As a technical founder, you’re used to building products with an investigative, problem-solving mindset. When things go wrong, you’re constantly probing, talking to customers, and trying to debug what’s up. And yet, when it comes to recruiting, many founders just throw up their hands when things aren’t working.
If you treat your recruiting funnel like a product – constantly tweaking it with data-driven curiosity – you’ll focus on solving the right problems and ultimately close better candidates faster.
A typical example I see:
- A company isn’t hiring as many people as they’d like…
- So they spend a bunch of time stuffing more candidates into the top of the funnel.
- But if they dug into the data, they’d see that the problem is really at the bottom of the funnel:
- Candidates are making it to the offer stage but declining those offers far too frequently.
- If you bring more people into the funnel, the problem will compound, as you’ll be wasting even more of your time with candidates who won’t accept offers.
- Instead, you must focus on why your offer acceptance rate is so low. What’s happening at the offer stage keeping great-fit candidates from saying “yes” to us?
Your recruiting funnel contains a wealth of information, alerting you to the stage/s that need your attention. In my experience, there are 3 key metrics (all conversion rates) you should focus on when it comes to your recruiting funnel.
Note: I recommend starting with evergreen roles (e.g., IC engineering) when tracking funnel metrics. Metrics for one-off roles (e.g., leadership hires) will look different. As you’re constantly hiring for evergreen roles, they’ll deliver comprehensive, valuable data for your early funnel-debugging efforts.
Outreach-to-interested rate
At the top of the hiring funnel, you’ll message passive candidates through cold outreach in order to build your early pipeline. The outreach-to-interested rate is the percentage of candidates who agree to engage with you for an exploratory phone call or interview out of all those messages you send.
outreach-to-interested rate = total # of candidates who respond with interest ÷ total # of cold outreach messages
This metric allows you to assess the effectiveness of your outreach efforts and the attractiveness of your pitch. Know that your interested rate will be low; that’s typical for an early-stage company. Over the past year, we’ve seen interested rates for senior engineers hover around 5 to 10% (on the higher end if the company has a particularly compelling pitch). This metric can also depend on factors outside your control, such as how many other companies are going after a certain talent profile. For example, AI researchers and scientists are very challenging to engage right now (2024).
I often see founding teams track response rates rather than interested rates. Response rates might make you feel better than interested rates do, but they’re ultimately only a vanity metric if the candidate doesn’t actually want to engage with your process. If 95 out of the 100 people you reach out to respond to say “no thank you,” that exceptional 95% response rate still won’t make a dent in your hiring funnel. That’s not to say response rates won’t be important down the line when your organization is mature enough to start considering its employer brand strategy. But at early-stage the important question is: Are you saying the right things to get talent to actually engage with you?
Outreach-to-interested rate is less a diagnostic metric than it is something you want to consistently improve upon. A 3% outreach-to-interested conversion rate doesn’t mean you’re failing; it’s just a baseline for your messaging efforts. How do you get that 3% up to 5, 8, or 10%? Almost always the answer to this question is a matter of attending to your pitch.
The two most common problems I see when this metric is low are that the product isn’t explained well, and the role doesn’t match the recipient’s motivations. Your messaging must effectively set your product apart from others in the market and ensure candidates grasp the problem you're addressing. It must also engage the recipient by highlighting the most attractive aspects of the role for them. Why is this role a more appealing opportunity than the kinds of roles they’ve held in the past or others they could consider now? In both cases, it’s essential to take on the candidate’s perspective.
There are many things you can do to improve your outreach-to-interested conversion rate. Seek feedback from potential candidates in your network who could thrive in this role (even if they're not actively job-hunting) to assess the appeal of your messaging. Is your story as good as you think it is? Ask the candidates who do respond with interest why they responded: What about your outreach caught their attention? Follow up with the talent who doesn’t respond and ask why—is there something essential from your pitch that you’re failing to mention?
Once you’ve got some useful feedback, experiment. Change up the elements you’re pulling from your pitch into your outreach. Explore different subject lines, vary your senders, try sending on different days of the week, and so on.
Onsite-to-offer rate
The second conversion metric I recommend early-stage founders track is toward the bottom of the funnel. The onsite-to-offer rate answers the question: of the number of candidates you bring through the process, how many of them do you extend offers to? By the way, when I say “onsite” I just mean final round – the end of your process – even if you aren’t physically bringing the candidate into your office.
