This Week, In Recruiting - Issue 104

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Have you heard about Join Talent's amazing Talent Acquisition Insights project? They are a series of how-to guides on topics such as Using Assessments in Talent Acquisition, Market Mapping, Benchmarking, Building KPI's and Using Data and more. It's some of the most pragmatic recruiter centric guides I've seen - and all freely downloadable in the Join Talent Resources Hub. All free to download, so get to it!

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Open Kitchen: I'm Going to Explain SVB

It should be clear by now that the only prediction anyone can safely make is that something crazy is going to happen, usually from out of the blue, to reset the board and throw everyone's plans into disarray.

The collapse into insolvency last Friday of Silicon Valley Bank - the default banker to the tech startup sector - threatened the entire tech ecosystem with a liquidity crisis which may have wiped out tens of thousands of businesses, along with hundreds of thousands of jobs.

The news this morning that the US Government is stepping in to fully guarantee cash deposits at least averts immediate apocalypse and gives breathing space for more permanent solutions to be found. Affected companies can now at least expect to be able to access their deposits, pay salaries and bills and continue to provide services to others.

It's been a breathless few days and today's Open Kitchen (and What's in the News tbh) is going to focus on what happened, why and what we in recruiting can expect the after effects to be.

1. What Happened at Silicon Valley Bank

1.1. Banker to the Tech Startup Sector

SVB was the 16th largest bank in the United States and the default banker to the tech sector. Remember all those Series A fundraises we used to hear about? Those funds once raised would need to be banked, and SVB positioned itself as the best place to deposit the cash. According to PitchBook, 65,000 funded startups used SVB as their banker, Garry Tan CEO at Y Combinator reckoned 30% of the YC startups - and even Recruiting Brainfood community members seem to be saying that 28% of them are with companies that bank with SVB. Not only restricted to the US, SVB had a significant role to play in Global tech Startup with supply of banking services to UK, India and China tech ecosystems.

1.2. Rapid increase in deposits during 2016-2021

In the low interest rate environment pre 2022, the tech ecosystem was awash with venture capital with SVB increasing its deposits from $69 billion to $173 billion as startups raised record amounts of financing. It's important to note that in the modern financial system, banks do not just hold cash deposits, but use those deposits to make loans at interest or make investments for yield so that interest could be paid to the depositors and the bank could make profit. In the low interest rate environment pre 2022, there was no better (or safer!) investment than buying US government bonds at 1.5-1.9% annual return. SVB bought these bonds - a lot of them, seemingly not aware or not concerned that as they were 'Hold to Mature' securities, their customers cash was being locked up in assets which may become illiquid should the market turn.

1.3 Fed Rate Rises 2022 Devalue Fix Rate Bonds

In the name of taming inflation, which the Fed Reserved blamed on excess money supply (rather than say, hostile de-globalisation) and so started on a series of unprecedented interest rate rises from March 2022 onward

This made loans more expensive but made investments more attractive - you suddenly had opportunity to get up to 5% on certain products, leading to bondholders on the 1.5% long term hold securities holding a lot of uncompetitive investment assets which were worth less than they were bought for. It turns out that SVB is not the only bank that has significant long term bond exposure - it was a conventional decision to invest in them during the era of for ever low interest rates. By February 2022, SVB is left holding huge amounts of bonds, which are now worth less than they paid for them - losses on paper which would sink the bank if they were ever realised.

1.4. SVB sells $21 Billion Bonds, Prepares to Raise Investment

Ever tightening money supply by continued interest rate rises meant less VC investment, less new deposits, less revenue growth for existing depositors and increase of demand for liquidity by those depositors. SVB needed to raise liquidity and on Weds 8th March, sold $21 Billion of bonds at discount, eating at $1.8 Billion loss, whilst preparing to raise a round of investment in order to meet depositor demand. These are all pretty conventional moves which in a less febrile environment may well have gone without undue notice. But SVB being the high profile bank it was, making what appeared to be a distressed sale, raised the alarm bells amongst VC's who were not only equity holders of SVB but also had obligations to protect their portfolio companies who have cash in the bank

1.5. $250K FIDC Insurance Guarantee

The red flag which become the siren call was the understated insurance clause at SVB which guaranteed depositors only the first $250,000 of their cash deposits. Anything above that number would not be guaranteed in the event of bank failure. Imagine if you were a founder who had just raised $10 Million Series A - you might lose 97.5% of your money if the bank went under! Sharper VC's recognise the risk, with people like Peter Thiel telling his portfolio to get their cash out of the bank on Weds. Bank run starts and within 24 hours, $42 Billion dollars gets withdrawn from SVB on Thursday alone as founders rush for the exits. SVB collapses into insolvency the next day.

