LLMs Are Not Going to Win the Looming Talent War

Amid the economic turbulence of 2022 and ChatGPT’s disruptive debut that same year, tech giants were forced to make drastic recalibrations. Cost-cutting measures swept through these companies like a cold wind, with HR and recruiting departments first on the chopping block. The talent acquisition landscape was left decimated. DoorDash reduced its recruiting team to a skeletal crew. Stripe followed suit, cutting over 60% of its HR and talent teams in 2022, with another 15% reduction in 2023, shrinking their team from 450 to fewer than 200. These cuts weren’t just about trimming costs; they signaled a deeper shift in how tech companies approached growth and sustainability. 

Beyond HR departments, external search firms and recruiting agencies—once riding high on a decade-long tech boom—suddenly found themselves in a nosedive. As the volume of searches dwindled, these agencies faced a rapid decline in demand, leading to significant downsizing. Many recruiters took a step back. Some branched out to start their own ventures, while others watched as startups pivoted from high-cost recruiting services to more budget-friendly talent acquisition strategies. The once-thriving recruiting industry was forced to rethink its game plan.

Now, it’s time to rethink it again. 

The AI mirage

In 2022, private tech companies, from early-stage startups to pre-IPO firms, all reached for the same playbook: cut costs, reduce headcount, pump profit margins. Unless you were OpenAI or Anthropic, you probably spent most of 2022 and 2023 in a hiring freeze. It’s only recently that we’ve seen hiring pick back up, with more capital flowing back into the market and companies reorganizing around AI investments. 

But now there are new challenges. Seed to Series B startups are still postponing hiring an internal recruiter, thinking they’ll deal with it “later.” Those who do hire internally often end up with someone junior who is quickly overwhelmed by the variety of roles they need to fill. This might be manageable if a company is only hiring a few people per month, but rapid acceleration requires strong relationships with external firms or hiring experienced recruiters. Both options are costly and time-consuming, with great recruiters being both expensive and in short supply. Could AI step in to fill the gap? 

The allure of AI as a panacea for hiring woes is strong but fundamentally misguided. Job boards, referral tools, and AI interview bots have all been tried before, with limited success. While these technologies might streamline certain aspects of the hiring process, they fall short when it comes to delivering relationship-driven work and attracting the caliber of talent that great founders need. 

The looming bottleneck 

As funding surges back into tech, hiring will quickly follow, but talent is about to become the biggest bottleneck in the next 12 to 24 months. A fresh wave of boutique search firms is already rising, staffed by hungry ex-principals and junior partners from the big recruiting houses. They’ll approach hiring with an executive search mindset—strong on market insight, but with less empathy for founders. Sure, they might land some great hires, but it’s an expensive, short-term fix.

These firms will initially slash their fees to stay in the game—offering contingent rates or bundled searches—but it won’t last. As soon as the market heats up, they’ll switch back to high-priced, retained fees and focus only on exec-level roles. 

Startups will hire their first in-house recruiters by late this year or early next. Unfortunately, I’m afraid they’ll make the same mistakes as before, opting for junior recruiters who act more like coordinators than strategic advisors. Well-intentioned but green, they won’t have the experience to push back or guide founders on talent strategy.

Next year, as pre-IPO companies ramp up hiring, they’ll face a choice. The smart ones will grab principals from these boutique firms—pros who know how to build networks, manage the process, and align with founders–and they’ll put them under a proper head of talent who’s built through scale. However, those looking to stay lean will opt for a more inexperienced team that can’t distinguish good from great, or effectively work with candidates and hiring managers. It’ll be cheaper upfront, but it could cost them big time in the end.

Founders—relying on AI to fix any of these deeply human challenges will be a strategic misstep. Great recruiters are still expensive and in short supply for a reason—relationship-building and matching company culture with candidate potential tend to require a human touch. 

At TheGP, we firmly believe that founders should invest in building strong internal recruiting capabilities early, which is why we made such a significant investment in our own bench of veteran recruiters (who built teams at Stripe, Robinhood, Uber, Meta, and Google) to deploy into portfolio companies. 

Typically, we work by helping founders accelerate along the curve. We act as an interim Head of Talent and Executive Recruiting for months at a time, bringing both the networks founders need and the strategy that organizations require to scale.

We also know what great internal recruiters look like. Part of our process is helping founders identify and hire their early talent team while also putting a tried and tested talent strategy in place. More specifically, we work best for founders who need to double their team, make critical first hires, establish a recruiting process that scales, and then build their own internal talent team.

If you’re a founder struggling to develop a scalable talent strategy or establish external partners, reach out.

Anthony Kline, a Partner at TheGP, built Stripe’s most critical teams. Now, as an investor, he continues to bet on what he knows best—collections of exceptional talent.