To calculate this number, divide the number of candidates who receive offers by the number of candidates who make it all the way through your interview process. If 5 candidates are brought in for onsite interviews (or whatever the final stage in your process is) and 2 receive job offers, your onsite-to-offer conversion rate is 40%.
onsite-to-offer rate = total # of candidates you extend offers to ÷ total # of candidates you bring through the hiring process
This metric tells you how good your pipeline is. A high onsite-to-offer rate means you’re bringing in excellent candidates you want to hire. On the other hand, a low onsite-to-offer rate suggests that your team is investing time with talent that isn’t of the caliber you want. This could stem from inadequate candidate sourcing strategies, ineffective assessment practices, or misaligned interviewer expectations.
A low onsite-to-offer rate is expensive. If your engineering team spends 10 hours interviewing a candidate and doesn’t extend an offer, that’s 10 hours lost not building the product.
I recommend companies target an onsite-to-offer rate of 80%.
Why not 100%? A 100% onsite-to-offer rate means you’re not taking risks. It’s important to leave room for error, possibility, and discovery. This might look like taking a measured chance on a candidate with a different background than your target candidate, but they show potential. 80% allows you to aim for a number high enough to maintain hiring efficiency77 but not so high that you’re not taking risks and missing out on those golden opportunities that other companies might overlook.
While your outreach-to-interested metric challenges you to optimize your pitch, your onsite-to-offer rate challenges you to optimize your persona or your process. If the candidates who make it to onsite interviews aren’t ultimately well-suited to the company or the role and don’t receive offers, you might want to improve your pre-screening process with early skill assessments or different questions to more rigorously gauge fit. You might refine your sourcing strategies and change the target profile. You might put interviewers through a more rigorous training process if it turns out they’re not assessing candidates well. Dig into the notes from your candidate debriefs. Look for patterns. Use those to debug this stage of your funnel.
Offer-to-close rate
You can spend all week talking to stellar candidates and handing out offers—but none of that work matters if you don’t close them. Your offer-to-close rate is the percentage of offers you make to candidates that they accept.
offer-to-close rate = total # of offers candidates accept ÷ total # of offers you extend
I always suggest targeting an 80% for offer-to-close rate.
Again, this leaves room for error and exploration. An 80% conversion rate at this stage of your hiring funnel means you’re doing a terrific job selling your company. You may start with a lower close rate than this, and that isn’t cause for despair! The goal is to determine what’s broken in the funnel and experiment to increase this number.
There are many reasons that companies fail to close well and why this metric might need improvement. A few examples:
- Your compensation isn’t competitive.
- Candidates don’t feel important because they didn’t talk to enough senior folks in the interview process.
- Offers are coming in too late (or too early).
- Their family doesn’t want them to go to an early stage company, and so they chose a later stage opportunity.
You’ll get some of this intelligence from candidates who turn your offers down. Ask these candidates why they chose not to work with you. Use that feedback to know where to focus.
FAQ
What about the middle of the funnel?
The 3 metrics we covered are at the bookends of the funnel (top and bottom). As your company grows, you’ll start drilling into the data at every stage of your hiring funnel. However, focusing on the bookends at these early stages is most helpful.
The top and bottom of the funnel combined alert you to the most critical elements of your hiring strategy. Your outreach-to-interested and offer-to-close rates will tell you most of what you need to know about how strong your pitch is, and your onsite-to-offer and offer-to-close rates will tell you most of what you need to know about how strong your candidate persona and your overall process are. Once you have your pitch down and fully understand your persona, some middle-of-the-funnel will work itself out.
Another reason to focus on the top and bottom first is that the middle of the funnel can be wildly variable: The number of interviews you have for different roles may vary, as will the nature of your assessments. People drop out of hiring processes for various reasons—the process takes too long or is unorganized, poor communication, the assessment is unreasonable or redundant, the candidate realizes there’s misalignment along the way, and so on. Begin with the bookends, and if you discover you still have a leak or a bottleneck somewhere in your funnel, then the middle of the funnel—with all its variability—will be the next place you look.
What about funnel benchmarks?
My perspective on the two bottom-of-funnel metrics above is that both conversion rates should be significantly higher than 50/50 but not 100%. I find 80% is a good rule of thumb, based on my own personal experience. While benchmarks can serve as a reference point, they may not always provide the necessary context or encourage you to aim high enough. Recently, a founder shared their goal of achieving a 60% close rate, citing industry averages for companies in their sector and size. But 60% isn’t a good close rate to aim for—that’s just better than chance. Don’t let benchmarks justify complacency.
By homing in on the metrics for these crucial stages early on, you’ll establish a solid foundation for your company’s recruiting strategy. Taking a data-driven approach to recruiting and hiring from the earliest days of your company will help you optimize resources, hire the right founding team, and serve as a foundation for future growth.