South African talent marketplace OfferZen gets $5.2M to deepen European expansion

South African tech talent marketplace OfferZen is one of the beneficiaries of the growing global demand for tech workers: It confirmed to TechCrunch that it has raised €4.5 million ($5.07 million) in Series A funding from South African investment company Base Capital.

This is OfferZen’s first round of funding since Philip Joubert, Malan Joubert and Brett Jones founded the company in 2015.

As a tech talent marketplace, OfferZen allows software developers and engineers to sign up as candidates who are then curated by OfferZen and made available to companies. The developers are live on the marketplace for four weeks, during which OfferZen guarantees that they’ll get contacted by different companies. The developers are only allowed to work permanent roles, the company said.

OfferZen operated solely in South Africa for four and a half years until April 2020, when it expanded to the Netherlands after acquiring an Amsterdam-based recruitment tech startup called TryCatch.

According to OfferZen CEO Philip Joubert, over 1,000 companies and 100,000 software developers use the tech talent marketplace. Most of its customers from both ends of the marketplace are based in South Africa, the Netherlands, and parts of Europe like the U.K. and Germany, which are prominent hubs for global talent.

The expansion to the Netherlands and servicing parts of Europe contributed heavily to OfferZen’s growth in the second half of this year, experiencing a 29% increase in placements between Q3 and Q4 alone.

“Tech hiring came to a near standstill in the first half of 2020 due to COVID. Since then, however, we’ve seen a huge acceleration in the market — companies are now raising far more capital than they were pre-pandemic, investing more in technology and subsequently hiring much faster,” the CEO said in a statement.

“Access to top tech talent has become the bottleneck for many companies and we’re in a position to help companies solve that.”

OfferZen doesn’t employ income-sharing agreements, a revenue model adopted by tech talent companies such as Bloom Institute of Technology (formerly Lambda School), or hourly rate charges, like Andela and Toptal. Instead, the South African tech talent company makes money only off companies via two models.

The first is a pay-per-placement model with a one-off 12.5% fee of the developer’s first salary. So, for instance, if a company hires a developer for $100,000, it pays OfferZen $12,500 as commission.

The second model is an annual subscription offering for companies that recruit lots of developers at once, paying upfront for OfferZen services. OfferZen says this model accounts for 40% of its revenue, while the rest is from the pay-per-hire model.

On competition, Joubert mentioned that what sets OfferZen apart from players such as Honeypot and Talent.io is how well the company focuses on building an engaged developer community through events and various channels as well as its sourcing process.

“We have a solid user base with very high-quality developers in our developer community. So we’re very, very well known [and] we invest a lot in the community,” he said.

“We also simplify the sourcing process. So we obviously have a lot of candidates on our platform, which is a good thing, but then companies also want to find the most relevant candidates. And so we have a sophisticated matching engine that shows the most relevant candidates for the positions that companies are currently hiring for.”

The company said most of the fresh funding would be plowed into OfferZen’s tech community. In addition, as OfferZen deepens its expansion into Europe into two more countries next year, a chunk of the money will go into growing its operations, product and growth teams.

When the Joubert brothers and Jones first conceived the idea behind OfferZen, they all lived in Silicon Valley, working as software developers. And although they had friends with similar professions in Africa, they realized that opportunity wasn’t democratized. 

“We had a bunch of friends back in South Africa, who were very smart as developers, but they weren’t working at great companies necessarily. And the reason they weren’t doing that was that they, I guess, [had] too many barriers to getting a really great job where they were,” the CEO said.

OfferZen connects developers to various local and global companies such as Luno, ABSA, MMI Holdings, Takealot, WeTransfer, Adyen and Catawiki.

Prior to this raise, OfferZen bootstrapped with the founders’ money. It opted to raise money now because it needed venture capital to expand into more European territories, Joubert said. 

“We had built up a business in such a frugal way, and of course, without raising funding and bootstrapping, you’re really forced to design a really strong business,” he said. “Now we are seeing all these opportunities that we think we could be tackled faster if we raise funding. So we decided, let’s raise some funding, now we can grow the team ahead of revenue, which we haven’t been able to do before. We can do that, take on the European market and expand faster.”