Quarterly Update - Q2FY23

Welcome to our new quarterly newsletter. This is a quick snapshot of the most prominent hiring and technology trends in our industry. Q2 has continued to be a volatile time in the market, here are some of the most notable trends that we've seen:

Company lifecycle: Start-ups vs.. established companies.

Timing is everything. Start-ups are hurting, and funding timing has been critical for their runway. Reports indicate that total VC funding raised by start-ups has plunged by 80% YOY in Q1FY23. Looking deeper into the valuations of these private businesses, later-stage companies D+ have had the most dramatic declines and subsequent down rounds. Candidates are more risk-averse and wary of early-stage businesses. At the other end many businesses, in particular Tier 1 vendors, are cutting or freezing headcount with a continued focus on maximising “operational efficiency” per headcount.?

The Winners?

Listed businesses (within the last 5 years) with established product-market fit, strong revenues ($800m+ ARR), consumption/cloud-based models, and disruptive tech continue to take market share from tier 1 and legacy players. These companies are "right-sized" for market conditions. They are not going anywhere, and existing customers trust them to deliver, but they are nimble enough to cater to the evolving needs of modern enterprises.?Whilst there are always exceptions to the rule, these businesses represent a port in a storm to many candidates.

Europe, the Middle East and Africa (EMEA)

EMEA leaders seem to be hesitant to explore previously “undervalued and lucrative markets” such as the Middle East, Turkey, Eastern Europe, Iberia, and South Africa. Instead, hiring managers are redirecting their headcount towards repurposing Account Executives to core markets such as the UK & Ireland, DACH, France, Nordics, and Benelux.

Partner initiatives

Across all international markets, vendors are increasingly looking for individuals who have greater experience selling through/building channel programs. The big 3 Cloud Service Providers continue to invest heavily in their partnerships with ISVs and we are seeing a corresponding pivot in many organisations to become more channel-friendly. ?

Increased reliance on the technical/product capability of salespeople

Cue the rise of “the full stack rep”... Hiring managers are looking for more than just candidates who can adapt well to changes, build rapport with customers, manage long sales cycles, and be strong storytellers in their presentations. Due to the reduction of customer success and professional services departments, salespeople are increasingly being asked to have deeper product knowledge and play a support role within vendors. This, coupled with the continual shift across the industry to move to consumption-based pricing models, result in salespeople needing to significantly up-skill their technical expertise in order to drive usage.

Cybersecurity?

Security continues to be a top-of-mind priority for customers and investors alike. As a result of numerous high-profile breaches, data leaks and significant overhauls to data privacy legislation. This affects hiring significantly across SaaS providers as adjacent technology spaces slow/halt expansion plans – cybersecurity continues to grow.?

Japan

As anyone who has done business there will tell you, Japan is a special market. The cost of entry is high, with product localisation, a small talent pool (in particular dual-language speakers) and a partner-driven market all playing a part. However, the rewards for the correct execution of a solid GTM strategy in the fastest-growing cloud market in the world can be disproportionately large when compared to other regions. As such, we’ve seen vendors hesitant to slow their growth plans in Japan, in some cases this will be the only region receiving investment globally.

Longer interview cycles with more stakeholders but faster end-stage offer processes

Interview processes have become longer with significantly more stakeholders involved. Intense headcount scrutiny, combined with a surplus of candidates in the market has made this possible. This is also due to the hangover from excessive scaling in 2021. We have also noticed that the offer process time to contract has become faster, perhaps in part due to the lower volume of outgoing offers.

Equity allocations

Equity allocations have significantly reduced across all roles. We estimate that equity allocations are down around 30% regardless of the stage of the company (public, private, etc.). Some vendors are not allocating equity at all, and examples of this trend are emerging. In tandem, VC investors are prioritising highly attractive preferred stock and liquidation preferences across their investments, meaning founders have had to sacrifice more to garner financial support.

?That's all for this quarter's update. We hope you found this information useful, and please don't hesitate to reach out if you have any questions!?