VentureLoop: A 17-Year Startup Journey Continues
One morning in 2002 I sat in my one-bedroom San Francisco apartment, which also doubled as my corporate address, and stared at a book entitled “How to File for Bankruptcy”. I had amassed just under $90,000 in credit card debt across seven credit card accounts through cash advances to pay for rent and food, and I was running out of courtesy checks with credit left on them to pay the minimum balances on the other cards. The tech bubble had burst, a terrorist attack had further decimated the economy, and running a software and services company that focused on recruiting was not a comfortable place to sit. It didn’t help that the prior week a guy named S. Fitzgerald somehow stole a $2,000 client check out of my mailbox and was able to add “care of S. Fitzgerald” after my company name and cash it at a local bank. I recalled a conversation a few years earlier where I commented on the stupidity of another startup founder who had generated over $60,000 in credit card debt to start her company. The irony was not lost on me. Karma was here, and she was not kind. Being a former CPA from PricewaterhouseCoopers doesn’t keep you from blindly following a passion; even up to the edge of a financial cliff.
A “wow” from Michael Moritz
I launched Referralworks.com in 1999 as an online employee referral program and quickly signed up fast-growing dot-com startups who were saving tens of thousands of dollars using our employee referral system instead of paying headhunter fees. During my early years at PwC (Coopers & Lybrand back then), I worked in the venture capital practice and had clients like Sequoia Capital, Kleiner Perkins, Mayfield, and other marquee names. I decided to try and leverage that experience and create a Referralworks.com network for VC firms to use with their portfolio companies to recruit candidates. I reached out to the CFO of Sequoia Capital at the time, who referred me to their Recruiting Partner. “Michael Moritz has been talking about doing something like this,” she said on our first call. “He wants to meet with you.”
I can pretend that I had been swimming in these VC waters for years as a CPA and that meeting with a prolific VC like Michael Moritz was not a big deal, but that would be a lie. I mostly worked with administrative partners in the CFO and COO capacity and rarely had the opportunity to converse with the investment partners. Michael is arguably one of the top 5 VC partners of all time. It was surreal, and I just hoped I didn’t puke on my shoes during the meeting.
I called my co-founder, Piyush Mangalick, who is the technical and product genius behind our venture. We quickly strategized on how to approach the meeting, hastily crafted a slide deck, and dreamed about all of the different possible scenarios. Piyush had more direct startup experience than me, so I had some level of comfort that I could lean on him and keep the puke off of my shoes.
The meeting with Michael was like a dream. It’s not often that you sit and listen to a VC pitch you on his idea instead of the other way around. After listening to Michael, we showed him what we already had built and mapped out how we thought it could work in a VC environment. “Wow guys. This is great stuff.” Yes, he really did say “wow”. I’m not certain of any other words spoken during that entire conversation by any party present, but “wow” was definitely uttered.
When the likes of Michael Moritz utters “wow” to you about what you’re doing, it’s hard not to think you’re on the path to unbridled success. Over the following months, we finished building out the career site for Sequoia Capital and started making plans for servicing every other VC who would surely be knocking down our door. After a successful launch of the site and confirmation that nothing was going to blow up, we asked for Michael to meet with us one more time to discuss how we could work with Sequoia as an investor in our company.
Brimming with confidence and the echo of “wow” still fresh in our minds, we pitched Michael on how we could move this forward together with Sequoia as our partner. But from the beginning the tone was different in this meeting. There were no “wows” or smiles or even faint flickers of interest. After we finished our pitch, the other shoe dropped. “Look guys, I really like what you’ve done for us. But to be quite honest, my preference would be that we’re the only VC that has this on our website. We want to be unique and ahead of the pack. So if we promote or fund you, we’re basically defeating the purpose of why we were interested in the first place.”
Deflated. In hindsight, Michael had been fairly clear about why he wanted to do this with us. But we only heard “Wow guys. This is great stuff.” Not “Wow guys. This is great stuff. I’m really excited to use this as a promotional tool for Sequoia and show we’re leaders in VC innovation.” Oh. There’s that part.
But hey, we weren’t going to let that get us down. We were confident in what we had done and went out to pitch every VC we could find. Two more VCs signed up immediately. A great sign. Maybe we could do this without even getting funding. Then it stopped. We assumed most VCs would want to make sure they didn’t miss out and get on board. What we hadn’t counted on is that most VCs are very risk averse when it comes to their own reputation. Most of the partners we spoke to had the same message. “I want to see how it works out for Sequoia first. Let them be the beta tester and we’ll sign up once we know it works and doesn’t blow up and embarrass us. Touch base in 9–12 months.”
How ‘bout them Cowboys?
