We have often turned to OpenView Venture Partners for insights into the state of the SaaS marketplace. Earlier this month the firm released a very interesting piece of research focused on the talent challenges facing SaaS companies. OpenView’s research team asked roughly 100 SaaS executives what talent trends they expect in the coming weeks, months, and years.
We’ll note some of the key findings from the survey and analysis here and also direct you to the report itself. First, one of the key observations is that SaaS companies were in a hiring frenzy in 2021. Companies with less than $5 million ARR increased their employee ranks by 195%. This speaks to the rush to drive growth — perhaps at any cost. And at the same time, those same companies expect to slow their hiring in 2022.
We think that is aspirational to some extent. With the fluidity of talent in the SaaS space, we’d expect those companies to be hunting for talent throughout 2022, even though they may not be adding overall headcount. Larger SaaS companies, defined as annual recurring revenue (ARR) of $5 million to $15 million, indicate they plan to add considerable headcount in 2022. This maintains the trend they saw in 2021.
In the chart below, OpenView identifies the hiring priorities by ARR. It is notable that for those with less than $15 million ARR, sales are the highest priority. For larger companies, it’s all about the product. That makes complete sense since smaller companies are nearly in a panic to drive growth, hence the focus on sales. Meanwhile, more established companies are in a rush to drive higher APRU and retention via product improvements.
The research team also asked the respondents about where they are in their hiring process. In virtually every department, respondents indicated that they were behind where they would like to be in terms of hiring. The functional area where teams are most behind is engineering, with some 67% saying they are behind in hiring the engineers they need. Next in terms of being behind schedule are both product and sales. Both large and small SaaS operations indicate that they’re about 40% behind in terms of hiring into those positions.
Next, the team dove into the notion of work location – home, office, or hybrid. The chart below speaks to the considerable impact the pandemic has had on SaaS executives’ thinking in terms of work location. Just 11% of new hires into SaaS companies expect to work full time in person. Another 19% expect to be partially remote. And a whopping 70% expect to be fully remote. To us that is staggering but it also speaks loudly to the challenges observed above.
Companies must cast their nets far and wide in order to find the talent needed to fill large vacancies. And that talent could be many miles, even many time zones away from HQ.
Streamline the Process
Another key challenge facing these SaaS companies is their vetting process for new hires. We reported last week in our write-up of the Borrell event what Robert Hawthorne had to say about interviewing.
In essence, he indicated that companies must streamline their interviewing process. And that makes sense since according to the OpenView analysis, prospects are speaking to as many as 11 companies before deciding on which opportunity to accept.
With demand far exceeding supply, it puts the onus on the hiring company to figure out an effective and efficient process for vetting prospects. As Robert Hawthorne indicated, those companies doing multiple individual interviews are in a risky position today. He believes a three-person interviewing team is just as effective and considerably more efficient.
This chart speaks to the potential missteps a hiring company can make or the red flags in the interview and assessment process. Interestingly we note the second most cited red flag. A lack of access to company data. This suggests a lack of transparency from the “get-go”. And tells us that prospects are much more sophisticated today than they were perhaps a decade ago. It also speaks to the considerable leverage prospects have in a world where demand far outstrips supply.
The takeaways are clear.
- Remote work is and will apparently be the norm going forward.
- Compensation expectations continue to rise.
- Time to hire has doubled.
We really appreciate the work OpenView undertakes in assessing the challenges and opportunities in the SaaS world. If you are in the SaaS space, we highly recommend you take the time to read their reports and analyses. They are well worth the time.