The Center for Venture Research of University New Hampshire recently released its 2007 report on the state of angel investing in the US. The 2007 Angel Market Analysis Report shows a slight growth in funds invested in 2007 ($26B) over 2006. Over 57,000 entrepreneurial ventures received angel funding in 2007 which was a 12% increase over 2006. The number of angel investors increased 10% in 2007 t0 over 258,000 individuals. This means there are more investors putting the same number of dollars into more deals so the average size of each deal is going down.
The sector breakdown for those investments is as follows:
Software 27%
Healthcare 19%
Biotech 12%
Industrial/Energy 8%
Retail 6%
Media 5%
As for returns, over 65% of the exits ended with a merger/acquisition. The average return for those was 20% to 40%. Only 4% of the exits ended with an IPO and 27% of the deals ended in bankruptcy.
Best regards,
Hall T.
Wednesday, April 9, 2008
Monday, April 7, 2008
Robert Todd talks about the Education Publishing Industry
Robert Todd talks about the education publishing industry, the challenges in using off shoring, and why publishing science programs is more complicated than it used to be.
You worked at Holt, Rinehart and Winston, the publishing firm. What did you do there?
Yes, I was the VP of Editorial for Science and Health, and my department created educational programs for middle schools and high schools. The programs from my department created about $100M in revenue each year. Our expertise has traditionally been in developing books and other print materials, but today the educational needs of our market are moving towards more online and interactive materials. We’re finding that experts who can turn content into compelling, interactive formats for electronic delivery are slim, at least within our financial limitations. On one large project that I worked on, we were forced to go overseas to develop a new interactive science product.
How was your off shoring experience?
It turned out to be horrible. They had a great deal of difficulty developing appropriate interactive science content for the web.
Was it an expertise issue or just the wrong group?
The group we agreed to go with was disbanded immediately after we accepted the prototype. The manager took another job, so we ended up with a brand new team. They seemed to have excellent technical skills, but they didn’t worry about the science details. In publishing, if we get it wrong, we get crucified.
What does the education publishing landscape look like?
There are approximately 20 states that are considered adoption states. Each one has a state-wide adoption process which starts with bids and eventually ends with a selection committee that selects the programs that fulfill the curriculum standards published by the state. These selections are then approved by the Board of Education. This is how Texas adopts its educational materials.
I hear Texas is a large state and has substantial sway over the textbook industry. Is that true?
It seems like all the larger states says that. If your program is placed on the approved list, it can represent a substantial revenue opportunity, but the competition is fierce. California has almost twice as many kids as Texas. Then there’s also Florida which is also quite big.
What’s the challenge in science publishing?
Every state creates its own science curriculum which is an expensive endeavor. There are national standards, but there is nothing that says the states have to follow them. It used to be in middle school, which is a big market, you had life science, physical science, and an earth science courses. Publishers could produce a book on each of those topics. Now, more than half of the schools are going to an integrated science curriculum, which combines all three subjects at each grade level. It is very difficult to publish a national edition of a book that meets everyone’s expectations because there seem to be an infinite number combinations on how the states want their content. This forces the publisher into the process of customizing their programs for each state, which is difficult, time consuming, and expensive.
I really believe that the nation would be better served if mandatory national standards were established and individual states did not have the option of spending large amounts of time and money developing their own curriculums. I think this money could be better spent on schools, teachers, and teaching.
What’s your philosophy in publishing?
I still believe in the “publish or perish” paradigm.
Why is that?
Spend more time actually publishing programs than you spend talking about publishing programs.
Best regards,
Hall T.
You worked at Holt, Rinehart and Winston, the publishing firm. What did you do there?
Yes, I was the VP of Editorial for Science and Health, and my department created educational programs for middle schools and high schools. The programs from my department created about $100M in revenue each year. Our expertise has traditionally been in developing books and other print materials, but today the educational needs of our market are moving towards more online and interactive materials. We’re finding that experts who can turn content into compelling, interactive formats for electronic delivery are slim, at least within our financial limitations. On one large project that I worked on, we were forced to go overseas to develop a new interactive science product.
How was your off shoring experience?
It turned out to be horrible. They had a great deal of difficulty developing appropriate interactive science content for the web.
Was it an expertise issue or just the wrong group?
The group we agreed to go with was disbanded immediately after we accepted the prototype. The manager took another job, so we ended up with a brand new team. They seemed to have excellent technical skills, but they didn’t worry about the science details. In publishing, if we get it wrong, we get crucified.
What does the education publishing landscape look like?
There are approximately 20 states that are considered adoption states. Each one has a state-wide adoption process which starts with bids and eventually ends with a selection committee that selects the programs that fulfill the curriculum standards published by the state. These selections are then approved by the Board of Education. This is how Texas adopts its educational materials.
I hear Texas is a large state and has substantial sway over the textbook industry. Is that true?
It seems like all the larger states says that. If your program is placed on the approved list, it can represent a substantial revenue opportunity, but the competition is fierce. California has almost twice as many kids as Texas. Then there’s also Florida which is also quite big.
What’s the challenge in science publishing?
Every state creates its own science curriculum which is an expensive endeavor. There are national standards, but there is nothing that says the states have to follow them. It used to be in middle school, which is a big market, you had life science, physical science, and an earth science courses. Publishers could produce a book on each of those topics. Now, more than half of the schools are going to an integrated science curriculum, which combines all three subjects at each grade level. It is very difficult to publish a national edition of a book that meets everyone’s expectations because there seem to be an infinite number combinations on how the states want their content. This forces the publisher into the process of customizing their programs for each state, which is difficult, time consuming, and expensive.
I really believe that the nation would be better served if mandatory national standards were established and individual states did not have the option of spending large amounts of time and money developing their own curriculums. I think this money could be better spent on schools, teachers, and teaching.
What’s your philosophy in publishing?
I still believe in the “publish or perish” paradigm.
Why is that?
Spend more time actually publishing programs than you spend talking about publishing programs.
Best regards,
Hall T.
Wednesday, April 2, 2008
Dewey Gaedcke of Minggl talks about a near Life-ending Experience.
Dewey Gaedcke of Minggl talks about a near life-ending experience, how a software application can go viral on the web, and why social networking software requires sophisticated programming techniques.
My story is the whole survival ordeal. I went out to Hawaii on a pleasure trip. My friend told me you have to hike out there and see the volcano. It’s just an incredible experience. They told me how to drive in and then hike out. I went out at night because the viewing is better and you can also see the lava so you don’t step in the wrong place. Coming back the moon went down, it got totally dark, and I got lost. It’s a 330,000 acre park and I had no water out there. I was missing for five days. They couldn’t find me. After three days they called off the search because no one has ever survived that long out there because there’s no water and because we don’t have vultures, we never find the bodies and we can’t do anything about it.
How did you survive without water?