Time to fundraise. While we never successfully raised money for VentureLoop, I did manage a fun fundraising trip to Dallas, Texas, in 2002. I stayed with a friend from high school who let me work out of a spare conference room in his office. As luck would have it, Charlie Waters and Cliff Harris, two form Dallas Cowboys players whom I watched growing up as a kid in Texas, worked for a consulting firm in the same building and I got to meet them both. Charlie had some incredible stories. My favorite, though probably not his favorite, was his last game as a professional. It was the playoff loss to the San Francisco 49ers and “The Catch”. The field was soaking wet from heavy rains leading up to the game, so the field crew covered the wet spots with an absorbent material that soaked up the water but looked like cat litter. When Joe Montana released the ball to Dwight Clark, Charlie was certain he was throwing it out of the end zone and began walking to the huddle for the next play. When he heard the roar of the crowd and turned to see what happened, he dropped to the turf, put his head to the ground, and remembers seeing nothing but cat litter in front of his face. It wasn’t exactly the scene he wanted as one of his final memories of his career.
I mentioned to Charlie that I actually had a collectible football card of his that I got as a kid. Had I known I was going to meet him, I absolutely would have brought it with me to get an autograph. Charlie was friendly and generous with his time for me, a complete stranger, and we parted ways. I did manage to awkwardly hand one of my business cards to him as he left. A few weeks later, I received a letter in the mail postmarked from Dallas. I thought my friend with whom I stayed must have sent something. To my amazement, the letter was from Charlie Waters. He sent me a football card and a short note thanking me for being a fan. I’m not an emotional guy, but I do admit to tearing up a bit when receiving the letter. I watched him play on television every weekend growing up, and he was larger than life to me. To this day, I am still amazed that he took the time to send me such an incredible gift.
The Decline
Over the next several months we added a few new VC clients here and there. Always enough to keep us excited and moving forward. But our window was starting to close. The market was crumbling. Our corporate clients who were using Referralworks.com for employee referrals were suddenly telling us to turn it off. “We’re going to be laying off half these people in the next two months. The last thing we want to do right now is encourage them to refer their friends to apply for a job here.”
The employee referral market was clearly heading into the tank. Only six to nine months prior, any company that had “dot-com” after its name was basically a guaranteed home run. Now no one wanted to have “dot-com” after their name. Our first rebranding and name change — HireLoop.
By late 2002 things were looking grim. Remember the bankruptcy reference at the beginning of this story? No one was recruiting, and venture capital firms hate to spend their own money on services.
The HireLoop brand would grind on. Our focus would be on the venture capital market. Those were some tough years to be sure. Piyush and I both recognized that our dream of getting funding and cashing out in a ridiculously overvalued IPO were gone. It was survival mode. The odd thing was that HireLoop would have quickly died with the hundreds of other Internet dogs if we had successfully raised money. The VC community wanted to get the toxic assets off their books, have a massive one-year write-down, and move on to greener pastures. At least the VC firms who survived and could still raise funds took those steps.
A VC Tries to Replicate VentureLoop
good morning,
I am interested in learning more about your products. Can you forward any relevant material on the offerings by email including a list of existing clients, ballpark pricing & terms, and technical requirements?
thanks,
Xxxxx Xxxxxxx
General Partner
We received that email from a venture capital partner on February 25, 2005. I quickly responded to the query with our marketing materials, pricing and other information. We never got a reply. I followed up one more time. Nothing.
We continued on with HireLoop as a going concern and added a few more venture firms over the next year, climbing over the 25-client count. We were still hopeful that keeping everything running while we pursued other jobs that paid the bills would keep the dream alive and allow us to return to HireLoop as a full-time focus.
Then something unexpected happened. A competitor sprung up in late 2008, early 2009, who was doing the exact same business model as HireLoop. The service seemed to have been launched by the same venture capital contact who had solicited us for information about our services a couple of years before. Worse, it was almost an exact replica. The capper? Their service was FREE. Could we compete with free?
The next few months were total chaos. Thoughts racing through our heads: “Was what they did legal?”, “It certainly wasn’t ethical, was it?”. For almost 10 years leading up to this I had scratched and clawed my way to keep our service running while delivering world-class service. Now some random service that looked to be started by someone in the industry was going to copy it!? We even heard that the new company was already publicly claiming this as a new service and that they were the originator of the entire idea. Anger. Frustration. Confusion. We held meetings daily to go over our options and stressed about whether or not they would dupe our clients.
The new entrant was aggressive. They came after our clients hard, and we had to field calls to discuss who this new company was and how we were different. I also received calls from friends in the banking community, and they were telling me the competitor was pitching them for referrals and saying that they were the only service of this kind in the market. One person told me he actually called them out on it and said they were being dishonest because he knew HireLoop started this service many years ago.
HireLoop was in panic mode and we tried multiple options to fend off the attacker. We quickly developed our own free version of HireLoop that was a different level of service and then offered additional services to further differentiate ourselves. Was it enough? How many clients would we lose?