2. What Can We Learn from SVB?

2.1. Fractional Reserve Banking

Banks do not hold 100% reserve of depositors money. Rather than hold a fraction in order to meet the projected depositor demand for access for their cash, and use the rest as loans at interest or investments for yield. No bank can withstand a bank run on its own because no bank holds enough reserves to meet 100% demand, despite making the promise of doing so. This is plainly fraudulent, but also legal and how the modern financial system 'works'. If you wanted a reason why Satoshi Nakamoto invented Bitcoin, dissatisfaction with this system probably would rank high in the list.

2.2. Federal Reserve

The Federal Reserve's narrow focus on 'taming inflation' by reducing the money supply is the fundamental reason behind systemic stresses that broke SVB and put risk throughout the tech ecosystem. Though they have ridden to the rescue here, we should not disguise the role they have played in making these events occur in the first place. After years of holding interest rates close to zero, thereby encouraging banks to buy long term bonds, their sudden pivot to hiking rates, left those banks holding illiquid, devalued assets which they were forced to sell at discount.

As Balaji says, this is not a single bank's problem, this is the central bank's problem. Worse might be to come as the Federal Reserve now needs to guarantee deposits at 100% for all banks outside of the Big 4 and so may well begin to loosen monetary policy (re-reduce interest rates) again in order to do so.

2.3 FUD and the Internet Information Cycle

Fear, uncertainty and doubt ('FUD') is a propaganda tactic used in sales, marketing, public relations, politics, polling and cults. It now most commonly used in bank runs. When a systemic flaw is exposed, panic actually becomes the rational thing to do - the depositors who moved quickest last week to get their cash out of SVB reduced their risk the most. Bank runs have a long history, but the speed at which FUD takes hold and panic spreads has accelerated - no doubt due to the mass amplification effect of brought about by mobile telecommunications and social media. In fact, it's a plausible theory that a single, well read newsletter in the VC space might well have started the FUD cascade at SVB.

3. What Are the Implications for Recruiting?

Recruiting is dependent on growth and growth is dependent not only on money supply but also on the confidence to spend it. Though the immediate triage over the weekend might have staved off the worst scenario at SVB, the only realistic assessment is to say that this episode will have a debilitating effect on business confidence overall and be hugely damaging to tech recruiting specifically.

3.1. Increase Hiring Freezes / Layoffs Risk

The immediate impact on recruiting will almost certainly be widespread (hopefully temporary) hiring freezes in the tech startup scene. When you think that thousands of tech employers came close to not being able to pay salary to existing employees, you can understand increased reticence to add to payroll costs in the immediate aftermath of this fiasco. We can expect greater due diligence, greater scrutiny on costs, slower pace of growth - all bad for recruiters who thrive on accelerating businesses. Furthermore, the likely persistence of defensive measures beyond the immediate - i.e CFO signing off any hiring budget - will mean slow down on hiring rate, reduced demand for recruiters and increased risk of recruiter redundancies.

3.2. EB Damage for Tech Startup

Big Tech / Small Tech is a not a distinction many people make. The rescue of the depositors at Silicon Valley Bank is already being conflated with the public sector bailing out profligate 'tech bro's'.

I entirely share the concern that my friend and industry analyst Sarah White observed, that there were significant parts of the population cheering on the demise of the SVB and their tech startups who used them, an outcome of the decades long failure to create a more equitable society in the aftermath of the Great Financial Crisis of 2008. At the recruiting edge, those companies which are hiring and growing will need to combat this sentiment and restate the value they add to wider society.

3.3. Bad News for Challenger Banks

The 4 day delay in announcing the backstop for SVB depositors is a strong signal that only the 'too big to fail' banks can guarantee the security. This not because traditional banks are any better for service provision or offer more competitive products (they often don't) but because they are systemically critical enough that governments have no choice but to bail them out if they ever came under duress. Founders will now have a fiduciary duty to use traditional banks ahead of challengers, so expect a flight of business away from the challengers - terrible news for the fintech sector.