I got really lucky. I could tell the dehydration was throwing off my thinking. I crawled into places where the lava had cracked open since it had been rained on for a long time and had broken down. There were little drips on the leaves. They were smaller than the beads of sweat on my arms so I thought to myself, “I’m going backwards.” But while I was doing this, I happen to set my hand on the base of tree. I thought it was weird and wondered what it was. It turned out to be green moss. I rip it off the tree and squeeze it and water comes out. So for five days, I empty my flashlight of its batteries and squeeze water into it. I drank green muddy water to survive.
That’s an incredible experience. So how did you come up with the idea for Minggl?
I was dating at that time of my life and I thought how dating was like being stuck on that island. You can’t communicate outside the space that you are in. Hawaii is the biggest island in the chain, and there were people only 3 to 4 miles away from me, but I didn’t know how to get to them or communicate with them. So I started seeing internet social sites as walled gardens that you can’t move through. That was the genesis of the idea behind Minggl. It’s a way to move friends, data, and communication across sites.
So the idea is to connect social sites together. So how did you come up with the architecture of the software – the picture within a picture concept?
We were thinking about what’s going to go viral. Being a student of psychology, I thought about managing a list of passwords, and bringing your friends together, and how that’s just a productivity play. All of those features are cool, but they’re not going to drive you to tell ten friends about it.
What will drive someone to tell ten friends about it?
I realized, if I can do the secret note in the classroom, or the clubhouse in the tree so there’s some exclusivity, so people can see things that other people can’t get to see. If I can create content on the page that other people can’t see but that other people want to see then they get to feel like a VIP and they are on the in crowd. There’s a social, emotional hook to it. That was the genesis for the notes idea.
What is the key idea behind Minggl?
It brings users social sites together in one place and then feeds you the latest activities of your friends.
I understand the application is quite sophisticated. How many languages was it written in?
About eight.
Why so many?
That’s more a factor of how the internet works. It’s also a factor of the goals. I wanted it to be massively scalable. Persistent data needs to be in a database so I need a database language for that. Then you need services that are not tied to the interface or the database so it can arbitrate between the two. Then you need something to connect to the website which includes HTML and CSS. Then to do anything user-side you need either Java or an executable. So the fact that we have logic and architecture running at each of these layers and levels requires that many languages. It’s a very sophisticated piece of software.
What’s your background?
I worked on Knowitall.com, 13Colonies, and there were others.
How long have you been working on Minggl?
We’ve been working on it for 2 and half years.
What’s the next step?
We’re going out to market it broadly, now.
Best regards,
Hall T.
My story is the whole survival ordeal. I went out to Hawaii on a pleasure trip. My friend told me you have to hike out there and see the volcano. It’s just an incredible experience. They told me how to drive in and then hike out. I went out at night because the viewing is better and you can also see the lava so you don’t step in the wrong place. Coming back the moon went down, it got totally dark, and I got lost. It’s a 330,000 acre park and I had no water out there. I was missing for five days. They couldn’t find me. After three days they called off the search because no one has ever survived that long out there because there’s no water and because we don’t have vultures, we never find the bodies and we can’t do anything about it.
How did you survive without water?
I got really lucky. I could tell the dehydration was throwing off my thinking. I crawled into places where the lava had cracked open since it had been rained on for a long time and had broken down. There were little drips on the leaves. They were smaller than the beads of sweat on my arms so I thought to myself, “I’m going backwards.” But while I was doing this, I happen to set my hand on the base of tree. I thought it was weird and wondered what it was. It turned out to be green moss. I rip it off the tree and squeeze it and water comes out. So for five days, I empty my flashlight of its batteries and squeeze water into it. I drank green muddy water to survive.
That’s an incredible experience. So how did you come up with the idea for Minggl?
I was dating at that time of my life and I thought how dating was like being stuck on that island. You can’t communicate outside the space that you are in. Hawaii is the biggest island in the chain, and there were people only 3 to 4 miles away from me, but I didn’t know how to get to them or communicate with them. So I started seeing internet social sites as walled gardens that you can’t move through. That was the genesis of the idea behind Minggl. It’s a way to move friends, data, and communication across sites.
So the idea is to connect social sites together. So how did you come up with the architecture of the software – the picture within a picture concept?
We were thinking about what’s going to go viral. Being a student of psychology, I thought about managing a list of passwords, and bringing your friends together, and how that’s just a productivity play. All of those features are cool, but they’re not going to drive you to tell ten friends about it.
What will drive someone to tell ten friends about it?
I realized, if I can do the secret note in the classroom, or the clubhouse in the tree so there’s some exclusivity, so people can see things that other people can’t get to see. If I can create content on the page that other people can’t see but that other people want to see then they get to feel like a VIP and they are on the in crowd. There’s a social, emotional hook to it. That was the genesis for the notes idea.
What is the key idea behind Minggl?
It brings users social sites together in one place and then feeds you the latest activities of your friends.
I understand the application is quite sophisticated. How many languages was it written in?
About eight.
Why so many?
That’s more a factor of how the internet works. It’s also a factor of the goals. I wanted it to be massively scalable. Persistent data needs to be in a database so I need a database language for that. Then you need services that are not tied to the interface or the database so it can arbitrate between the two. Then you need something to connect to the website which includes HTML and CSS. Then to do anything user-side you need either Java or an executable. So the fact that we have logic and architecture running at each of these layers and levels requires that many languages. It’s a very sophisticated piece of software.
What’s your background?
I worked on Knowitall.com, 13Colonies, and there were others.
How long have you been working on Minggl?
We’ve been working on it for 2 and half years.
What’s the next step?
We’re going out to market it broadly, now.
Best regards,
Hall T.
Wednesday, March 26, 2008
Jon Lebkowsky of Polycot Talks about the Early Days of Web 2.0
Jon Lebkowsky talks about the early days of Web 2.0, how Austin is evolving in the digital media space, and what he proposes to grow it.
So you were one of the early pioneers of Web 2.0. What was it like in the early days?
We didn’t call it Web 2.0. Back then we called it social software iIn the early 2000s, we started talking about social software. We had formed a Ssocial Ssoftware Aalliance that was a nationwide group. It was, though based primarily in Silicon Valley.
Was it made up of blogs and wikis?
Yes, the major blog companies at the time, like Blogger and Six Apart, were on board. The wiki part was byPete Kaminski of Socialtext, was the instigator of the Alliance. I was close to SocialText because I knew Adina Levin, one of the principals, who at the time was based in Austin.
What is Socialtext?
