A contingency agency is paid a percentage of salary when a candidate it submitted is hired. At later stages, with an in-house team to absorb a wide funnel, that model can work well. At seed stage it often disappoints founders, for reasons that are structural rather than about any individual recruiter. This guide explains the four reasons and what a seed-stage company can use instead.
Correction: An earlier version of this article included hire rates, retention percentages, time-to-fill medians, and fee figures presented as Refery data. There is no verified dataset behind those figures and they have been removed. This version describes the mechanisms; test them against your own experience.
The four structural problems
| Problem | Mechanism | What the founder experiences |
|---|---|---|
| Incentive to fill, not to fit | Paid on placement, working many searches at once | Pressure to close the first "good enough" candidate |
| Same candidate pool as everyone else | Sourcing from databases and outreach | The same active job seekers every other startup is seeing |
| Conflicted representation | One recruiter, several client startups, the same candidates | Competing for your own candidate on offer terms |
| Cash shape | Percentage fee on senior salaries from a small round | A large share of the round spent on fees |
1. Incentive to fill, not to fit
A contingency recruiter carries several searches and is paid when one closes. That creates pressure to close whichever candidate is closest to an offer, not whichever candidate will still be there in two years. Founders eager to fill the role often accept. The cost appears months later as a re-hire.
The fix on your side is a decision standard you set before the search: what evidence a hire requires, written down. See build an anchored interview scorecard.
2. Same candidate pool as everyone else
Database sourcing and cold outreach reach people who are visible and, mostly, active. The senior engineers a seed-stage company most wants are usually neither. They reply to people they know. A recruiter without a personal relationship is competing with every other message in the candidate's inbox.
3. Conflicted representation
A recruiter working several startups at once will, reasonably, show a strong candidate to more than one. You then compete on offer terms with companies you did not know were in the process, and the candidate goes to whoever moves fastest. Seed-stage founders, with less process and less cash, often lose that race.
Ask any recruiter directly: which other companies will see the candidates you send me? See prior recruiting relationship disclosure.
4. Cash shape
A percentage of a senior salary is a meaningful share of a seed round, and the fee arrives at start date regardless of how the hire works out. The number itself is not the issue; whether the search buys candidates you could not have reached otherwise is. Put every proposal on the same basis and include the cost of searches that do not close. See recruiting agency vs referral marketplace: compare the actual cost.
The case for the agency, stated fairly
A good contingency recruiter does spend more hours per role than a referrer, and those hours are real: outreach, screening calls, scheduling. For roles with a broad, active candidate pool, that work is valuable and the model fits. The mismatch is specific to seed-stage senior hiring, where the candidates who matter are not in the pool the hours are spent on.
What to use instead at seed stage
- Investor introductions. Your cap table knows operators. Ask with named target profiles.
- Founder and team network. List everyone you have worked with; ask each for the best person they have worked with.
- A referral network. For reach beyond your own contacts, without a retainer. Refery routes a role to founders, operators, investors, and specialist recruiters who refer people they know, vets every referral, and charges 15% to 25% of first-year base only on hire, with scope and fee agreed upfront. No fee on candidates already in your pipeline.
- Retained search, sparingly. For an executive role with a narrow candidate universe, where a dedicated researcher is worth paying for in advance.
The ten alternatives to recruiting agencies guide covers the full set with the work each one asks of your team.
When a contingency agency is the right call
- A later-stage company with an in-house recruiting team using agencies as overflow for specific roles.
- A niche where the agency owns a candidate pool a referral network does not reach: regulated industries, specific hardware or defense skills.
Both are unusual at seed stage. If you do use an agency, agree the fee basis, exclusivity, replacement terms, and duplicate-candidate handling in writing first. See recruiting payment and guarantee questions.
Share your role with Refery to agree the scope and fee for your search.