Now with fresh funding and $4 million in revenues, what is HackerEarth really betting on to give itself global leader status?
Starting in 2012, Sachin Gupta says there were a lot of questions around what HackerEarth really was.
He says, “People love to put things in boxes and compare or believe that you are like something.”
In their case, it was considered more like GitHub, a model that, Sachin reiterates, was completely different from theirs.
But after the firm just announced their Series A equity funding of $4.5 million on Tuesday, Sachin seems rather more confident about the new discourse that the Bengaluru-based company is choosing to embark upon.
Speaking about the funding, he says that the current equity round of $4.5 million is led by strategic investor DHI Group Inc., which is the owner of New York-based career website Dice; followed by Singapore-based early-stage venture fund BEENEXT, startup platform BEENOS, online marketing firm Digital Garage, and BizReach.
HackerEarth’s current investor, Prime Venture Partners, has also participated in this round, which takes the total equity raised by the company till date to $5 million (Rs 33 crore).
HackerEarth is a provider of innovation management and talent management software provided to large service organisations. Innovation management for the company essentially means the process of collaborating on ideas and converting them into proof of concepts through their platform. Sachin adds that Dice is a reseller for HackerEarth’s SaaS product line in the US.
The company also plans to deploy this funding to build out their product (in the innovation management space); strengthen its product team and expand its business to international markets.
In February, the news came out that the platform had already expanded its presence to African and South American markets including Kenya, Nigeria, Mexico, Brazil, Bolivia, and Venezuela.
Talking about the reason behind the investment, Teruhide Sato, Founder and Managing Partner of BEENEXT, said,
“What I value most about HackerEarth is its great founders with their ambitious vision and passion in this space. As both of the co-founders are themselves engineers, they understand what drives an engineer. We value their platform approach by creating a unique community for both developers and businesses to solve the problems of driving innovation and talent management.”
Further, with this new funding push, the firm plans to gradually phase out their developer sourcing business and focus their energies on evolving their SaaS product called Sprint.
According to the founder, HackerEarth was sourcing close to 22-30 developer positions every month for bigger corporates. While not putting down an exact number, Sachin says that this business function could be contributing close to 15-20 percent of the overall business for the platform.
Objectivity over subjectivity
So, how did they do it?
For founders Vivek Prakash and Sachin Gupta, the goal for HackerEarth was simple – to assess the talent of developers under objective parameters of quality (of code) and the problems they crack over time.
Our anecdote to start up was in college, when we saw the best guy in our batch not getting placed. We realised that the way engineers or developers were evaluated is very subjective and riddled with biases. But the thing about developers is that their skill is so objective, and it wasn’t being objectively assessed.
This led the duo to building a proprietary assessment technology platform that allows developers to come on the browser and code. The tech then assessed the code based on run-time and other parameters.
Seeing the business potential, the founders converted the platform into a SaaS offering, allowing companies to send across an assessment to candidates to code upon, rather than the first round of interview.
And this was the founding stone for their first product, Recruit, launched in August 2013, for talent assessment and talent mapping of a developer’s strengths and weaknesses.
Today, more than 500 customers worldwide use the Recruit platform, including names like Amazon, DBS, UBS, and L&T Infotech, claims Sachin.
Based on an annual license model, Recruit has a split pricing for domestic and international markets. Starting at $5000 for the domestic market, for international markets, the product is priced anywhere between $15,000 to $30,000.
HackerEarth was simultaneously also building its community of developers, and today holds a total base of 1.2 million developers signed onto its platform. Of this, 75 percent are based out of India, while the other 25 percent are from the US, Europe, and South East Asia.
Finding more to chew
According to Sachin, midway through their journey, the company realised that it could help these large service organisations not just assess talent, but also discover them.
“The problem statement posed by large firms was around thinking out-of-the-box. And that’s where the concept of hackathons came across, to connect with the open developer ecosystems for newer and fresh perspectives. Around the same time companies were pushing their internal teams to solve newer interesting ideas, through these contests.”
And, in 2015, they launched Sprint, HackerEarth’s hackathon management software, which offered end-to-end management capabilities of hackathons. Moreover, the product had a remarkable impact on the business, providing for close to 60 percent of the firm’s revenue and eventually growing it.
Based on an annual subscription model, the platform charges companies between $25,000 to $50,000 for Sprint, depending on the number of users on the platform. Having close to 250 paying customers, HackerEarth also makes additional revenues by charging in the range of $10,000 to $30,000 for hosting a hackathon, depending on geography and scope.
The company has held more than 200 hackathons for various organisations in this regard.
Moreover, it is safe to assume that SaaS businesses can make up to 80 percent in margins on their product deployment.
Change is the only constant
However, Sachin says that when the team stepped back to understand why companies are investing in hackathons, this is what they found. He believes,
There are three reasons why companies are holding hackathons. First is to get their brand name out there, second to evangelise their products (open APKs, cloud platforms), and third is to outsource the activity of thinking and building innovative solutions.
Hence, under what they call innovation management, HackerEarth plans to evolve Sprint to help organisations internally collect and convert ideas to proof of concepts and later MVPs. This democratises the entire process of innovation, allowing employees from all levels to be heard and help in the building process.
And, according to the founders this conversion of ideas to proof of concept or MVP will set Sprint apart from other platforms like Slack in the market, which market on the same theme of collaboration.
Further, once the idea is fixed upon, Sprint will also allow organisations to open up the idea to the open-developer ecosystem of HackerEarth to leverage on their expertise. However, this particular process will be a managed service for the platform and not a part of the complete automation.
But this manoeuvring comes at a cost; Sachin says that as a startup they can’t do everything. Therefore, this prompted them to gradually let go of their sourcing business. “Something has to take a hit, right?” asks Sachin.
Speaking about the most obvious future plans, Sachin says that the company plans to open up for the US and Europe markets. He believes,
This is the right time for us to look at markets overseas, when our India business is still growing, rather than a time when we are reaching saturation in this market. At present, 85 percent of our revenues come from India and 15 percent from international markets. In three years, we see this balancing out to a 50-50.
Currently with 120 members, HackerEarth has close to 45 people in engineering, 15 marketers, and 25 sales representatives, with the rest in operations.
Standing at an annual run rate of $4 million in revenues, HackerEarth is plowing back its revenues to build its operations.
With more than 750 customers, the firm plans to grow the entire business at a rate of almost 75 -100 percent by the end of next fiscal year. This means almost doubling their customer count by next year.
Further, with multiple SaaS companies like Zoho already proving their mettle in international markets, Sachin remains confident that innovation in Indian SaaS remains robust to scale and provide strong business use case for geographies worldwide.