It’s a company which touted wikis as a social software for the enterprise. We formed the Ssocial Ssoftware Aalliance in 2002, before at the Emerging Technology conference for that year, which was in San Jose. But we didn’t hang together for too long because everyone went off to do their own thing,. We were going to push for and we realized the kinds of standards we were discussing were better supported through a standards body like the IETF -- the Internet Engineering Task Force which tends to generate a lot of the internet standards. The key issue at the time was that the blog companies (Blogger, Sixapart, and some others) were not crazy aboutanted more robust syndication than RSS. They thought it was a too limited format. They were working on something called Echo which later became Atom. It’s a pretty common format now. It was one of the key accomplishments of the Social Software Alliance.
What was it like in Austin in those days?
Austin didn’t have much happening, and people here weren’t very aware of social software or social media. I came back from the Emerging Technology Conference where we had solidified the Ssocial Ssoftware Aalliance,. And oOne of my partners said that nobody would ever pay us to set up a social network siteblog. The vision hadn’t sunk in quite yet, though it wasn’t long before our work was mostly social software development, and people relabeled that movement “Web 2.0” after Tim O’Reilly and Dale Dougherty wrote their famous paper. At Etech, Tim had been talking about the Internet as an operating system… the thinking that went into the Web 2.0 paper and drove even more innovation. LiveJournal was one of the first to promote a standard way to present the information.
There’s a group of companies here in Austin that would like to see a more robust ecosystem behind the Web 2.0 space – Demand generation, SEO, and SEM companies. What can be done there?
Last night we had an Entrepreneur’s Town Hall meeting at IC2, which was developed by Kevin Koym. One of our brightest guys in the Bootstrap Austin group is moving to Palo Alto because he wants to do the semantic web and - there’s nothing substantial going on here now in that space, what they’re calling “Web 3.0.” That’s one thing. We really need to support cutting edge web R&D, testbeds etc., so that we won’t lose talent to other parts of the country – we want the key creative talent coming here, not leaving. The other thing is that in 2001, I was working in Whole Foods. WI was involved in e started an economic development initiatives with IC2, beginning with and a clean energy initiative. I helped them with that even though it wasn’t related to my web stuff, because there wasn’t much web business happening, and we needed to focus on economic development in several areas. After that, they I managed IC2’s Wireless Future project, which was a real boost for the wireless industry locally. Then they wanted to do digital convergence.have a project focused on digital media and digital convergence, the Digital Convergence Initiative, That waswhich was started by Alex Cavalli while he was Deputy Director of IC2. We filled the room with over 50 people.
The digital media Digital Convergence Initiative at IC2 was partly focused on the digital Digital media Media laboratoryCollaboratory, which still exists. Alex had a vision of doing a project, related to thatinitially focusing on digital media. Initially, we did a wireless futures project. We wereWireless Future was a first step, and was pretty successful in getting the wireless sector together into a trade association. That all came out of that year of development we did.We spent a year in meetings, working on a report, and developing a track for SXSW Interactive. We involved the city and we did well with that. That was the first step in what Alex called the Digital Convergence Initiative. They did a body of research where they inventoried the companies in the area related to digital media. As all media became data, it was quite disruptive. They found that it wasn’t just media that was going digital, but everything is going digital including medical, energy and most- pretty much any kind of data.
Back then wireless wasn’t well installedhad limited penetration, but today it’s in every coffee shop.
DCI is not working on an Electronic Marketplace, a technology If you can with which you can pull the various companies together and get them working effectively so they can have the capacity they need by being aware of each other and collaborating. My interest is to try and make this region competitive and it appears to be working at the moment.
What would you do for the Web 2.0 sector?
We have had an earlier initiative in which we’ll to build a web test bed with advanced web services. We need to revive that, and bring in more Web 2.0 and semantic web thinking, collaborative research and development. We think we can enhance the productivity of companies by getting companies them to work together creatively. We had a party at SxSW in 2004 and demonstrated some success. That later fell by the wayside and DCI had to rethink it. The history is that we did that web services piece and then we started talking about creating a network of web developers and web business people. From that emerged projects in which entrepreneurs worked together. DCI’s approach now is now looking at creating ist to build anthe electronic marketplace to allow companies to see available capacity in the region and come up with collaborative agreements. So if you are building a certain kind of widget and you lack some capacity, you can find the capacity hopefully find the capacity you need in through athe database that the Marketplace will evolve. There also will be structures for to support collaboration with technical and legal frameworks.
What is needed to get it going?
It’s an incubation thing. The traditional incubator takes a company that’s already pretty far along. What about the guys back in ideation that are basically in the kitchen trying to figure out what they can cook? How do you support those guys?
We need to create support ideation among those who have a passion for technology and connecting them with others in the same proximity a context where they can rub shoulders, do creative thinking together.
DCI is at a point where it needs some funds to get an electronic market place up and running. It would benefit collaborative companies who would join and pay dues.
Best regards,
Hall T.
So you were one of the early pioneers of Web 2.0. What was it like in the early days?
We didn’t call it Web 2.0. Back then we called it social software iIn the early 2000s, we started talking about social software. We had formed a Ssocial Ssoftware Aalliance that was a nationwide group. It was, though based primarily in Silicon Valley.
Was it made up of blogs and wikis?
Yes, the major blog companies at the time, like Blogger and Six Apart, were on board. The wiki part was byPete Kaminski of Socialtext, was the instigator of the Alliance. I was close to SocialText because I knew Adina Levin, one of the principals, who at the time was based in Austin.
What is Socialtext?
It’s a company which touted wikis as a social software for the enterprise. We formed the Ssocial Ssoftware Aalliance in 2002, before at the Emerging Technology conference for that year, which was in San Jose. But we didn’t hang together for too long because everyone went off to do their own thing,. We were going to push for and we realized the kinds of standards we were discussing were better supported through a standards body like the IETF -- the Internet Engineering Task Force which tends to generate a lot of the internet standards. The key issue at the time was that the blog companies (Blogger, Sixapart, and some others) were not crazy aboutanted more robust syndication than RSS. They thought it was a too limited format. They were working on something called Echo which later became Atom. It’s a pretty common format now. It was one of the key accomplishments of the Social Software Alliance.
What was it like in Austin in those days?
Austin didn’t have much happening, and people here weren’t very aware of social software or social media. I came back from the Emerging Technology Conference where we had solidified the Ssocial Ssoftware Aalliance,. And oOne of my partners said that nobody would ever pay us to set up a social network siteblog. The vision hadn’t sunk in quite yet, though it wasn’t long before our work was mostly social software development, and people relabeled that movement “Web 2.0” after Tim O’Reilly and Dale Dougherty wrote their famous paper. At Etech, Tim had been talking about the Internet as an operating system… the thinking that went into the Web 2.0 paper and drove even more innovation. LiveJournal was one of the first to promote a standard way to present the information.
There’s a group of companies here in Austin that would like to see a more robust ecosystem behind the Web 2.0 space – Demand generation, SEO, and SEM companies. What can be done there?
