OfferZen, a South African tech talent marketplace, has raised €4.5 million ($5.07 million) in Series A funding from Base Capital, a South African investment business. This is OfferZen’s first round of venture funding since the company was launched.
The majority of the new funds will be invested in OfferZen’s tech community, according to the company. Furthermore, as OfferZen expands into Europe into two more nations next year, a portion of the funds will be used to expand the company’s operations, product, and growth teams.
Prior to this round, OfferZen was self-funded by the founders. It chose to raise funds now because it required venture capital to grow into new European markets, according to co-founder and CEO Philip Joubert.
“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.”
Why The Investors Invested
OfferZen has generated considerable traction since it was founded. According to Joubert, the IT talent marketplace is used by over 1,000 firms and 100,000 software professionals. The majority of its customers are headquartered in South Africa, the Netherlands, and regions of Europe such as the United Kingdom and Germany, which are important centres for global talent.
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OfferZen’s growth in the second half of this year was fueled by its expansion to the Netherlands and service of portions of Europe, with a 29 percent rise in talent placements occurring between Q3 and Q4.
Luno, ABSA, MMI Holdings, Takealot, WeTransfer, Adyen, and Catawiki are just a few of the local and global companies that OfferZen links developers with.
Based in Gauteng, South Africa, Base Capital was founded in 2004 with the goal of offering business and corporate finance advice services and solutions to organizations in Southern Africa as well as international companies looking to enter the South African market.
A Look At What The Startup Does
OfferZen, founded in 2015 by Philip Joubert, Malan Joubert, and Brett Jones, allows software developers and engineers to join up as candidates, who are then vetted and made available to businesses by OfferZen. The developers will be live on the marketplace for four weeks, during which time OfferZen assures they will be approached by various businesses. According to the company, developers are only permitted to work in permanent positions.
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OfferZen was only active in South Africa for four and a half years before expanding to the Netherlands in April 2020 after acquiring TryCatch, an Amsterdam-based recruiting tech business.
Income-sharing agreements, which are used by IT talent businesses like Bloom Institute of Technology (previously Lambda School), and hourly rate charges, which are used by Andela and Toptal, are not used by OfferZen. Instead, the South African tech talent business relies on two business strategies to make money.
The first is a pay-per-placement approach, in which the developer is charged a one-time 12.5 percent fee on their initial wage. For example, if a company pays $100,000 for a developer, OfferZen receives $12,500 in commission.
The second model is a yearly subscription for companies that want to hire a large number of developers at once and pay for OfferZen services up front. According to OfferZen, this strategy accounts for 40% of its revenue, with the rest coming from the pay-per-hire model.
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What sets OfferZen different from competitors like Honeypot and Talent.io, according to Joubert, is how successfully the firm focuses on establishing an engaged developer community through events and multiple platforms, as well as its sourcing methodology.
“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.”
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer