By Laura Roe
Copyright =C2=A9 1999 The Industry Standard, May 10, 1999
For the founder of an Internet company, one of the first items on the
checklist is assembling the team to turn an idea into a profitable realit=
y.
Only sometimes, founders are a little bit too passionate to be the ones
doing the hiring. "Founders are very emotional," says Ray Holley, preside=
nt
of Austin Group International, an Austin, Texas-based executive-search fi=
rm
that works with computer companies and startups. He thinks such enthusias=
m
may not translate with interviewees in the marketplace. "A candidate is a
lot more objective and might have worked for startups before," he says.
This puts founders in a tough situation. They need to hire the best
candidates to attract more money, but often they are not trained in
conducting interviews. Of course, they want to sell the candidate on thei=
r
vision, but ebulliently stating that they will be the next Amazon.com (AM=
ZN)
or Yahoo (YHOO) can scare candidates away, says Holley.
So if entrepreneurs aren't the right people to lead the hiring, who shoul=
d
do the job?
Most everyone who's worked in the Web business knows a lot of the growth
comes by word of mouth, so a lot of the hiring happens that way, too.
Administrative types, like human-resources pros, can hardly be expected t=
o
be as close to the market as company founders. But Buck Goldstein, himsel=
f a
founder of NetWorth Partners, an Atlanta-based venture-capital firm
affiliated with Mellon Bank (MEL), believes that they manage the process
best. "Just as you need a CEO to attract the money, you need an HR
professional to keep and attract human capital," argues Goldstein. "Start=
ups
might hire a CFO before a top HR person." A CFO isn't usually needed till
much later =E2=80=93 when the company is considering options for a financ=
ial exit
strategy. Complicating matters, says Goldstein, "The CEO often thinks he =
can
handle the HR needs =E2=80=A6 and may fail to attract people and may lose=
people."
Goldstein's putting his money where his mouth is. NetWorth plans to inves=
t
$60 million this year in 10 to 12 second-stage companies. Goldstein, who
often recommends key players for startups, sometimes won't fund companies
that ignore the HR element. In fact, just two weeks ago he decided not to
fund a company with a good idea because its initial employees, while
qualified, were not "top flight." In his pre-VC life, Goldstein founded a=
nd
led KnowX, a Web-based company providing real-time access to billions of
public records, and Information America, an electronic service that provi=
des
legal information. For KnowX, Goldstein hired an HR director who helped p=
lan
interviews, place parameters around job descriptions and help Goldstein
determine the characteristics and skills needed for the positions. "We ha=
d a
great HR function within Information America. The internal HR function ge=
ts
important sooner than founders think. The entrepreneur thinks he has a
finger on the pulse of the industry, but a great HR professional is integ=
ral
to any decision you make," Goldstein says. While it's true that, like mos=
t
jobs in the Internet business, HR enjoys a higher status and more creativ=
ity
than in other fields, formal HR planning is rare in the industry. Most
founders of startups try to tackle interviews and negotiations in an adho=
c
fashion. The very vision that propelled the idea into a company can hurt =
its
chances of landing the best candidates, Holley says.
EBay, which has attributed much of its success to key hires, such as Meg
Whitman from Hasbro (HAS) and Brian Swette from Pepsi, went solo. The onl=
ine
auction house did not have an "official HR person" until December 1997 =E2=
=80=93 two
years after the company was formed. Jeff Skoll, eBay (EBAY)'s VP of
strategic planning and analysis, as well as its first employee, says he a=
nd
eBay chairman and founder Pierre Omidyar hired the first 10 employees
"entirely by word of mouth." "Recruiting in an early stage is almost
entirely driven by the passion of the founders. I can't recall a single
incidence where it wasn't the vision and ability to communicate passion
around a vision that came from either Pierre or me that wasn't the key
influencer on hiring," Skoll says. eBay did eventually hire a third-party
recruiter to help with hiring. Skoll says part of the reluctance came fro=
m
the notion that recruiters would not be passionate enough. "In order to m=
ake
a recruiter great, you have to sell her or him on the vision and make the=
m,
in turn, be enthusiastic when they're out there pitching the company," he
says.
How about the venture capitalists who are behind the company? They're
neither the ones working in the company day in and day out, nor are they
paid outsourcing types. They also have coveted Rolodexes and tight ties t=
o
top recruiters. David Kixmiller, managing partner of the Menlo Park, Cali=
f.,
office of Heidrick & Struggles, has recruited CEOs for Drugstore.com, the
Wedding Channel and NeoPath (NPTH). He says he is often called in after
venture capital is raised and the chairman is looking for a CEO replaceme=
nt.
Kixmiller agrees with Goldstein that the involvement of venture capitalis=
ts
in a CEO search can help sell the company to top candidates. Kixmiller do=
es
not, however, believe that companies should always lean on VCs for candid=
ate
referrals. (Many recruiters often want to run the whole show themselves.)=
It
also depends on the VC's reputation. What many VCs can offer is a pitch
that's a little more down to earth. After all, the VCs are in it for the
money, not to change the world. For this reason, they can describe the jo=
b
opportunity to the candidates better than founders can, Kixmiller says.
"Significant value is added by the venture capitalist. Most candidates fo=
r
Internet startups really want to talk with the venture capitalists. They'=
re
the experts," he says. Other times, it's simply a matter of confidentiali=
ty.
Venture capitalists can call potential candidates and describe the
opportunity without mentioning the specific company, Kixmiller notes. But
there are downfalls if too many venture capitalists are involved in
recruiting. Goldstein likens it to drinking martinis. The first one is
fabulous, and the second one is still good, but by the third one, you're
starting to feel woozy.
Tushar J. Mehta
email: [email protected]