Last night we had an Entrepreneur’s Town Hall meeting at IC2, which was developed by Kevin Koym. One of our brightest guys in the Bootstrap Austin group is moving to Palo Alto because he wants to do the semantic web and - there’s nothing substantial going on here now in that space, what they’re calling “Web 3.0.” That’s one thing. We really need to support cutting edge web R&D, testbeds etc., so that we won’t lose talent to other parts of the country – we want the key creative talent coming here, not leaving. The other thing is that in 2001, I was working in Whole Foods. WI was involved in e started an economic development initiatives with IC2, beginning with and a clean energy initiative. I helped them with that even though it wasn’t related to my web stuff, because there wasn’t much web business happening, and we needed to focus on economic development in several areas. After that, they I managed IC2’s Wireless Future project, which was a real boost for the wireless industry locally. Then they wanted to do digital convergence.have a project focused on digital media and digital convergence, the Digital Convergence Initiative, That waswhich was started by Alex Cavalli while he was Deputy Director of IC2. We filled the room with over 50 people.
The digital media Digital Convergence Initiative at IC2 was partly focused on the digital Digital media Media laboratoryCollaboratory, which still exists. Alex had a vision of doing a project, related to thatinitially focusing on digital media. Initially, we did a wireless futures project. We wereWireless Future was a first step, and was pretty successful in getting the wireless sector together into a trade association. That all came out of that year of development we did.We spent a year in meetings, working on a report, and developing a track for SXSW Interactive. We involved the city and we did well with that. That was the first step in what Alex called the Digital Convergence Initiative. They did a body of research where they inventoried the companies in the area related to digital media. As all media became data, it was quite disruptive. They found that it wasn’t just media that was going digital, but everything is going digital including medical, energy and most- pretty much any kind of data.
Back then wireless wasn’t well installedhad limited penetration, but today it’s in every coffee shop.
DCI is not working on an Electronic Marketplace, a technology If you can with which you can pull the various companies together and get them working effectively so they can have the capacity they need by being aware of each other and collaborating. My interest is to try and make this region competitive and it appears to be working at the moment.
What would you do for the Web 2.0 sector?
We have had an earlier initiative in which we’ll to build a web test bed with advanced web services. We need to revive that, and bring in more Web 2.0 and semantic web thinking, collaborative research and development. We think we can enhance the productivity of companies by getting companies them to work together creatively. We had a party at SxSW in 2004 and demonstrated some success. That later fell by the wayside and DCI had to rethink it. The history is that we did that web services piece and then we started talking about creating a network of web developers and web business people. From that emerged projects in which entrepreneurs worked together. DCI’s approach now is now looking at creating ist to build anthe electronic marketplace to allow companies to see available capacity in the region and come up with collaborative agreements. So if you are building a certain kind of widget and you lack some capacity, you can find the capacity hopefully find the capacity you need in through athe database that the Marketplace will evolve. There also will be structures for to support collaboration with technical and legal frameworks.
What is needed to get it going?
It’s an incubation thing. The traditional incubator takes a company that’s already pretty far along. What about the guys back in ideation that are basically in the kitchen trying to figure out what they can cook? How do you support those guys?
We need to create support ideation among those who have a passion for technology and connecting them with others in the same proximity a context where they can rub shoulders, do creative thinking together.
DCI is at a point where it needs some funds to get an electronic market place up and running. It would benefit collaborative companies who would join and pay dues.
Best regards,
Hall T.
Wednesday, March 19, 2008
Angel Capital Association Releases Predictions for 2008
The Angel Capital Association (ACA) recently released the results of a survey on the angel’s outlook for 2008. In the report over half of the angel groups expect deal flow to increase in both quantity and quality. Exits in 2008 are not expected to be stellar. Also, a down trending stock market may slow some angel investments. The top industry segments expected to receive investment are:
• Software (83 percent)
• Medical Devices (75%)
• Industrial/Energy – including “clean tech” (64%)
• Business Products and Services (64%)
• IT Services (63%)
Additional ACA reports can be found here.
The ACA also did a nice write up about the Central Texas Angel Network. You can read more here.
Best regards,
Hall T.
• Software (83 percent)
• Medical Devices (75%)
• Industrial/Energy – including “clean tech” (64%)
• Business Products and Services (64%)
• IT Services (63%)
Additional ACA reports can be found here.
The ACA also did a nice write up about the Central Texas Angel Network. You can read more here.
Best regards,
Hall T.
Monday, March 17, 2008
Jeff Turk – The 4 ‘Cs an Angel Should Look for in a Deal
Jeff Turk of Formaspace Technical Furniture talks about his investment experiences and the four C’s he looks for in deals.
Congratulations on being nominated for Austin under 40. How does it feel?
I’ve been a bridesmaid twice but not yet a bride. I enjoy it. My friend Corey Bell won it last year. Corey wrote a recommendation for me this year so maybe that will help.
You once mentioned your 4 C’s for investing. What are they?
I went to the Kellogg School of Management to become an entrepreneur. While I was there I started a medical device company with the inventors. It didn’t go great. We ended up licensing out the technology. It could have worked out. It was all partner issues. I watched other Kellogg entrepreneurs and watched their startups take off from the seed stage. I wrote a research paper on the modes of success and failure. Many people think that companies fail because they run out of money. I think that’s the effect, not the cause. I wrote the paper on the 4Cs which are character, capability, commitment, and cohesion.
What’s an example of character?
I saw people try and cheat a partner out of a few percentage points. Some tried to squeeze a supplier at the wrong time. Overpromising is another example of an issue with character.
What about commitment?
People who aren’t fully invested in the idea are unlikely to succeed. I look for entrepreneurs to put their own money at stake in a deal or something besides their time. If not all of their money, then a substantial part of it. I’m fully invested in my own deals.
What about capability?
I split this into two parts --education and experience. I worked for a VC at the seed stage when I was in school. We would see deals in which the founders were either PhDs with no business experience or the guy didn’t have any education but had industry experience – the plumber that wanted to start his own company. Those entrepreneurs are the heart of small business, but in either case, the lack of some core capabilities is likely to impact their ability to scale the business.
What about cohesion?
I look at how well the team works together and have they worked together before.
What’s been your experience in investing? What’s been the most successful?
My own deals by far. I have not found great success in investing in other people’s ventures. I would like to invest in other people’s deals but I haven’t found a lot of success yet.
Any spectacular failures?
If they’re failures then they’re all spectacular. I just got done wrapping up a deal on the West Coast where an entrepreneur had a series of successes on a small scale. A lot of people invested in it. It was a parking lot technology. They installed devices in each parking space in a parking garage, and then the device could tell if your car was parked over it. The user then texted on his phone and it would automatically bill him just for the time he was there. It would reduce parking fraud, and only charge you for the time you were there. It increased parking lot efficiency which is important in cities like San Francisco and Chicago.
