Not all startups are built for a billion-dollar exit — or to grow as a stand-alone company at all.
The appearance of easy-flowing subsequent funding likely led to the intense funding swell of the few years leading up to 2022. This is not to say all these companies are bad by any means! Many of them have customers, which proves that they’re building something people want; some businesses likely even have meaningful revenue.
On the other hand, some of them will realize that without an abundance of venture funding, their business model won’t be successful on its own, and they will have to come up with a new plan. Heroes Jobs was one of them.
The San Francisco-based startup launched in 2018 to create a LinkedIn for Gen Z: a more informal way for companies and potential employees to connect using video and making a platform that resembled TikTok. The company just announced that it had been acquired for an undisclosed amount by JobGet, an hourly job marketplace startup that has raised more than $50 million in venture funding.
Heroes Jobs co-founder and former CEO Cyriac Lefort said that despite the company having a signed term sheet for a Series A, continuing to raise venture funding as an independent company no longer made sense.
The startup raised $9 million in prior venture funding across two rounds while growing its ARR to $2 million and landing partnerships with well-known brands like H&M, Panda Express and Chipotle. But despite that, the current funding environment made Lefort and his co-founders realize that even if they did raise the Series A, they would likely run into issues down the road: Their startup relies on a large number of users, and customer acquisition costs are too high.
“Think of Uber, the ridesharing app. They couldn’t have existed today if they didn’t raise a billion dollars. It’s just math,” Lefort said. “So, we raise $12 million, then what? Then in three years if we don’t raise $40 million, it’s bad? We all know that you don’t want to start doing down rounds; it becomes complicated for the company and the rest of the people in the company.”
But by joining with a company that already had the users, it was able to both slim costs and also get the product in the hands of more people, thus making it more impactful.
“Let’s unite forces, let’s join another company that has a lot of users, and together we will be stronger,” Lefort said. “[The funding environment] has changed a lot even today, and it’s going to get even more tough.”
JobGet seemed like a great match for Heroes Jobs. JobGet has been downloaded by over 2 million people and has more than 50,000 companies using it to post jobs, according to JobGet. While the terms of the transaction weren’t disclosed, Lefort said that it was favorable on both sides. Of course, we can’t confirm that, though.
So while Heroes Jobs isn’t exiting through a $1 billion IPO or a flashy nine-figure acquisition, I think this path is both smart and one founders should really take to heart when thinking about the future of their companies in this funding market. Many businesses will thrive when paired together, which is a lot better than eventually going out of business trying to force independence.
Some startups have already realized this. Last fall, The Muse bought Fairygodboss, both of which were job advice websites and marketplaces targeted at women. At the time, The Muse founder, Kathryn Minshew, said that it made sense for her startup to start acquiring others; teaming up made them more powerful because there was a limit to how many job marketplaces companies were going to sign up and pay for.
“These brands that have done a really good job of building community can reach some scale,” Lauren Bonner, a managing partner at MBM Capital, which facilitated the acquisition, said at the time. “They can finally get exposure to all of the Fortune 500 rather than just a sliver of it.”
I think that’s some sage advice for founders, especially at the early stages with rough fundraising roads ahead of them. It’s even good advice for those that could probably pull together at least one more financing round, like Heroes Jobs. Sometimes it’s easier to make a clean exit now than a messy one later.
Founders aren’t always going to want to abandon the plans they had when they started their startups, especially when they’ve poured their heart and souls into the business. While selling early to many will seem like failing all the same, it likely will give founders and investors more of a return than if they waited.
Founders can then choose to really build and scale their companies within another organization, or with a partner, or they can look to start something new with a former founder that had a successful exit on their resume.