To catch up, check out the previous post on Executive Recruiting, Take 1

Well Seth and I met with our CEO candidate over the weekend and had a great conversation. He spent 3 days in NYC, and we met him for meals everyday and spent hours in between discussing our vision for OnCard and his ideas for making it a huge success. At the end of three days, we felt that we had a variety of reasons to make this adviser a CEO. The deal was great. He wanted a modest stake in the company and would even provide the seed capital required to launch the business. Seth and I were obviously very excited when he left to go back to Texas. We called our lawyers Monday morning to have them start working on the contract.

So yesterday rolls around, and we have already run up a $1,300 legal bill on the employment contract. That’s not so bad, considering I wrote most of it myself. The worst part was that I received an email last night from our favorite Texan, telling us that after much thought, he cannot accept the offer as CEO of our new venture. The issue was not so much the lack of compensation but more that he wanted to stay located down in Texas. He fully understood that we could not afford to pay any salary for the foreseeable future and even tried to convince us to move to Texas where it would be cheaper to live and run the business. Seth and I debated for a brief moment the merits of picking up and moving to TX but eventually decided that we would be crazy to leave all friends and family in NY to relocate the business around our new CEO.

In the end, $1,300 and a month after beginning conversations, Seth and I think it’s best to pass on this executive hiring decision and avoid making a huge mistake. We are confident to run the business ourselves for the time being and avoid all the headaches of relocating or dealing with a new CEO in a different time zone. We’re definitely disappointed after a series of good conversations, but that’s just how business works I guess. You win some, you lose some, and always roll with the punches…

Bottom Line: When deciding to hire a key executive, especially a significant equity holder who will run the business, be certain that the benefits outweigh the negatives. Make a list of each and see how they stack up. For us, the decision was not as clear in the beginning but became more so towards the end. Before going down this road, figure out if you really need this person. Do they bring something unique to the table? Make sure you get personal references before pulling the trigger and remember, it’s always hard to take away equity once you give it out. So be careful how much you promise people (advisers, employees, investors), because before you know if you could be left with nothing (our worst nightmare).

JT

Advertisements

Seth and I decided that magazine publishers would be a great partner for us. The magazines had tons of female subscribers and no real rewards or loyalty programs to offer them. Some have credit cards and the like, but we think we’ve got something unique. I started doing my research about a month ago on the top publishers and came up with a pretty short list. Conde Nast, Meredith Corp, Rodale, Time Inc., Hearst and Dennis Publishing were at the top. I decided to focus on these guys and start networking into the organizations to speak with somebody in sales or marketing for some of the well-known magazines. While doing my research on each of the publisher’s websites, I realized that they provided lots of contacts for their advertising personnel, since that’s the primary way they make money by selling ads in the magazines. I thought that this was a pretty good place to start since I could narrow my search to ad sales personnel by magazine. I made a list of names from the websites (most of which gave names, emails and phone numbers) and started smiling and dialing.

Most of the emails I sent were never answered. There were, however, a few bites. I managed to set up a call with a couple people from ad sales at Stuff Magazine for last week in July. I’m not sure that they are the right crowd to discuss a subscriber rewards program. But we’ll just have to see. I’ll probably follow-up with the 150-odd people I contacted this week over the next month or two to see if there are any new bites. I’ll keep you posted…

JT

Seth and I decided that last weekend we were going to take a trip up to Cornell to perform some research on the local market. We had discussed our business idea with some store owners over the past couple weeks informally in NYC and had gotten some good feedback. However, we really wanted to do a more detailed survey study of a local market and speak to approximately 20 merchants (mostly bars, restaurants and retailers) in a college setting, since we think that college students might be our ideal target market, especially for bars and restaurants. Given we went to Cornell for 4 years, we knew the area well and thought it made the most sense to conduct our contained study up there. Plus, the weather was great and we figured we would bring our golf clubs and play a round at our favorite cheap course outside of town.

The research went well. We spent Friday and Saturday speaking with approximately 24 local merchants in both college town and down in the Ithaca Commons. We received some really positive feedback on our service. Most merchants said they would try it out, and almost all of them complained how expensive advertising in the local paper and radio was (confirmation of our hypothesis). They gave us some good advice on the pricing of our service. Some felt we should take a smaller percentage of sales, while others thought we should charge a subscription fee. They also told us what they thought was too confusing and needed to be simplified. Seth and I wrote all this down and compiled the notes over a beer at the Chapter House (our favorite college town pub).