But they never got the magnetometer to work appropriately. I asked that question over and over again. I didn’t like the deal structure and I probably did the deal for the wrong reasons. I did it because I knew the people well. It was more friends money rather than investor money.
What was the deal structure?
It was a convertible debt deal which I probably won’t do again. As the second largest investor I should have been on the board of directors or at least on the advisory board.
Any advice for entrepreneurs?
That’s always a difficult question. Entrepreneurship is challenging, more so than most people starting a business would imagine. I would say, start with a really hard hitting self-assessment on the four C’s. Where are your strengths and weaknesses in terms of character, and how are you going to amplify your strengths and mitigate your weaknesses? Are you 100% committed, no matter what? Do you have all the tools you need to give you the capability to succeed, and how will you fill in the gaps? Are you able to pull together a cohesive management team? Once you’ve done that really difficult self-assessment, go out and do something you love and believe in.
Best regards,
Hall T.
Thursday, March 13, 2008
Jenny Krengel of Dream Jobs Inc. talks about Off-Ramping and On-Ramping
Jenny Krengel of Dream Jobs Inc. talks about professionals off-ramping and on-ramping in their career, the challenges of balancing software development with customer requirements, and the mixed blessing of getting what you wish for.
What is your background?
I left my professional job as a salesperson for a computer software company to have my daughter. I started meeting a lot of professionals who had taken that same off-ramp. Some stay at home with their kids full-time, but I’m not wired that way. I’ve been working since I was fourteen years old and supporting myself financially since I graduated from high school. It was odd for me to take a step back, so when my daughter was 4 months old I started writing the business plan for Dream Jobs.
What is Dream Jobs?
Dream Jobs provides talent acquisition and retention solutions for sourcing professionals from a hidden pool of talent outside the traditional workforce and hiring populations. After I wrote my original business plan, I ran across validating concepts and research by Dr. Sylvia Ann Hewlett. Her Harvard Business Press book, “Off-ramps and On-ramps – Keeping Talented Women on the Road to Success” is a collection of best practices which were a huge inspiration to me as I continued to develop my business. She also runs a blog on the topic. While her book is focused on the career issues of professional women, the work she does in research and policy change is a thought leadership position that encompasses both genders.
What services do you offer?
We offer two distinct products. The first is a public internet site called dreamjobsinc.com, and this site is geared toward matching approved, experienced professionals with small, medium and large businesses who need access to this talent. We are different than a typical job board in that there is an application process for these professionals.
How much does one pay for a subscription?
As we build our database, the sign-up process for professionals is free. Eventually individuals will pay an annual fee of $89 for exclusive membership.
Employers will pay depending upon company size:
For employers with less than 500 employees: $199 for 3 months, and $600 for 12 months (unlimited access to the database for both searching the database and job postings).
For employers with more than 500 employees (and for recruiters/staffing agencies) the price is $799 for 3 months and $2400 for 12 months.
What else do you offer?
The second product is under development and it is called eDETOURS.com. This tool is a web-based human resource software that empowers large organizations to leverage skilled, former employees who are not available to work in a traditional capacity.
eDETOURS mirrors our original concept, but privatizes the employer’s talent pools of off-rampers and on-rampers for “internal use only”. We’ve taken corporate best practices from some of the leading firms who have tackled this issue of “brain drain” proactively. The services are evolving to help companies solve their retention and acquisition issues for employees. That’s the piece we’re now focused on.
What vertical markets do you serve?
Financial services, technology, healthcare and professional services are the first targets. These markets tend to have large populations of professionals with high acquisition costs, and where retention is a key issue for them.
What is an example of a company using your services?
We’re working with a major financial services firm based in NYC to provide the resources (and technology) to develop a program to help them manage those who want to step out of the standard job. Their current HR system doesn’t let them manage that talent pool well.
Is the site up and running?
It’s under development and will be available for demo in about 6 weeks.
How do you drive the subscription traffic?
In Austin it was one kick-off event and word of mouth. For our New York City launch we have secured two key sponsors: Goldman Sachs and American Express. We’ve found that financial services are proactively recruiting from this talent base, so we are going where the pull is. With more financial resources and as we get better prepared to handle the business operationally, we will drive our strategy more through SEO. HR has a problem with shrinking talent pools. There are three drivers behind that – the disproportionate size of the baby-boom generation who are leaving the workforce (78m over the next 20 years), there’s declining birthrates coupled with people living longer, and the millennial generation is requiring a different work structure (research is showing they’re not 8 to 5ers, and compensation is no longer a key driver for this generation.
How did you do last year?
Our first year in business we actually drove some revenue through our subscriptions and services. In Austin we have about 250 qualified professionals who are in the database that are either on-ramping—they’ve been out of the workforce for a while and are coming back in, or are off-ramping – professionals who want to reduce the number of hours they work each week and have more of a modified work schedule. We would rather drive a database of highly qualified professionals than drive masses of random warm bodies. We also have about 30 corporate customers locally and several corporate prospects who are ready for our eDETOURS.com product to launch.
What are the challenges you face?
I’ve kept our expenses very low. In my whole sales career, I’ve never had such a challenge in balancing the development of the software with customer uptake. It’s one of those catch-22’s in which I’m negotiating to get my software developed in sync with the requirements of the customer. Then there’s cash flow that has to be managed.
What is the next step?
We’re doing an event on May 5th in New York City, to launch Dream Jobs Inc. Our goal is to drive business for dreamjobsinc.com, as well as harvest some additional prospects for eDETOURs.com. Dr. Sylvia Ann Hewlett is my keynote speaker which I am very excited about.
It sounds like things are going well. What’s it like?
It’s one of those things in which you get what you wish for and then it gets really scary.
Best regards,
Hall T.
What is your background?
I left my professional job as a salesperson for a computer software company to have my daughter. I started meeting a lot of professionals who had taken that same off-ramp. Some stay at home with their kids full-time, but I’m not wired that way. I’ve been working since I was fourteen years old and supporting myself financially since I graduated from high school. It was odd for me to take a step back, so when my daughter was 4 months old I started writing the business plan for Dream Jobs.
What is Dream Jobs?
Dream Jobs provides talent acquisition and retention solutions for sourcing professionals from a hidden pool of talent outside the traditional workforce and hiring populations. After I wrote my original business plan, I ran across validating concepts and research by Dr. Sylvia Ann Hewlett. Her Harvard Business Press book, “Off-ramps and On-ramps – Keeping Talented Women on the Road to Success” is a collection of best practices which were a huge inspiration to me as I continued to develop my business. She also runs a blog on the topic. While her book is focused on the career issues of professional women, the work she does in research and policy change is a thought leadership position that encompasses both genders.
What services do you offer?
We offer two distinct products. The first is a public internet site called dreamjobsinc.com, and this site is geared toward matching approved, experienced professionals with small, medium and large businesses who need access to this talent. We are different than a typical job board in that there is an application process for these professionals.
