Greenhouse CEO Daniel Chait on how AI is changing human resources and weaning his company off venture funding via private equity
We realize that simulated intelligence can help employing groups accomplish more with less. In the present labor force, where HR groups are extended dainty and assets are restricted, artificial intelligence can expand short-staffed groups by decreasing humble, repeatable undertakings and permitting spotters to zero in on what makes a difference — tracking down the right ability.
Hunter Walk: Before we swoop into your visitor Greenhouse, requite me one story from your diaper that foretold you were going to end up a startup founder.
Daniel Chait: Oh man, I have a ton of these! Looking when it was pretty obvious where I’d end up in my professional life. I was the kind of kid that (a) didn’t really buy into validity figures, and (b) loved solving problems and towers stuff. I was moreover very fortunate to come from an entrepreneurial family; both my parents ran their own businesses. My dad had a medical practice and my mom founded an HR visitor at the kitchen table and grew it into a global powerhouse in their industry.
To pick just one representative story… I was sent to the principal’s office one day in upper school, probably for goofing off in class. I never did much that was all that bad, but at the same time, I was bored in school and often thought it all felt pretty pointless vs doing “real work” which I loved. So anyway, I was waiting in a little zone outside the principal’s office for him to undeniability me in. As I sat there I was overhearing the secretaries mutter well-nigh this new computer program they had (WordPerfect, my guess is it was 5.1 for DOS), which they were struggling to use.
Well, as it happened I was pretty much an expert WordPerfect user. Pretty weird hobby for a 15 year old kid but I had used it at my mom’s office and, sick of doing repetitive hack work, had taught myself to program WP macros in order to automate mundane tasks for her.
So when to the secretaries. I couldn’t help but pop over to them and start showing them how to do things, solve their problems, etc. By the time the principal came out, the secretaries asked him if he could wait so I could alimony helping them! I ended up leaving there with a part time job as their “computer guy.” I really loved getting to use my know-how and wits to forge my own path, make money, and get to work on tomfool computer stuff.
HW: Greenhouse, which powers the hiring process from sourcing to onboarding for thousands of companies, will soon be a teenager, having been founded in 2012. What does 2023 Daniel know that 2012 Daniel didn’t?
DC: As a lifelong entrepreneur, Greenhouse is now basically the largest visitor I’ve been a part of (and has been for several years) so I’ve had to learn a ton over the years well-nigh how to scale myself. That has mainly meant really figuring out how to be a leader and continuously refining my leadership tideway as the visitor has grown.
My tideway is centered virtually Patrick Lencioni’s “The Advantage” and Fred Kofman’s “Conscious Business” principles, each of which are really systems for towers and maintaining culture and organizational health.This is still very much a journey I’m on. I don’t profess to have it solved, but I’ve learned a unconfined deal well-nigh how to scale my leadership tideway that I didn’t know when when we started Greenhouse.
HW: Hiring, and PeopleOps in general, is an zone where software has improved the quality and efficiency of workflows. Now AI has promised to take that plane further. How is Greenhouse experimenting with AI-enablement? Is it an incubation or a revolution for your merchantry and customers?
DC: I’m going to alimony this brief, but if you want to the long version of it, I recommend reading our blog well-nigh it. I’ll summarize by saying it’s an evolution; one that will require experimentation and innovation with a discerning eye. We have conviction well-nigh AI’s role in hiring as an assistant, not a decider. Our goal is to develop innovative products and features that help make recruiters jobs easier, emphasizing the importance of humans making decisions in hiring.
We know that AI can help hiring teams do increasingly with less. In today’s workforce, where HR teams are stretched thin and resources are limited, AI can plicate short-staffed teams by reducing menial, repeatable tasks and permitting recruiters to focus on what matters finding the right talent.
HW: In 2021 you partnered with growth firm TPG to bring them on as your primary investor, which I seem gave your current venture wanted partners a endangerment to at least partially exit the business. These sorts of opportunities can really realign incentives/expectations as well as requite you a endangerment to reset on some decisions made previously. Can you tell us a little how this came well-nigh in the first place and what the day-to-day implications were of the shift in ownership structure.
