Using a bespoke analytical tool called ‘a8recruitment’, the idea is to create what amounts to a dating-type service for recruiting, where skills and experience supplant hobbies, interests and vital statistics.
An individual’s profile is assessed and contrasted with data about high performers in a similar role. In theory, positions and professionals are matched together, thereby reducing the risk of a bad hire.
Managing director Laurence Collins and his colleagues have spent the past two years developing their “intelligent” software and are now taking it to market. To help them achieve this, activ8 has attracted top technical and commercial staffers and has brought in Paul Gratton, former CEO of internet bank Egg, as non-executive chairman to add some extra gravitas to the project.
The company has also secured almost £1 million in funding and its product has recently received critical acclaim from Legal & General. The insurance giant was the first big company to trial the technology and the results ticked all the boxes that had been built into activ8’s software programme.
Trial and little error
When working with the insurance company, Collins and his team found that, according to the intelligent software criteria, only three out of seven hires at Legal & General were suitable when matched against the ideal profile. They also found that the recruitment process lacked consistency across different locations and there was an overall inconsistent application of psychometric assessments that hindered good hiring.
Activ8 then revamped the recruitment process for Legal & General to help shape the hiring decisions. The result has been a successful hire rate increase to 80 per cent from 43 per cent and cost savings and efficiency improvements of some £10 million over three years.
Collins admits it’s not a bad start for a business that had only four staff 18 months ago and relied for funds on the assets of the management team – that’s savings and mortgages.
In that time the management team has been in no doubt about the efficacy of the software, but for 35-year-old Collins the turning point that helped push the project to the next crucial phase was winning a competition for business start-ups. He modestly sends up the event as ‘Dragon’s Den meets the X-Factor’, but winners can afford to be coy about success.
‘When we started looking at different types of business funding, our first port of call was the web,’ Collins says. ‘We wanted to see how other businesses had dealt with that process. We were aware of different types of funding mechanisms and the different suitors to approach, but we wanted to try to see how we could calibrate the level of investment we required.’
Rising to the challenge
The team used an online profiling tool that asked questions about the business based on experience. Following this, Collins received a self-help report that highlighted the gap between the company’s aspirations and its position as a growing concern. For the team it was an invaluable lesson in finding out the criteria that venture capitalists and banks use to assess different funding options for start-up firms.
While using the profiling tool, serendipity then played its part in helping activ8 to achieve its financing strategy. Collins took a phone call from regional funding body Connect Midlands – backed by Catapult Venture Managers, venture capitalist Midven and public sector agency Advantage West Midlands – which launched the Connect £1 million Investment Challenge in July last year.
Collins says: ‘Connect had affiliated with the website tool and had been trying to attract early stage businesses into the competition to win the investment prize. I was sceptical to begin with. But we soon realised that with the checklists these people put us through and the disciplines it imposed on us, it was right for the business at that stage.’
These checklists included understanding the forecasts and projections of the business, the strength of the market proposition and what the future business strategy looked like. Judges were also looking for the size and scale of the market opportunity that activ8 was aiming for.
And the winner is…
Some 360 companies entered the event and these were whittled down to 12 for the final. Activ8 then won the final heat. Collins says: ‘The kudos and credibility of going through such a rigorous selection process and then winning meant that a lot of the due diligence that a potential VC would go through had already taken shape.
‘We were quickly ushered into a series of meetings with potential backers and shown what they could offer and how they would want to work. It opened a lot of doors.’
Collins and his colleagues eventually selected Catapult, which had shown a keen interest in the product from day one.
Says Collins: ‘Artificial intelligence in HR is not something you can go out and speak to hundreds of people about as it’s new and a little bit edgy. For us, Catapult demonstrated a belief in the product, access to credible management advice and reflected a fair evaluation of where the business was.
‘At the time, we needed to think about what level of funding would be required to deliver some of the plans. We needed to get the balance right between equity and debt-based finance. So we were able to come up with a deal that also involved a level of debt financing and the rest of it equity based.’
With 25 per cent of debt provided by the Royal Bank of Scotland and individuals in the management team adding their own investment, the funding deal came to £900,000. For the first two years, Activ8’s turnover had been close to £1 million and with the funding Collins predicts this will increase tenfold during the next few years.
Since winning the award, Collins and his team have started to approach big blue chip organisations that have a recruitment drive involving large numbers of people across a range of roles. Filling these positions can often be difficult as a result of high staff turnover, time to fill the vacancy, quality of candidates and length of time getting the successful ones up to speed.
Theactiv8 management team, plus Gratton and Graham Mold, director of Catapult, are understandably confident that the company’s software will take the recruitment and HR industry onto a new level.
For Collins, these high expectations aren’t enough. He believes the product could have a key role in deal making and will be used during acquisitions as a tool to help smooth through the post-M&A integration issues. Also, private equity firms may be tempted to use it when looking at the management teams of potential targets.
Above all, Collins believes he’s only just starting to understand the potential that can be unlocked with his intelligent software programme.