Updated September 2026
Coding tests still have a place in startup hiring in the age of AI, but only if you redesign them. Keep them short, pay for take-homes that run longer, allow AI tools and assess how the candidate uses them, and favour live collaboration, real-world tasks and existing work over abstract puzzles. A test that ignores AI now measures who followed the rules, not who can do the job.
Why coding tests frustrate both sides
The take-home test has long been a staple for developer hiring. Its purpose is sensible: check problem solving, familiarity with the language and tools, and how someone approaches debugging and optimisation. The problems are on both sides of the table.
What candidates say
- Time. Great developers are busy. Asking for hours, sometimes days, of unpaid work feels unreasonable, especially when they are interviewing with several companies.
- Fairness. Candidates wonder whether every submission is judged the same way.
- AI rules. Many now ask a simple question: am I allowed to use AI tools?
What founders say
- Cheating. How do I know who solved it?
- Drop-offs. Long tests put off the strongest people, who have the most options.
- Weak prediction. A passing score does not always mean strong performance on the job.
The AI question: cheating or productivity?
AI assistants can write whole functions, suggest better algorithms and debug code quickly. So is a candidate who uses them cheating, or working the way your team works every day?
For most startups the second answer is closer to the truth. Your engineers already use these tools. Banning them in a test measures a skill you do not need, and you cannot enforce the ban on a take-home anyway. The better move is to say clearly that AI is allowed and then assess what matters: whether the candidate understands the code, can spot where the tool is wrong, and can explain the trade-offs they made.
How to rethink coding tests for a startup
1. Keep them short
Long take-homes lose great candidates. Aim for a task that can be done well in under two hours, and tell candidates the expected time up front.
2. Pay for their time
If a task has to run longer, pay for it. It shows respect for the candidate's effort and signals how you will treat them as an employee.
3. Use live, collaborative sessions
A live session shows how someone thinks in real time. The point is not a perfect answer. It is collaboration, communication and how they handle being stuck. Let them use AI in the session and watch how they prompt, check and correct it.
4. Review existing work
Open-source contributions and personal projects on GitHub often tell you more than a one-off test about coding style, creativity and depth. Ask the candidate to walk you through a piece they are proud of.
5. Use real-world tasks
Swap abstract algorithm puzzles for a small version of work they would do in the role, such as extending an endpoint or reviewing a pull request. It feels more relevant to the candidate and tells you more about practical skill.
A simple structure that works
One structure that works well: a short screening call, a take-home of under two hours with AI allowed, then a live session where the candidate explains and extends their own submission. The follow-up conversation is where you learn whether they understand what they submitted. For senior roles, add a system design discussion. Our guide on hiring a CTO covers assessing technical leaders.
Where Funded.club fits
Funded.club runs engineering searches for startups on a fixed fee. A dedicated recruiter headhunts and screens developers before they reach your technical interviews, and can help you shape a test process that candidates will complete. First screened candidates arrive within 7 days.
The fee is set by salary band and agreed before the search starts. For a $140,000 engineer, a 20 to 25% contingency fee would be $28,000 to $35,000, while Funded.club's fixed fee is $11,500. See pricing for every band.
Frequently asked questions
Should startups allow AI in coding tests?
Yes, in most cases. Developers use AI at work, so allow it openly and test whether the candidate understands, checks and can explain the code it produces.
How long should a take-home coding test be?
Under two hours is a good limit. If the task needs longer, pay the candidate for their time or replace part of it with a live session.
What is the best alternative to a coding test?
A walkthrough of the candidate's existing work, followed by a short live exercise based on a real task from your product, gives strong signal without asking for hours of unpaid work.
Worth a brief chat about your next hire? Book a free call.
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