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ERNIE, please use the form on the
linked page. That said, there was never a better time to be building an Electronic
Recruiting business.
Although we occasionally still encounter a team who are pursuing the
IPO lottery, expectations have normalized. The adrenaline testosterone
cocktail of the fast buck dreamers appears to have had a mild infusion of
B vitamins and settled down a bit. The decks are cleared and the time to
build the next generation is upon us. Increasingly, the business models we
hear about have that down to earth quality of selling something to
customers while trying not to spend all of the money they give.
That's how you build a business.
The freedom that comes with lots of Venture Capital money is a very
mixed blessing. While the organic growth that can be achieved with
"bootstrapping" has a slower acceleration than what's possible with a
large bank account, a pure connection with customers has amazing
consequences. Many of the really large market mistakes we've witnessed
were driven by the notion that building a business didn't involve
customers. Rather, pleasing the investors became the name of the game.
That's problematic when you understand that the very investment mechanism
used, pre NASDAQ crash, assumed that the investors were unable to predict
winners.
Large scale hedge investing, where ten bets are placed on the
assumption that one will pay, was the standard method employed by VCs
during 1999 and early 2000. By definition, acquisition of that kind of
money means that your investors think you only have a 1 in 10 chance of
making it. It's hardly an endorsement. Better off were the few enterprises
who were given the demand that they produce real revenue results.
There are a number of large projects that can not be taken on purely
based on a sales driven machine. The development of real, sophisticated
targeting, advertising delivery systems; At the same time, there are a few
investments that might make real sense for the VCs in todays market.
There are any number of properties on the market that have way too much
money invested in them. Designed by a genius who was buffered from market
realities by too much money, they are really specialized tools. To the
extent that they duplicate readily available functionality, they are
worthless. The value in these tools is the places where they are different
from the run of the mill stuff. A clear understanding of the market and a
tightly focused sales program can turn some of these dogs into modestly
successful products. They aren't the world beaters that their founders
claim. But they are precision tools that can be used in very specifically
defined circumstances. In this group are a number of lexicon driven
profiling systems that, when used by focused and highly trained
researchers, can dramatically improve the quality of the overall hiring
process.
Unfortunately, the broad markets never wanted these sorts of tools.
Their inventors focused on technology, which is what VCs wanted at the
time. Marketing, the critical link between customer and product, took a
back seat. Generally, successful businesses in our industry are spending
35% to 50% of their budgets on marketing. Rather than believing that an
excellent product is enough, they met customers, listened and sold.
In Wayne's World, the mantra was "if you build it, they will come".
Here's to hoping that 2000 brought a solid end to large scale investments
in these sorts of projects.
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