There were probably a handful of merchants who even expressed interest in signing up right then and there, and we felt sheepish trying to explain that we were simply conducting research that would enable us to build the service over the next 6-12 months. They seemed disappointed but understood and eagerly took our business cards and marketing materials for later. We left Ithaca Sunday afternoon very optimistic about the venture we were embarking on. It seems people are interested. Now all we need to do is build it…

JT

About a month ago, Seth and I were put in touch with an older Cornellian who had started a major enterprise out of Ithaca NY. The company dealt with student ID cards, among other things, and had just purchased a smaller company that dealt with student discounts at a variety of well-known stores, hotels, etc. This gentleman suggested we speak to one of his colleagues at this recently acquired company to discuss a potential partnership for our fledgling business, OnCard Marketing. I reached out to this individual and had a couple conversations to explain what Seth and I were trying to build. He seemed very intrigued, considering we were focused more on the technology side than they were. We arranged to get together two weeks ago in-person when he was in NYC on business. Seth and I met with him and one of his associates over dinner and had a really invigorating conversation about the future of their business and how we might be able to add value through a partnership. Seth and I were excited when we parted ways that evening because they seemed to buy into what we were doing. They even suggested that they might be able to provide facilities in their own offices to incubate us until we got off the ground as part of the partnership. Well, all very exciting stuff…

We followed up on that meeting by putting together a PowerPoint presentation that outlined exactly what we envisioned in a partnership and what we would bring to the table. We were scheduled to go to their offices in Boston and present to them last Friday. We signed NDAs on Wednesday to protect both parties from divulging confidential information, and I emailed them the presentation a day ahead so they could print it and review it to make for a more meaningful meeting. Well, I received an email Thursday morning after I had sent them our presentation that they could not go ahead with the meeting unless we voided the NDA we signed the day before. They said it was because they were working on some semi-related things and did not want to put themselves in a legal bind. I didn’t know exactly what this meant, but took it to mean a big FU. We canceled the meeting so we didn’t run the risk of presenting to them without legal protection and had our lawyers draft a letter regarding the confidential materials we already sent them and asked them to destroy the materials. Seth was even more livid than I was about this whole ordeal. Regardless, that was our first attempt at securing a partnership…

Bottom Line: This was a blessing in disguise because this partnership did not make complete sense. It was the proverbial square peg in a round hole. We were trying to make it fit. It’s very easy to get overly excited about potential partnerships. Try to stay focused on your own business and come up with 5 good reasons why this partnership would help you attain your own business goals. We should have done this, because we only could come up with 2 in retrospect and would have avoided a huge headache. Our advice is to be careful with disclosing too much to potential partners without and NDA (non-disclosure agreement), although many people, including us, will tell you that it’s more a gesture of good faith than an enforceable legal document. The last piece of advice is that if something looks suspicious or doesn’t feel right, follow your gut instinct and walk away. This last piece of advice is the most important and will serve you in good stead as you make future business decisions.

JT

So Seth and I got to talking about the need for executive management for our new start-up. We recognized that we were a bunch of young guys without any real start-up experience. We thought that we might be best served if we brought on a more seasoned entrepreneur with lots of experience to help lead our company. Seth and I want to remain the “founders” of OnCard Marketing, but we thought it might make sense to bring on another partner. We have been speaking with a few of our advisers about this and the responses are mixed. Some think we should run the company ourselves and rely on our board of advisers for guidance. Others agree that we need senior leadership brought in to run our business. The problem is that we will probably need to give a ton of equity for this individual.

Well, based on this advice, Seth and I decided to pitch the idea to one of our advisers who lives down in Texas to see if he might be interested in taking the helm. I have been in touch with him frequently over the phone about business-related issues and invited him to New York next week to meet with us in-person. I’ll keep you posted on how it goes…

JT

My first week at work

July 9, 2006

So it was my first week at work… after a very short long-weekend for July 4th, considering my last day in the corporate world at Citigroup was June 30th. It was a very weird feeling since it was the first time in my life that I supposedly had a job but no physical office to report to. I truly can’t explain the feeling. Liberation? Freedom? Confusion? Anxiety? Probably all of the above and then some. You really only know what I’m talking about if you’ve tried to start a business in your apartment/house from scratch. It’s not easy, and you probably didn’t know where to begin. I began with reaching out to various technology vendors to price out options of outsourcing our tech development. Given we’re a technology firm, it seemed like the right place to start.

I have to believe that this will be a trying time for any new entrepreneur. Anybody in my position will probably not know exactly what he should be doing (it could manifest itself as a deer-in-the-headlights phenomenon where you’ve got so much to do and don’t know where to start)

Bottom Line: I keep telling myself to keep my eye on the long-term strategy and take baby steps towards that goal. I will try to view each activity I perform (each phone call, email, proposal) as a baby-step towards accomplishing our end vision.

JT