weight: 400;\">Solving for the Long Tail<\/span><\/h1>\n<p><span style=\"font-weight: 400;\">Today, if your product is easy to use, people will try it.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">It\u2019s easy to get to $10M or $15M ARR, but the problem is\u2026 What happens next?\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In the ATS industry, buyers might choose the cool, new, shiny, and cheaper product. That\u2019s a great pitch, so every year, a new and cheaper flavor comes out.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The problem is if you\u2019re in business for any amount of time, the product gets a bit older. Hiring is complicated, so you have to build a lot of software to get to $200M ARR.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">It\u2019s challenging to be easy to use, simple, <\/span><i><span style=\"font-weight: 400;\">and<\/span><\/i><span style=\"font-weight: 400;\"> big.\u00a0<\/span><\/p>\n<h1><span style=\"font-weight: 400;\">A Multi-Segment Strategy<\/span><\/h1>\n<p><span style=\"font-weight: 400;\">You have to be intentional in your strategy to solve for the long tail.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Greenhouse intended to be multi-segment, even though it\u2019s a tradeoff. In a year like this, SMB is doing worse, with a lot more churn and startups going out of business.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">On the other hand, their Enterprise segment is bigger and doing great.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But in other years, SMBs are jumping in the boat, so you get amazing growth long-term with a multi-segment strategy.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The great part about having a couple of thousand startups using your product every day is there is so much innovation.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The SMB markets can test out features that aren\u2019t built to scale yet, and as they succeed, Greenhouse invests in them and rolls them out to Enterprise customers.\u00a0<\/span><\/p>\n<h1><span style=\"font-weight: 400;\">Putting Revenue in Enterprise Marketing as You Scale<\/span><\/h1>\n<p><span style=\"font-weight: 400;\">Something folks yo-yo on as they scale is the idea of putting all of your money into Enterprise marketing when the majority of revenue is coming from Enterprise.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The yo-yo comes when they realize they aren\u2019t putting enough into startups, and people don\u2019t always find them later. You have to do upmarket and then rotate back.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><strong>Does Greenhouse want to capture these people with just a few million or even less in revenue so they stay for life?\u00a0 Y<\/strong>es.\u00a0 <\/span><span style=\"font-weight: 400;\">When looking at Greenhouse\u2019s Enterprise business, many of them started when they were tiny.\u00a0 A<\/span><span style=\"font-weight: 400;\">\u00a0huge amount of their mid-market was SMB just a few years ago, so it\u2019s worth looking at the true lifetime value of those companies.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Sometimes, it might look like SMB churn when they\u2019re really just moving into mid-market.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The swing nature is true for where to invest marketing dollars, so founders need to be thoughtful when running a portfolio of bets.\u00a0<\/span><span style=\"font-weight: 400;\">You have to place a few chips in each square and be consistent over time.\u00a0<\/span><\/p>\n<h1><span style=\"font-weight: 400;\">Multi-Product vs. Laser Focus<\/span><\/h1>\n<p><span style=\"font-weight: 400;\">The biggest theme at SaaStr Annual this year was multi-product. Everyone was talking about it.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Is Greenhouse multi-product?\u00a0 Not quite yet.\u00a0 Their core product&#8217;s TAM is pretty darn big.\u00a0\u00a0<\/span><span style=\"font-weight: 400;\">Their flagship software is the bulk of their business and could get them to a billion in revenue.\u00a0 Per Daniel, g<\/span><span style=\"font-weight: 400;\">etting from $200M to $400M doesn\u2019t require any imagination.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To get to a billion of ARR just on an ATS business though might require some imagination.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The first decade of Greenhouse was focused on winning the ATS market. Check! They did it.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Now, over the next decade, they need to think about other things their customers do in hiring that aren\u2019t done well and could be scaled.\u00a0<\/span><\/p>\n<h1><span style=\"font-weight: 400;\">Discovering Your TAM<\/span><\/h1>\n<p><span style=\"font-weight: 400;\">In the early stages of Greenhouse, they knew hiring was a big problem and worth a lot of money.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The ATS business failed to solve the hiring problem, and they knew they could do something different.\u00a0 <\/span><span style=\"font-weight: 400;\">For the first six months, they didn\u2019t think they\u2019d build an ATS at all because it didn\u2019t seem relevant to the problem.\u00a0 <\/span><span style=\"font-weight: 400;\">But buyers buy exactly one ATS and never two, so as much as they didn\u2019t want to be an ATS business, they were.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Two places Daniel could discover their TAM were:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">On LinkedIn. All of their buyers are on LinkedIn.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">On websites. He could go to any website careers page and learn about the incumbent and what they were hiring for.\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">It was a very addressable market worth doing if they saw it as a vehicle for a larger problem they were going to solve.