Executive recruiting, take 1 continued

July 30, 2006

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

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