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How A Startup Can Go From Bootstrapped To $63 Million In Funding In One Fell Swoop

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This article is more than 9 years old.

The founders at ZipRecruiter had been through the startup cycle before. After twenty years in the game, they didn't need the money, really, but they had what they thought was a solid idea: to help human resources at small companies like theirs hire and on-board people when they couldn't afford to expand their HR staff. And the office would be in Santa Monica--not the worst place to tinker away.

"We started out with humble ambitions, to bootstrap a lifestyle business," admits CEO Ian Siegel. "But it really took off on us, and at that point it's less about being a scrappy entrepreneur who bootstraps. It's very rare in our industry to get something with this potential."

Just four years old, ZipRecruiter has turned into much more than a hobby for Siegel and his team. The company has 150 employees a 40,000 square foot new office in downtown Santa Monica, and will take in north of $50 million in revenue this year on more than 100% year-to-year growth. All for an HR platform for small- and medium-sized businesses who want one place to aggregate all the job listing sites and then help with the process to bring new hires into corporate systems.

"We took tools used by the bigger companies, and we greatly simplified them to make them more available at the lower end of the market. The idea is to help the person doing HR at these places, whether they are an HR professional or not," says Siegel.

So what makes ZipRecruiter a bit unusual is that it's chosen to raise a massive first round of institutional funding after hitting financial metrics that most startups only see as milestones on the horizon. There are the 30,000 small businesses coming onto the platform each month, and the headcount that will push 300 in the next year. But ZipRecruiter is also "substantially profitable" already.

Add it up, and the Series A funding round that ZipRecruiter just raised is not your typical first institutional round. A group of growth equity venture capitalists--experts at fueling later-stage private companies who typically have had earlier investors helping them for years--lined up. The company ultimately scored a $63 million round led by Institutional Venture Partners, more known for leading fifth or sixth rounds in startups. And even the size of the raise, which likely values ZipRecruiter at as much as $400 million, was for what Siegel says were community-centric reasons: "We chose IVP because they have investments in the LA area and are rock solid there, people like them," he says.

Then ZipRecruiter enlarged the round to make room for two local VC firms, Basepoint and Industry Ventures. "It was important to take some money from LA, to see the LA tech community grow."

Those firms probably don't see their investment as a charity case--a lot of startups are trying to do what ZipRecruiter is attempting, but mainly working at the end of the funnel, targeting enterprise-sized companies. There's a lot more money in a contract with a bigger company than a couple small ones. ZipRecruiter admits that it's had to work harder to build a customer base because of that, but now points to the 5 million SMBs in the United States as a target market that doesn't have much competition in town.

ZipRecruiter integrates job sites like SimplyHired, Backpages.com and Monster.com. It's other tools are focused on setting people up in your payroll, vacation tracking and other systems just that first time, meaning that Siegel is betting that being employee management software companies won't really compete for the same use case.

But as a startup that just leapfrogged from self-funded to growth equity, Siegel says he'd bootstrap again, but warns startups not to miss out by going it on their own too long. "When I look back now, bootstrapping is a great discipline for bringing out the best in a company, because you have to be among the strongest," he says. "But there came a point in retrospect where we were maybe being foolish not taking money. There were opportunities we had to skip."

Now ZipRecruiter can eye acquisitions and a faster roll-out than its founders expected from their hobby project when they started out in 2010. And Siegel's cocky about their prospects.

"Becoming a billion-dollar company is not a question."

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