After several months, the results were in. Three. We lost three clients. Two of those clients were having trouble raising their next fund, so “free” sounded like a great idea to them. But everyone else stayed. As I gathered feedback from our clients, I was somewhat humbled by what I heard. Yes, they were pursued by this competitor, but they loved HireLoop and our services. We offered a great service at a fair price, and they trusted us to run the career section of their website. While I was panicked about creating a free alternative to our service, I hadn’t stopped to consider that maybe we had earned some loyalty from our clients and they considered us something worth paying for. It was also a lesson in focusing on the things that you’re great at doing and make sure you keep doing them.
Pretty soon, we forgot about this new threat; our clients loved us and the service we provided. I was at peace, and I sometimes went months without even thinking about the other company. We were the innovator, not them. We were the leader, not them. We needed to focus on our own business and not worry about what some copy-cat might be doing.
Higher or Hire? Maybe Venture
Piyush got a top-tier MBA and moved on to bigger and better things, but he continued to help keep everything alive on life support while we both pursued financial security. Sarbanes-Oxley saved my bacon. While the rest of the market struggled mightily, the large CPA firms were desperate for staff people who could implement Sarbanes-Oxley processes for public companies. Thanks to my CPA background, I was able to get some lucrative work recruiting for these firms and start to pay down that $90,000 credit card bill. Meanwhile, HireLoop remained a side business that kept going.
Fast-forward to late 2009 when there was an odd turn in the market. Most industries were struggling after the housing collapse, but oddly we started getting a lot of calls from VCs who wanted to use our service. It was time to give our struggling business another look.
Over the years we had an annoying branding issue with HireLoop. A lot of people wanted to spell it HigherLoop instead. It felt like the right time to rebrand and get rid of that issue. After considerable research and brainstorming, we settled on VentureLoop. While researching for this story, I was reminded that the second place finisher for our rebranding strategy was “SonicRain”. Yeah, I’m glad we went with VentureLoop.
The Experiments that Didn’t Work
CleanLoop
We briefly dipped our toe into the clean tech frenzy and launched a website focusing only on clean technology jobs. It quickly became clear that the media was far more interested in this space than the market. CleanLoop shut down after two years.
LoopTwo
It was only natural that a job board company would have a recruiting services business associated with it. LoopTwo provided outsourced recruiting services for several years, but it was a punishing market. Client expectations are very unrealistic, and even our significant achievements were met with a shrug. Our success in other service areas allowed us to stop accepting new recruiting clients and quietly close up shop.
A Successful Journey Forward
Since our rebranding, we’ve had a steady journey of growth and experimentation. The VentureLoop family consists of four successful business ventures, and we count close to 100 venture capital firms as clients today. That equates to over 45,000 job postings from nearly 4,000 venture-backed companies. We’ll soon be promoting our first major recruiting event in December to connect top technology professionals with exciting startup opportunities.
VentureLoopHR
In 2011, one of our venture capital clients asked us if we ever considered starting a Professional Employer Organization (PEO). This firm said that they do not allow new portfolio companies to use certain larger PEO firms because the level of service is so awful. If we could service a PEO as well as we service the job board, they would love to consider us a primary referral option.
Two months later, I happened to meet a regional sales director for one of these PEO’s at a networking event put on by our law firm. The PEO had also sponsored the event. While speaking to the sales director, I mentioned that our firm payrolled two temporary employees as a favor for a client. He was furious and felt that we were a competitor and that the sponsors had agreed not to invite competitors to the event. As I opened my mouth to clarify that we were not actually in his market space, he turned his back and began speaking to someone else. I decided on the spot to start a PEO business. If this is how they treat people, we’ll have no problem being successful. And VentureLoopHR was born.
We’ve been lucky enough to work with top tech luminaries like Ev Williams and Biz Stone from Twitter when they launched their new ventures. I’m honored to be using the Medium platform that Ev built in order to publish this story.
VentureTemp
Those two temporary employees we payrolled as a favor for a client soon expanded to many more workers. We had never done employer of record services before, and it turned out we were over-servicing our clients relative to what the competition provided. Clients loved it! Our business organically expanded, and VentureTemp is now our fastest-growing line of business. Unlike our other lines of business, our client focus has strayed outside of the startup world for VentureTemp. We count multiple publicly-traded companies and rapidly-growing firms with over 2,000 employees as our clients.
Venture Benefits Insurance Agency
After years of servicing benefits plans for our PEO, I finally did the unthinkable. I got my insurance broker license. Most insurance brokers don’t like working with startup companies. We do. So it only made sense for us to expand our services into that area as well, and thus VenBen was born.
The Journey Continues
It’s hard believe we’ve been on this journey for 17 years. We haven’t hit that elusive home run, but we’ve built a great group of service businesses for the venture community that allows me to stay directly involved with clients. Which is what I love most. We’re excited about what the future holds, and we enjoy working with our startup clients (and not-so-startup clients). More adventures ahead…