How much does one pay for a subscription?
As we build our database, the sign-up process for professionals is free. Eventually individuals will pay an annual fee of $89 for exclusive membership.
Employers will pay depending upon company size:
For employers with less than 500 employees: $199 for 3 months, and $600 for 12 months (unlimited access to the database for both searching the database and job postings).
For employers with more than 500 employees (and for recruiters/staffing agencies) the price is $799 for 3 months and $2400 for 12 months.
What else do you offer?
The second product is under development and it is called eDETOURS.com. This tool is a web-based human resource software that empowers large organizations to leverage skilled, former employees who are not available to work in a traditional capacity.
eDETOURS mirrors our original concept, but privatizes the employer’s talent pools of off-rampers and on-rampers for “internal use only”. We’ve taken corporate best practices from some of the leading firms who have tackled this issue of “brain drain” proactively. The services are evolving to help companies solve their retention and acquisition issues for employees. That’s the piece we’re now focused on.
What vertical markets do you serve?
Financial services, technology, healthcare and professional services are the first targets. These markets tend to have large populations of professionals with high acquisition costs, and where retention is a key issue for them.
What is an example of a company using your services?
We’re working with a major financial services firm based in NYC to provide the resources (and technology) to develop a program to help them manage those who want to step out of the standard job. Their current HR system doesn’t let them manage that talent pool well.
Is the site up and running?
It’s under development and will be available for demo in about 6 weeks.
How do you drive the subscription traffic?
In Austin it was one kick-off event and word of mouth. For our New York City launch we have secured two key sponsors: Goldman Sachs and American Express. We’ve found that financial services are proactively recruiting from this talent base, so we are going where the pull is. With more financial resources and as we get better prepared to handle the business operationally, we will drive our strategy more through SEO. HR has a problem with shrinking talent pools. There are three drivers behind that – the disproportionate size of the baby-boom generation who are leaving the workforce (78m over the next 20 years), there’s declining birthrates coupled with people living longer, and the millennial generation is requiring a different work structure (research is showing they’re not 8 to 5ers, and compensation is no longer a key driver for this generation.
How did you do last year?
Our first year in business we actually drove some revenue through our subscriptions and services. In Austin we have about 250 qualified professionals who are in the database that are either on-ramping—they’ve been out of the workforce for a while and are coming back in, or are off-ramping – professionals who want to reduce the number of hours they work each week and have more of a modified work schedule. We would rather drive a database of highly qualified professionals than drive masses of random warm bodies. We also have about 30 corporate customers locally and several corporate prospects who are ready for our eDETOURS.com product to launch.
What are the challenges you face?
I’ve kept our expenses very low. In my whole sales career, I’ve never had such a challenge in balancing the development of the software with customer uptake. It’s one of those catch-22’s in which I’m negotiating to get my software developed in sync with the requirements of the customer. Then there’s cash flow that has to be managed.
What is the next step?
We’re doing an event on May 5th in New York City, to launch Dream Jobs Inc. Our goal is to drive business for dreamjobsinc.com, as well as harvest some additional prospects for eDETOURs.com. Dr. Sylvia Ann Hewlett is my keynote speaker which I am very excited about.
It sounds like things are going well. What’s it like?
It’s one of those things in which you get what you wish for and then it gets really scary.
Best regards,
Hall T.
Monday, March 10, 2008
Sue Malone –Community Express Loans
Sue Malone talks about how almost any entrepreneur can get an SBA-backed $25K loan within one week after filling out a one page form.
So what kind of loans do you make?
I do from $5K to $25K loans. Simple. No collateral. No business plan. I fund companies who need just about anything -- build a beta unit, file a patent, or even pay payroll.
What do you charge for that loan?
It’s prime interest rate plus 4.5%. It’s uncollateralized. I do artists. I do things to give people a chance. I come to Austin twice a year to give a seminar on it.
What’s it called?
The Community Express Loan. It comes from the SBA. It’s a pilot program. I fight tooth and nail to keep it alive. We’re an SBA-licensed lender. They launched 13 of them back in the 1970s. We bought our license from Transamerica and put in $55M to back it.
Why do they want to kill it?
People in Washington don’t think we need it. They want to go back to funding the strip mall shopping centers at $350K loans that are collateralized. The Community Express Loan is a one –page application that can get approval in about a week.
Do you have any success stories here in Austin?
Yes. In Austin, I’ve done a dessert place, two women who have a marketing group here, an author, an artist, a mortgage broker, and a lot of restaurants. A nightclub called Blubbers and there’s more.
What is the default rate?
3%. It’s like microfinance.
How did you arrive at 4.5% + prime as your interest rate?
The US law allows us to go up to 7%. We could charge more but it’s all about cash flow.
How long do they have to pay you back?
Ten years.
What deals can you not fund?
Gambling, narcotics, sex and non-profits. I see a lot of that.
Is that a charter in your organization that says that?
I have an SBA license and the SBA statutes set that criteria.
Are you an SBIC?
No. SBIC’s were a good idea. Those were set up during the first Bush administration and they were trying to spread the risk. The pension funds that invested in them were not at risk because the SBA came in with a cash match. Before the dotcom bust you could get a 3x to 4x the cash match. But where they lost it was they put a cap on the profits at 10%. It really distorted the returns because the positive returns couldn’t make up for the losses. The SBA got out of it because they lost too much money since they capped it.
How did you get into doing this?
I went to the SBA and I said you’re not doing anything for small businesses. They pointed me to their microloan program. I looked into it and found they had done seven loans.
Why so few?
No one could meet the requirements. I said something has got to change. So I started this program. Just about anyone can come to me.
Do you look at their credit score?
We don’t look at their FICA or Beacon score. We only look at how they pay back their current loans. If they have a few missed payments that is okay.
Where can one get more information about the program?
You can find the loan application
here, and the web site provides the forms and instructions for completion.
Best regards,
Hall T.
So what kind of loans do you make?
I do from $5K to $25K loans. Simple. No collateral. No business plan. I fund companies who need just about anything -- build a beta unit, file a patent, or even pay payroll.
What do you charge for that loan?
It’s prime interest rate plus 4.5%. It’s uncollateralized. I do artists. I do things to give people a chance. I come to Austin twice a year to give a seminar on it.
What’s it called?
The Community Express Loan. It comes from the SBA. It’s a pilot program. I fight tooth and nail to keep it alive. We’re an SBA-licensed lender. They launched 13 of them back in the 1970s. We bought our license from Transamerica and put in $55M to back it.
Why do they want to kill it?
People in Washington don’t think we need it. They want to go back to funding the strip mall shopping centers at $350K loans that are collateralized. The Community Express Loan is a one –page application that can get approval in about a week.