3.4. Increased Risk aversion for Venture Capital

It is not socially popular to be sympathetic with VC's but a large portion of the sector came close to seeing a near total wipe out of their portfolio. Had intervention not occurred over the weekend, a lot of tech investments might have simply vaporised - not due to bad business practice or bad investment decisions but because of deeply flawed banking system. This has got to have a debilitating affect on investor confidence - all the way from small Angel to top tier VC. This means an already tight tech investment market just got tighter.

Big Tech Winter, which has been long and hard ever since the Q1 2022, is set to get longer and harder. What we have to do as recruiters and HR professionals is to understand the deeper mega trends which cascade down to our operational work, train for individual and institutional agility, spend down time getting skilled on Generative AI and invest in developing trust relationships with other people in the community.

We'll get through it but we'll get there faster and stronger, together

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What's in the News?

It's all Silicon Valley Bank folks - see above

If you are a recruitment service provider or technology business and have any news to share, comment below, this is your application to get into next week's addition of This Week, In Recruiting. Make sure to @ mention me so that I see it

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What's On Offer?

TRech International is offering a 10% discount on their Open Business Development & Negotiation Workshop for Staffing Specialist/Recruiters if you let them know that you are coming from Recruiting Brainfood (#Brainfood10 + First Name).

TRech is a Global Training Incubator of Recruitment, founded by former Top Billers. They offer a high impact range of solutions and learning programs to develop and maximise skills with the goal of Unlocking your Recruitment Potential.

On top of their inhouse training, they organize regular Open Workshops on specific topics for individuals looking to upskill themselves as well as for Agencies to register employees who can benefit from continuous learning.

So if you want to drive business growth and success, book your spot today by following the link below:

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*Cohort pricing for agencies available 

If you are a recruitment service provider or recruitment technology vendor have any exclusive offer for the community, comment below with your offer in order to be included in next week's edition of This Week, In Recruiting. Make sure to mention me so that I see it.

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What's Going On?

Big List of Recruiting and HR Events to Attend in 2023

Having just attended the fantastic Recruiters Unite event in Cape Town, I'm now 100% evangelising for more in person events and for recruiters and HR folks to start attending them! Make sure you bookmark the above spreadsheet folks and get your events up there if they are not there already. There is value in meeting people in industry, which simply cannot be replicated or captured any other way - and I say this is a person who wouldn't trade remote for anything. List is here folks, get to it.

AI in Candidate Assessment, Thurs 16th March, 5pm GMT

Let's go with this series on AI in recruitment! Excited to work with Metaview CEO Siadhal Magos, on how AI is coming to different parts of the recruitment process and how recruiters can use it to get better at their jobs. First up we're talking about AI and candidate assessment, with the awesome Matthias Schmeißer, Global Director of Talent Acquisition (Emnify) and effervescent Annie Jackson, Head of Talent Acquisition (Cleo) - register here

Brainfood Live On Air - Ep197 - Hiring in South Africa in 2023

I'll be back in the UK when this show runs, but I'll be there in spirit as I talk with local recruiters in South Africa on how recruiting works in this country. We're with Vanessa Raath, Founder (Talent Hunter), Lerato Mopeli Dibodu, Talent Acquisition Partner (Bash), Megan Petty, Senior Marketplace Specialist (NTT) & Nkosinomqhele Zulu, Talent Acquisition Specialist (Kindred) and I hope we can get Jonnathan Koch, CEO (Clipdrop), Samantha-Leigh Hayward, Founder (S. Hayward Consulting) and Jacqui Ford, CEO (APSO) to join. Register here folks.

If you have an event, webinar or podcast going on next week and want it featured on next week's newsletter, comment below with the link and event details. Don't forget to at mention me so that I see it

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Whose Story?

It's Amanda Kop, Freelance Recruiter

I first met Amanda several years ago at an event in Amsterdam and was immediately struck by how self assured she was for one so early in her career. It has been fantastic to see her career progress to date and when we reconnected over text recently, it became obvious to ask her to join the Brainfood Tribune. I asked Amanda 20 Questions - here are her answers.

If you want to share your story and join this project, comment below and simply put yourself forward. Brainfood Tribune is open for all community members.

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Who's Hiring?