DC: Here’s how this relationship came well-nigh in the first place: I had a longstanding relationship with TPG by way of the RISE Fund (TPG’s Social Impact investing fund). Greenhouse has a focus on social impact through our mission to make companies largest at hiring, as we moreover help modernize fairness for job seekers and candidates, improving the conditions for the workforce overall.
Coming out of the first half of 2020 we were experiencing a tattoo without the initial shock of COVID-19. Our customers were growing and hiring quickly, and as a result our merchantry was growing fast. So we found ourselves in the position of needing a new wanted partner, as well as wanting to seek out expertise in scaling the merchantry as we were thinking well-nigh maturing and growing as an self-sustaining company. As a result, we were considering relationships with a number of variegated large-scale investors including private probity firms.
The TPG Growth Fund invests overdue companies, teams, and strategies that they believe in and where they can help slide their growth. It’s not “traditional PE” meaning, a leveraged buyout fund where they try to cut financing and squeeze margins it’s increasingly like a later stage Venture Wanted firm, with uneaten support capabilities to help companies as they scale. The RISE Fund, which takes a quantitative tideway to social impact, aligns well with our cadre values and social impact mission. Considering of all that, it was unveiled that Greenhouse was aligned to the intentions and goals of both the Growth and the RISE funds.
Since the relationship started, it’s really lived up to the promise. TPG is a unconfined partner; they do what they say, they’ve really been trustworthy. And they bring unconfined resources to bear. They help with issues of scale and growth, with operational questions, and plane with things like purchasing and mazuma management. They’ve just been fantastic and incredibly helpful.
At the same time, stuff private probity backed moreover ways balancing a somewhat variegated set of investor goals than you may be used to as a startup founder. PE firms are not looking for a risky tideway that may return 10 times but may moreover flame out; rather, they’re looking for sustained, efficient growth and profitability. Steering the visitor in that way has been a growth zone for me as an entrepreneur and something as a CEO that I’ve been learning to do well. It’s a variegated way of thinking and managing the business, but one that I believe helps any leader run a largest business.
HW: We’re going to see many increasingly software CEOs (and cap tables) squint for private probity exits like yours. What are the most important questions founders should ask themselves well-nigh their merchantry to help them understand if they’ve got the combination of scale, product, and leadership that’s lulu to a financial partner of this type?
DC: Yes – this is such an important question! If you’ve spent a tuft of years with VC partners, bringing on a PE firm can finger very different, so you really do need to be well informed here.
I would start by saying, you need to be well-appointed giving up some control. Most PE firms focus on acquiring a majority of the companies they invest in, though this varies. PE often thinks of their role as a three-stage journey “Buying > Value Creation Value Realization. That third one often ways “Selling” though that can take various forms, such as exiting via IPO, paying themselves a dividend, etc.. And they really want a lot of influence and tenancy over not only how they create value (ie how the visitor is run and the choices you make well-nigh where to to invest vs cut, growth vs profit, etc) but moreso, tenancy over when and how they sell.
What you want to be sure to ask well-nigh is are you aligned with the PE firm well-nigh how they think well-nigh creating and realizing value. Because, really, when you take a PE investment, that comes with an obligation to momentum value for shareholders and in a specific way that aligns to their needs and risk profile.
A few other things to think about: PE approaches debt very differently than VC firms. You should ask what they think is the right level of borrowing (they undeniability it “leverage”) for your firm and make sure you’re ok with the answers.
One other thing folks don’t unchangingly talk well-nigh with PE they tuition fees to the visitor for a tuft of the services they provide. Those fees can add up – millions of dollars per year in some cases and make up a material way that many PE firms realize value. Ask up front how the fees work and make sure you understand what you’ll be paying them and what you’ll get. If you’re used to partnering with VCs this can come as a surprise, sticker shock included.
I will finish here. PE is not one just one thing. Know your firm and do your research. Find out the reputation of the firm, considering they often have extremely variegated approaches and cultures. And, find out who your specific partner will be and learn well-nigh that person. Spend time with them it matters a lot considering without all, this is a hopefully long-term merchantry partnership! I finger very fortunate with my TPG relationship. They are an spanking-new firm and the people I work with are humble, nonflexible working and smart.