Do you have any success stories here in Austin?
Yes. In Austin, I’ve done a dessert place, two women who have a marketing group here, an author, an artist, a mortgage broker, and a lot of restaurants. A nightclub called Blubbers and there’s more.
What is the default rate?
3%. It’s like microfinance.
How did you arrive at 4.5% + prime as your interest rate?
The US law allows us to go up to 7%. We could charge more but it’s all about cash flow.
How long do they have to pay you back?
Ten years.
What deals can you not fund?
Gambling, narcotics, sex and non-profits. I see a lot of that.
Is that a charter in your organization that says that?
I have an SBA license and the SBA statutes set that criteria.
Are you an SBIC?
No. SBIC’s were a good idea. Those were set up during the first Bush administration and they were trying to spread the risk. The pension funds that invested in them were not at risk because the SBA came in with a cash match. Before the dotcom bust you could get a 3x to 4x the cash match. But where they lost it was they put a cap on the profits at 10%. It really distorted the returns because the positive returns couldn’t make up for the losses. The SBA got out of it because they lost too much money since they capped it.
How did you get into doing this?
I went to the SBA and I said you’re not doing anything for small businesses. They pointed me to their microloan program. I looked into it and found they had done seven loans.
Why so few?
No one could meet the requirements. I said something has got to change. So I started this program. Just about anyone can come to me.
Do you look at their credit score?
We don’t look at their FICA or Beacon score. We only look at how they pay back their current loans. If they have a few missed payments that is okay.
Where can one get more information about the program?
You can find the loan application
here, and the web site provides the forms and instructions for completion.
Best regards,
Hall T.
Wednesday, March 5, 2008
Aruni Gunasegaram of Babble Soft talks about her Startup
Aruni Gunasegaram talks about her new startup focused on parenting, the mobile phone application space, and the importance of Search Engine Optimization.
I like your blog post on your fundraising toolkit for entrepreneurs. I meet many entrepreneurs who engage with investors but don’t even have a one page summary of their business. What is your background?
I have a background in accounting and an MBA. I was founding CEO of a startup back in the late 1990s called Isochron. Entrepreneurship is in my family tree. I was not always a great employee at the Big 6 companies because I wanted to do things differently. If I saw a better way of doing things I wanted to try it which didn’t always go over well with my superiors. My grandfather was a doctor who made and sold baby powder, distributed baby formula and later started a pathology laboratory and then a medical school in Sri Lanka.
What is the name of your company?
It’s called Babblesoft and focuses on building web and mobile applications supported by a social aspect for those transitioning into parenthood.
How did you come up with the idea for it?
After our son was born we were looking for ways to record information about his activities but we didn’t find anything out there so I thought it was a good place to innovate.
Is your product up and running?
We’re in the beta version with our Baby Insights and Baby Say Cheese applications and the site has been up and running for a while now. We’re now raising funding for the next phase which is to add a social networking element to it and build out more applications
What’s the new concept about?
It’s about connecting people through mobile web and web 2.0 technology so you can find parents going through the same problems you have.
Is this just for parents?
No, it will be for people who are trying to conceive as well.
What is your revenue model?
It’s a mix of advertising and subscriptions.
How does the site help parents aside from connecting to others?
We have a number of applications. One of them is called Baby Insights and keeps track of information about the baby such as breastfeeding and bottle feeding schedules, baby sleep times, mom’s pumping schedule, and diaper changes.
Isn’t there quite a bit of competition in that space?
There are general social networking sites, but not many focused on this space.
How do you drive traffic to your site?
SEO has turned out to be the best source for visitors so far- far better than traditional PR as a matter of fact. We only actively started engaging in SEO in mid December 2007 and we are starting to see traffic double to our site.
What Web 2.0 technologies do you find most useful?
There’s off-the-shelf backend technology that you can use to run it. We plan to integrate mobile applications with our social and web application suite of applications as well. Our technologies will focus on helping people identify others who have a similar situation or issues.
What do you find in the mobile space?
Our current Baby Insights application is built using Microsoft .Net. With additional funding we plan to expand the mobile application to mobile browsers. Our audience consists of parents and they are mobile. They are out and about and they use their mobile phones a great deal. I think everyone is still exploring the mobile arena for expansion of web applications so we’re still early in the game and learning along with the rest of the companies out there with a mobile presence.
Best regards,
Hall T.
I like your blog post on your fundraising toolkit for entrepreneurs. I meet many entrepreneurs who engage with investors but don’t even have a one page summary of their business. What is your background?
I have a background in accounting and an MBA. I was founding CEO of a startup back in the late 1990s called Isochron. Entrepreneurship is in my family tree. I was not always a great employee at the Big 6 companies because I wanted to do things differently. If I saw a better way of doing things I wanted to try it which didn’t always go over well with my superiors. My grandfather was a doctor who made and sold baby powder, distributed baby formula and later started a pathology laboratory and then a medical school in Sri Lanka.
What is the name of your company?
It’s called Babblesoft and focuses on building web and mobile applications supported by a social aspect for those transitioning into parenthood.
How did you come up with the idea for it?
After our son was born we were looking for ways to record information about his activities but we didn’t find anything out there so I thought it was a good place to innovate.
Is your product up and running?
We’re in the beta version with our Baby Insights and Baby Say Cheese applications and the site has been up and running for a while now. We’re now raising funding for the next phase which is to add a social networking element to it and build out more applications
What’s the new concept about?
It’s about connecting people through mobile web and web 2.0 technology so you can find parents going through the same problems you have.
Is this just for parents?
No, it will be for people who are trying to conceive as well.
What is your revenue model?
It’s a mix of advertising and subscriptions.
How does the site help parents aside from connecting to others?
We have a number of applications. One of them is called Baby Insights and keeps track of information about the baby such as breastfeeding and bottle feeding schedules, baby sleep times, mom’s pumping schedule, and diaper changes.
Isn’t there quite a bit of competition in that space?
There are general social networking sites, but not many focused on this space.
How do you drive traffic to your site?
SEO has turned out to be the best source for visitors so far- far better than traditional PR as a matter of fact. We only actively started engaging in SEO in mid December 2007 and we are starting to see traffic double to our site.
What Web 2.0 technologies do you find most useful?
There’s off-the-shelf backend technology that you can use to run it. We plan to integrate mobile applications with our social and web application suite of applications as well. Our technologies will focus on helping people identify others who have a similar situation or issues.
What do you find in the mobile space?
Our current Baby Insights application is built using Microsoft .Net. With additional funding we plan to expand the mobile application to mobile browsers. Our audience consists of parents and they are mobile. They are out and about and they use their mobile phones a great deal. I think everyone is still exploring the mobile arena for expansion of web applications so we’re still early in the game and learning along with the rest of the companies out there with a mobile presence.
Best regards,
Hall T.