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">At the time, there wasn\u2019t a huge successful ATS business. Now, there are at least three with plus a billion dollar valuations.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">That wasn\u2019t obvious in 2012.\u00a0<\/span><\/p>\n<h1><span style=\"font-weight: 400;\">Build in a Bucket<\/span><\/h1>\n<p><span style=\"font-weight: 400;\">Even saying the word ATS is a growth journey for Daniel. He didn\u2019t want to say the word. At first, while he and co-founder Jon Stross wanted to reimagine hiring, they didn&#8217;t want to build an &#8220;ATS&#8221; (Applicant Tracking Service) per se.\u00a0 He ran from the term.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But on sales calls, the buyer would say the product looked amazing &#8212; and that they needed an ATS before buying Greenhouse. <\/span><span style=\"font-weight: 400;\">Without realizing Greenhouse was an ATS, too.\u00a0<\/span><\/p>\n<p><b>Why is that important?\u00a0<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Because you have to learn the language of your buyers. And it\u2019s different from the language of investors and your visions, which goes to your employees and yourself.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In software, there are buckets \u2014 a CRM bucket, an HRM bucket, an ATS bucket.\u00a0<\/span><\/p>\n<p><strong>As founders, we want to make categories and innovate, but it\u2019s usually better to do it in a bucket.\u00a0<\/strong><\/p>\n<p><span style=\"font-weight: 400;\">Buyers have been buying these buckets for twenty years and are rebuying them.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">It\u2019s already a ton of energy to buy your category within a bucket. It\u2019s even more energy to train people in an entirely new bucket.\u00a0<\/span><\/p>\n<h1><span style=\"font-weight: 400;\">AI in the Real World<\/span><\/h1>\n<p><span style=\"font-weight: 400;\">AI has burst on the scene, and everyone\u2019s rushing to add a ChatGPT-like thing to their product.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Greenhouse is no different.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Of course, when you have a paradigm shift of an old version and new version, before the internet and after the internet, before AI and after AI, things eventually get folded down into the main stack.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">People want reporting, but Greenhouse is taking it a step further.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Greenhouse wants to use AI to improve fairness.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you\u2019re not fairly assessing candidates, you\u2019re missing out on great talent.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There\u2019s so much bias in AI models. Folks say they\u2019ll take AI and filter top-of-funnel. That\u2019s a disaster and will magnify any bias in that database.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Greenhouse is combating this with a patent on a new machine learning-based resume parser to increase accuracy.\u00a0<\/span><\/p>\n<h1><span style=\"font-weight: 400;\">AI Could Improve Hiring<\/span><\/h1>\n<p><span style=\"font-weight: 400;\">When thinking about hiring, so many resumes are coming in, and parsing is only one part.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Could there be a way to use AI to find hidden gems? How many applicants are big companies processing?\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">At Greenhouse, their customer base can get overwhelmed with applicants, while others are starving for candidates.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There\u2019s a real opportunity to focus on the right candidates.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">AI can be a dangerous way to find the \u201cright\u201d candidates because of biases.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But some other options exist, like automatic taxonomy.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If one resume says software engineer and the other says developer, AI can converge these skills so people don\u2019t slip through the cracks because they typed a title incorrectly.\u00a0<\/span><\/p>\n<h1><span style=\"font-weight: 400;\">Leveraging Your Team When You\u2019re Away<\/span><\/h1>\n<p><span style=\"font-weight: 400;\">As a CEO of a company with $200M in revenue, you have to leverage your team.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As a CEO, no one can do what you do because no one else is the founder of your company.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This role gives you a certain kind of power in any room you want to take advantage of.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Daniel doesn\u2019t make their products, write product roadmaps, sell a single copy of Greenhouse, or manage customer accounts. He can\u2019t do anything the company does anymore, but he does show up as the CEO and add value to a room based on his role in the company.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you can find people on your team who add value to your life and help you get out of the weeds, that\u2019s a big unlock in hiring.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Daniel\u2019s team is an anti-gravity device. He doesn\u2019t get weighed down in their world or fix their stuff.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As founders, you should find people who can run things well and solve problems while you\u2019re away.\u00a0<\/span><\/p>\n<h1><span style=\"font-weight: 400;\">How Enterprise, Mid-Market, and SMBs are Trending\u00a0<\/span><\/h1>\n<p><span style=\"font-weight: 400;\">Salesforce just announced they were rehiring 2,000 people they laid off, and Samsara, a rocket ship, way under-hired for sales reps. Let\u2019s look at the trends Greenhouse is seeing in Enterprise, mid-market, and SMB over the last 12 months.