Head of People and Culture, Talpasolutions, Essen, Germany

Healthcare Recruiter, MSG Staffing, Remote Global

Senior Recruiter, Western Union, Vienna, Austria

(Senior) HR Manager (f/m/d), PAIR Finance, Berlin, Germany

Recruitment/Talent Acquisition Coordinator, SYSTEMIQ, London, UK

Level II Recruiter, ADB Companies, Remote USA

HR Executive, Blenheim Chalcot, Cape Town, South Africa.

HR Executive, Blenheim Chalcot, London, UK

If you are an employer and looking to hire recruiters, then feel free to post your job on the Brainfood Jobs Job Board. Use coupon code BTCFREE for 100% discount.

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Whose Available?

I'm hoping with that the news of US Government intervention to fully secure the depositors of SVB will mean that there are going to be slightly less pressure on community members to come onto the open market. However, for those who are open to have conversations, this is the place to have them. Sign up for an account here, employers hiring for recruiters sign up here - discount details below.

We are up to 181 available and ready-to-interview candidates on the Brainfood Talent Community. If you're hiring for recruiters or HR staff, apply for a free company account and get access here, using this code 'BTCFREE' for 100% usage. If you're a recruiter or HR person looking for work, you can apply here, and increase your exposure to employers vetted by me!

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Who's Posting?

Big List of Places to Post Jobs (Globally) in 2023

Going to update this Big List every week folks - 500+ job boards from 50+ countries worldwide. One of the most frequent questions that gets asked in the online community is 'how to hire in country X' - figuring what type of online spaces candidates use is step one in figuring this out. Bookmark this page folks and if you run a job and it doesn't appear here, add it to the bottom of the spreadsheet here

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Who's Moving?

Seb O'Connell joins Org as Group Chief Executive Officer, after nearly a decade leading Cielo Talent, having before than been senior exec at Randstad Sourceright and Spring Group. I do believe I first met Seb on my first day in the industry over 20 years ago. We haven't had the chance to reconnect much since then but its been fun watching a meteoric career from the start. Congrats on the new role Seb!

Cinzia Iacovelli joins NAVEX as Strategic Events Manager. It was great working with Cinzia whilst at Appcast and excited to see this next move for you. Events is happening folks, and great to see companies invest in the field marketing again - this is not something you can tack on as a project to an existing team

Aaron Walker joins Capital On Tap as Head of Talent, having previously lead the TA functions at MarshMallow and Just Eat Takeaway. Financing has obviously been in the news of late, and I suppose there can't be a more apt name for an employer at the moment! We obviously need more financial innovation, especially as SME and Startup cannot rely on regulatory compliant institutions to keep their money safe and their access to capital secure.

Flora Farquharson joins DEMICA as Senior Talent Acquisition Specialist, having previously worked at companies such as Elastic and New Relic. Safe to say an interesting week for Fintech, a great deal of whom bank at the now insolvent SVB. How does this impact hiring? You have to hope that it won't, but you equally have to think that it probably will.

Orianne Wightman joins ARM as Global Early Careers - Senior Manager having previously worked as Talent lead for the likes of Indeed and Experian. Perhaps there is industry more interesting or important at the moment than the SC. Fascinating time and place to do some recruiting!

Ani Alexander joins Triton Play as Marketing Director. Crypto has been going through another tough week with the closure of Signature Bank, and so being able to reset the narrative is so important to ensure that great companies can continue to thrive despite the wider sentiment of the market. Great to see you still in there Ani, fighting the good fight.

Congratulations everybody on the job moves, the world has got to keep turning.

If you have made a senior exec appointment to your business, and feel the wider community needs to know about it, comment below with the details and see it featured in next weeks issue. Don't forget to @ mention me in it so that I see it

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What Are You Doing?

Not much it seems! Let me know in comments below, what personal projects you've been up to that needs wider audience to know about!

If you are doing something new, comment below with what it is and share a link to where you want people to go. Don't forget to mention me in it so that I see it

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End Notes

Last day and night in Cape Town. Got to say, it's been pretty good hanging about in a beach resort having some chill. Not really looking forward to a long flight tomorrow but hopefully the in flight entertainment will be good. Back in London for a next few weeks, so looking forward to eating better, catching up with friends I have not seen for nearly 2 months and doing a hard reset on my body, as its a potato atm.

Have a great week everybody

Hung

Hung Lee is the curator of Recruiting Brainfood, and now This Week In Recruiting. Subscribe to both if you are into recruiting or HR or just interested in world of work.