Monday, March 3, 2008
Mike Mayeux of Novotus – Purveyor of the Knowledge Base
Mike Mayeux of Novotus talks about how he entered the recruiting market, how he started up the business, and why an internal knowledge base in the form of a Wiki is a powerful tool for any business.
Who is Novotus?
Novotus is Hire.com with skin on it. We’ve taken those technologies and added highly skilled users and brought together some Web 2.0 technologies to coordinate it all. We have a state of the art environment. We have another company called Reaching Talent that drives traffic to job web sites. We have a group called Nitro which is a research department. Between the three of those groups we’re doing things most other companies have never done. We just celebrated our 5th year anniversary at Novotus.
How did Novotus startup?
We did it all on a little severance check I got when I left Hire.com. We bootstrapped it all the way. There are a lot of people out there who are very gifted at what they do but when it comes to building a company can they actually convert?
What are some of your successes?
When Dell opened a call center in Panama City, Panama, we placed 550 people there in seven weeks. A small startup in Boston, we built employee number 2 to 35 for them. We’ve made over 1000 placements at Dell since 2005. Our big claim to fame is the proof of process for recruiting outsourcing. Oil and services gas company out of Louisiana. We hire 1700 people a year for them which includes everyone from C-level to the truck driver level.
Why are you so successful?
It’s the way recruiters get paid. It’s all or nothing. If they don’t close a deal they don’t get paid. Because of that they don’t invest much. In general they fill one in seven jobs. If you’re hiring a $100K sales guy, you’ll spend $25K to $35K to find him through a headhunter. If you have an internal HR team hiring, you’ll spend around $15K to find that person. We do the same thing for $6K.
How did you get that started?
When I was a rookie back in 1991 in Dallas, I got into the business because I was good at it. There were 4000 recruiters in the country and 1500 were rookies. I just didn’t have the stomach for it. There was never a partnership there. I serve three constituents – the client, the candidate, and the recruiters who put the deals together. The clients want higher quality people faster and for lower fees. The candidates got screwed by the internet because there’s so much information out there on them. Recruiters are inundated with data. The candidate went from being a human being to data. The recruiters are looking for a closer relationship with their clients and better tools. We’ll have about 6500 people apply to Novotus for a job every month. It shouldn’t cost $35K to fill a job.
We have 200 customers now that are plugged into our recruiting environment that pay “by the drink.” We take our knowledge base which is in the form of a Wiki and we can leverage that for each account.
How many hires do you need for that to make business sense?
At least a 100 hires per year.
What is the knowledge base that you have?
It’s based on a Wiki. We found that it was great way to capture people’s knowledge so over time, the person coming in behind them can benefit from their experience. So as knowledge evolves, the new information is over written on the previous information so you can see the evolution of it. We use Wikis to drive internal procedures and it works great. It’s a hard thing to get people to use it, but the benefits are phenomenal. I’m amazed at how many of our original business values were transferred to our new employees. We have a culture of promoting people who build and use the internal Wiki.
There are hundreds of jobs boards out there. How can they be successful?
The key is to aggregate jobs from other sites onto the jobs board. It helps overcome the chicken and the egg problem by seeding the board with some job postings. You can do that based on niche or location. Austin had Indeed.com last year that scraped jobs from everyone’s web site.
What are you interested in doing now?
I would like to provide mentoring to startup companies. I can coach on the talent workforce side. I can also give speeches on motivation and collaboration.
(Editorial note: There are other mentoring sites available on the web including Micro Mentor, Idea Crossing,, and Entrepreneur’s Organization.
Best regards,
Hall T.
Who is Novotus?
Novotus is Hire.com with skin on it. We’ve taken those technologies and added highly skilled users and brought together some Web 2.0 technologies to coordinate it all. We have a state of the art environment. We have another company called Reaching Talent that drives traffic to job web sites. We have a group called Nitro which is a research department. Between the three of those groups we’re doing things most other companies have never done. We just celebrated our 5th year anniversary at Novotus.
How did Novotus startup?
We did it all on a little severance check I got when I left Hire.com. We bootstrapped it all the way. There are a lot of people out there who are very gifted at what they do but when it comes to building a company can they actually convert?
What are some of your successes?
When Dell opened a call center in Panama City, Panama, we placed 550 people there in seven weeks. A small startup in Boston, we built employee number 2 to 35 for them. We’ve made over 1000 placements at Dell since 2005. Our big claim to fame is the proof of process for recruiting outsourcing. Oil and services gas company out of Louisiana. We hire 1700 people a year for them which includes everyone from C-level to the truck driver level.
Why are you so successful?
It’s the way recruiters get paid. It’s all or nothing. If they don’t close a deal they don’t get paid. Because of that they don’t invest much. In general they fill one in seven jobs. If you’re hiring a $100K sales guy, you’ll spend $25K to $35K to find him through a headhunter. If you have an internal HR team hiring, you’ll spend around $15K to find that person. We do the same thing for $6K.
How did you get that started?
When I was a rookie back in 1991 in Dallas, I got into the business because I was good at it. There were 4000 recruiters in the country and 1500 were rookies. I just didn’t have the stomach for it. There was never a partnership there. I serve three constituents – the client, the candidate, and the recruiters who put the deals together. The clients want higher quality people faster and for lower fees. The candidates got screwed by the internet because there’s so much information out there on them. Recruiters are inundated with data. The candidate went from being a human being to data. The recruiters are looking for a closer relationship with their clients and better tools. We’ll have about 6500 people apply to Novotus for a job every month. It shouldn’t cost $35K to fill a job.
We have 200 customers now that are plugged into our recruiting environment that pay “by the drink.” We take our knowledge base which is in the form of a Wiki and we can leverage that for each account.
How many hires do you need for that to make business sense?
At least a 100 hires per year.
What is the knowledge base that you have?
It’s based on a Wiki. We found that it was great way to capture people’s knowledge so over time, the person coming in behind them can benefit from their experience. So as knowledge evolves, the new information is over written on the previous information so you can see the evolution of it. We use Wikis to drive internal procedures and it works great. It’s a hard thing to get people to use it, but the benefits are phenomenal. I’m amazed at how many of our original business values were transferred to our new employees. We have a culture of promoting people who build and use the internal Wiki.
There are hundreds of jobs boards out there. How can they be successful?
The key is to aggregate jobs from other sites onto the jobs board. It helps overcome the chicken and the egg problem by seeding the board with some job postings. You can do that based on niche or location. Austin had Indeed.com last year that scraped jobs from everyone’s web site.
What are you interested in doing now?
I would like to provide mentoring to startup companies. I can coach on the talent workforce side. I can also give speeches on motivation and collaboration.
(Editorial note: There are other mentoring sites available on the web including Micro Mentor, Idea Crossing,, and Entrepreneur’s Organization.
Best regards,
Hall T.
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