• Mon. Nov 28th, 2022

Arlan Hamilton wants to reroute how startups hire

ByASNF

Feb 19, 2022

Since launching the venture firm Backstage Capital in 2015, Arlan Hamilton has invested millions in more than 195 companies led by underrepresented founders, from a duo taking on auto insurance to a team rethinking how we virtually learn. Despite the breadth in the business, Hamilton says she is consistently asked two questions by her portfolio companies:

“Can you help us raise money? And, “Can you help us with hiring?”

While Hamilton’s fund is a response to the former, her latest bet — built by Hamilton herself — is a startup that explores the latter. Runner is a labor marketplace that connects startups with operations people looking for part-time work. It seeks to combat some of the largest tensions in early-stage startup building, such as deciding when it’s time to hire your first head of talent, or figuring out what to contract out, or what to build in-house when it comes to staffing. It’s launching with an explicit focus on operations roles.

“There are so many places you can go if you want to learn how to code or if you want to get a job as in the more technical side of things,” Hamilton says. “But where do you go right now if you want to be someone’s right hand, the COO, etc. … it’s sort of an afterthought for most [companies].”

Conceptually, Runner isn’t contrarian. Upwork and Fiverr have built solid businesses atop the freelancer economy. What’s different about the startup, though, is in who it targets — operations folks in tech — and how it employs them. Every “runner” or part-time professional who is looking to get a new gig is employed by the company under a W-2 classification. Around 200 runners are on the platform today, including those with experience in corporate roles or those who were previously entrepreneurs who want another stream of income.

Many current executives at the company first joined as runners. For example, head of customer success Melanie Jones joined the platform after spending time as a product manager at a dental network. Within a month, she was hired as an executive, alongside a number of other runners-turned-decision-makers at the company. Separately, Boeing exec Diana Moore joined as a COO just four months ago.

By classifying runners as employees instead of contractors, individuals are able to get basic protections and more job stability. Bluecrew, a Y Combinator graduate, similarly launched to provide on-demand workers, but hired them as employees with benefits, albeit in roles such as bartending, event staff, security, data entry or customer support.

For Hamilton, Runner is a return to an idea she’s been working on before she even broke into venture. Before Backstage, Hamilton was a production coordinator and tour manager for musicians (she continues to pepper music references into her work as an investor). While in that role, she would often work with runners, or individuals with local expertise who could be a right-hand helper to make things happen while on the road. When she was building Backstage, she began using runners in her own life, hiring people for one-day help while meeting founders across the country.

After the investor saw synergies between this role within the production world and tech’s love for flexibility, she brewed up Runner, with a logo and everything.

“We were building Backstage, we had no resources, because COVID hadn’t happened yet, people were really kind of confused by the idea of it,” she said. “So it was just one of those whiteboard ideas.” Now, nearly two years into a still ongoing pandemic, the market is ready.

The company’s business model is a 25% cut of a runner’s hourly rate. Additionally, if a runner is recruited by a customer to join them full-time, the customer must pay a 10% recruitment fee of the runner’s first year’s salary.

Unlike Backstage, which wants to upend the way venture capital is distributed and to whom, Runner isn’t building under the guise of helping companies recruit underrepresented talent — a choice Hamilton made, interestingly, because she didn’t want to “pigeonhole” the company.

“It would have been really easy for us to just categorize ourselves as a DEI recruitment company, but we didn’t want to be responsible for that — it should be everyone’s responsibility,” she said. That said, today, all executives at Runner come from historically overlooked backgrounds.

Before it went to the waitlist model to better deal with demand, Runner secured around 120 pilot customers at a $500,000 run rate. Its app is set to launch on March 15, 2022.

As for financing, Hamilton initially bootstrapped the company and, within the first 100 days, raised a $500,000 angel round. Most recently, Runner raised a $1.5 million pre-seed round on a SAFE note at an undisclosed valuation.

Backers in that round include Precursor, Lunar Startups, Freada Klein of Kapor Capital, 360 Venture Collective and Gaingels. Backstage Capital’s crowd syndicate, Backstage Flex Fund II and Backstage Opportunity Fund I, also invested in the startup.

It’s rare to see investors pour their own fund’s money into a company they started, but, as Hamilton notes, it’s not unheard of when you consider Guy Oseary’s Sound Ventures investing in his company, Bright, or David Sacks’ Craft Ventures investing in his audio company. Still, it can create a conflict of interest if decision-makers at the firm feel pressure to put money into a GP’s company, because they are, well, the GP.

Hamilton was part of the investment committee that decided to put money into Runner, but also gave each person authority to make autonomous decisions, she says. She also added that the eight-page deal memo — which gets into challenges, opportunity and gaps — was written by Backstage partner Brittany Davis, and associate Kelly Lei, without any alterations from her. The Runner team provided the pitch deck.

“It’s my fiduciary duty at the firm to bring back returns, and it’s my duty as a CEO of Runner to bring in the best investment partners possible. I did both,” Hamilton adds over Twitter DM. Another balance in the mix is that any Backstage portfolio company that uses Runner doesn’t have to pay the 25% service fee, or the amount that goes to the company’s revenue and operations.

“Our goal is to have 1,000 or more learners by the end of the year making an average of $40,000,” Hamilton said. “[Then] we are a half a billion dollar company.”

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