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There\u2019s been a lot of stress on small businesses and VC-backed small companies.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The era of free money is over.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Vendors are seeing churn because many companies are going out of business.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But TechCrunch doesn\u2019t represent the entire world. The U.S. has 3% unemployment.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Greenhouse over-indexes on knowledge workers like management consultants, finance companies, advertising, marketing, and other companies with similar talent characteristics of a tech company.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Those industries are hiring less, going out of business, and experiencing more layoffs.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The impact has stopped getting worse but isn\u2019t getting better yet.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Enterprise is seeing a lot more positive and healthy trend because they won\u2019t go out of business from interest rates going up a few points.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Some of them may have gotten too lean, so if you\u2019re still growing, you have to keep up with it.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Layoffs were about quickly getting lean and fit and making Wall Street happy, but there will likely be a quiet reflation in 2024 because no one can freeze for two years and still grow.\u00a0<\/span><\/p>\n<h1><span style=\"font-weight: 400;\">Private Equity Acquired or Owned Startups<\/span><\/h1>\n<p><span style=\"font-weight: 400;\">Greenhouse was bad for three weeks and was very good for two years. Texas Pacific Group bought investors out for close to a billion dollars all in.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Two years later, Daniel is still CEO and gets liquidity as part of the deal.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For certain founders, it\u2019s not perfect, but it\u2019s the best of both worlds \u2014 some liquidity and getting to play another card.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><span style=\"text-decoration: underline;\"><strong>Daniel\u2019s advice for startup founders is that your opportunities for liquidity are few and far between.<\/strong><\/span>\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Some people wrestle with the idea that they\u2019re leaving money on the table or hoping it triples along the way. <\/span><span style=\"font-weight: 400;\">But you might not get another bite of the apple.\u00a0 <\/span><span style=\"font-weight: 400;\">Not all Private Equity is the same. Some founders stay, while others leave the day after IPO.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For the average PE investor, they want a triple, not a grand slam. It\u2019s a different feel than a VC because the PE wants to manufacture consistent wins.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Daniel chose this route because it was a growth fund focusing on social impact, not a buyout fund.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">All in all, every startup founder has to choose the best path forward for themselves and their companies. Greenhouse continues to grow and release exciting new features. <\/span><\/p>\n<p><iframe title=\"What&#039;s New at Greenhouse!  $200m ARR, AI in the Real World, Getting Bought by PE, More\" width=\"1080\" height=\"608\" data-src=\"https:\/\/www.youtube.com\/embed\/dTdSjvbRsQ8?feature=oembed\"  allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" class=\"lazyload\" data-load-mode=\"1\"><\/iframe><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Discover what\u2019s new at Greenhouse, a $200M ARR recruiting software company. CEO and co-founder Daniel Chait and SaaStr founder and CEO Jason Lemkin discuss AI, trends in the market, getting bought by PE, and much more. <\/p>\n","protected":false},"author":13,"featured_media":294442,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","om_disable_all_campaigns":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpscp_schedule_draft_date":"","_wpscp_schedule_republish_date":"","_wpscppro_advance_schedule":false,"_wpscppro_advance_schedule_date":"","_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_selected_social_profile":[]},"categories":[24898,31,117,122,112,21,34,3529,20,24897],"tags":[],"class_list":["post-294438","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ai","category-blog-posts","category-compensation","category-featured-videos","category-hiring-topics","category-podcasts","category-product-role","category-tech-news","category-videos","category-whats-new-at"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/www.saastr.com\/wp-content\/uploads\/2023\/10\/youtube-thumbnails-AI-23.png?fit=1000%2C563&quality=70&ssl=1","jetpack_shortlink":"https:\/\/wp.me\/p5oib2-1eB0","jetpack_sharing_enabled":true,"fifu_image_url":"https:\/\/www.saastr.com\/wp-content\/uploads\/2023\/10\/youtube-thumbnails-AI-23.png","_links":{"self":[{"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/posts\/294438","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/comments?post=294438"}],"version-history":[{"count":0,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/posts\/294438\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/media\/294442"}],"wp:attachment":[{"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/media?parent=294438"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/categories?post=294438"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.saastr.com\/wp-json\/wp\/v2\/tags?post=294438"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}