A Startup’s CEO Journey to Beta Launch

How I nearly lost my mind, money and dignity launching BusinessElite, the Social Recruiting Platform

When I left my job as VP Executive Recruiting & Talent Acquisition for AOL in December, 2007, life was grand. While I enjoyed a decent, nearly four year run at AOL, I decided to trigger my pre-negotiated severance package after my boss left and when 3 other members of the HR Leadership team decided to exit too.

In-coming 2008 seemed set. Good fortune was smiling upon me as I quickly landed 3 retained executive searches. Little did I know then that 4 small words would forever change my blissful life.

Shortly after departing AOL, I was sitting in nearby Panera Bread with one of my recently departed AOL HR colleagues, Tom. We compared and rehashed our AOL experiences and chatted about the future. During that conversation I mentioned how I attempted to do a recruiting startup way back in 1999. The concept then was an exclusive recruiting community where executives qualified to get in and where recruiters used “virtual” recruiting tools to recruit. The company, called BusinessElite, was a spectacular failure! The memories of which still haunt me from time to time.

Having both led the Talent Acquisition function at AOL, we discussed how neither of us ever found a truly effective online recruiting solution - especially as you move up the organizational chart. We talked about the types of services currently in the market - from job boards to new “community” recruiting services. None of them really worked.

As I looked at my friend I thought to myself, “Hey, I’m much smarter now than I was back in 1999. I have much more experience and a platinum rolodex. Heck, I got my year’s income all sewn up. Why not take another stab at doing the whole startup thing again?” I turned to my colleague and said those famous 4 words every entrepreneur utters at one time or another:

“I have an idea!”

As our conversation turned to the notion of maybe doing our own startup, we both got excited. Sure, the online recruiting space was crowded but hell, hardly any online recruiting company was built by people who actually recruited. We thought if we leveraged Tom’s Leadership Development experience along with my executive recruiting experience and previous startup experience (such that it was) we could build something unique and, profitable. Going back to the core of my first attempted startup, we would build an exclusive talent community - an “Elite” LinkedIn - and offer recruiters our own proprietary matching and assessment tools - like “eHarmony”. And, we would call this company, BusinessElite!

Seeding the company

Over the following several days, Tom and I met at Panera Bread throwing out idea after idea. It was fun. I felt like I was back in Silicon Valley (before the carnage of the dot-com implosion). After a few days I spoke to my wife about the prospects of doing another startup. Given my last startup attempt nearly bankrupted us, I was actually surprised when she gave me her blessing with only 1 restriction. I could not touch my AOL severance money. The only money I could risk was that was earned through my retained search efforts.

I told Tom I was serious about making another run at a startup run and asked if he was serious. He said he was but could not make any cash investments into the venture. Using money I had recently earned from some initial retained search assignments, I invested the initial $250,000 to seed the company - giving me majority ownership. We were off and running!

Lawyers, Guns & Money

After a week or so we had enough initial ideas to choke a horse. Tom and I worked within the technology sector but we were both only HR dweebs - not techies. We needed to find someone to help us corral our ideas and lock in on an initial product plan. We pinged folks in our network and were referred to a local onshore/offshore development firm. I met with the owner, told him what we were attempting to do and asked if they could help. That meeting was perhaps his easiest sales call ever — within a few days we signed a contract and were officially “in development”. Tom and I were thrilled!

Little did we realize we just made what turned out to be the first of many colossal blunders.

With the development process officially kicked off, it was time to actually set-up our new company. We needed a lawyer. Fortunately for us, our new development partners seemed to be fairly well-connected in the local startup community. They introduced us to a lawyer with previous “big firm” experience. He was now on his own and could quickly, easily, and affordably set up our corporation. BusinessElite, Inc. a Virginia corporation was soon formed. We were now legitimate.

With our corporation now filed and a new business bank account set up at a “venture bank” (courtesy of yet another introduction by our development partners), we were deep into the “product process”. For the next few weeks we worked nearly daily with a contract “product guy” whose job was to start laying out all of ideas, prioritizing them and building “use cases” (all of which were neatly documented on our very own “Project Wiki”).

One of the early decisions we made was to use a third party resume parsing and semantic matching technology as the basis for our platform. We previewed some software and selected a vendor. Our development partners immediately hired a small dev team - in Latin America - to start learning the system and running tests. BusinessElite was now not only “international” but we were officially using outsourced development, just like all the other cool startups.

We were in development for nearly 3 months when it became apparent that our “product guy” didn’t know much about consumer technology products. Upon reflection, I am not sure the guy knew the difference between “products” or “produce”. On the positive side, our dev partners did introduced us to a really cool design company out of Baltimore but we soon realized the whole “onshore/offshore” model was not quite right for us and we needed to get out of our current contract. In addition to that, we learned our lawyer gave us some really bad advice (incorporating in Virginia instead of Delaware) so with one fell swoop, we dispatched both our development partner and lawyer - all for the tidy sum of nearly $60,000.

Treks to Baltimore

Not ones to dwell on the past, we set our sights to working with the Baltimore design firm. The CEO of that firm confessed to me that the “typical” way to begin the product process was to create either a comprehensive product requirement document spelling out everything you want developed and/or create visual requirements that depicts how the product will look and function. Being the visual people we are, we engaged this firm to help us create the visual requirements that would become the blueprint to the core features of BusinessElite. In addition, the firm would design mock-ups of key pages of the site including the homepage, dashboards and our matching interface. For the next several weeks we trekked back and forth to Baltimore, working with a person who clearly “got us”. On paper, the BusinessElite vision was taking hold.

5 Months In. . .

Time certainly flies when you are in a startup - especially when you don’t really know what you are doing. We worked with the Baltimore firm until the beginning of May when they handed us our visual requirements. Next, we needed to find a new development team to begin a proper development process. As it turns out, a friend of mine - an engineering VP from AOL (and someone I recruited), contacted me saying he was leaving the company and joining an old colleague in a small development firm down in Texas. How lucky were we? A close “friend” arriving just when we needed him!

My “friend” and his partner flew up and met with us to discuss our project. Armed with our visual requirements, we spent a full day going through the details. Questions were asked and answered. Issues discussed. Five days later we got their proposal. Since we already had a bid from the Baltimore shop (they had a sizable development team in addition to design capabilities), we were blown away at how low my “friend’s” proposal was. Given our “friendship” they agreed to help us out by doing the dev work on the cheap. They would barely break-even by doing our development but given our relationship, they were only too happy to help. With a new contact signed, we went back into development.

With Friends Like These. . .

Within 10 days of starting our engineering engagement, my “friend” sent me an email saying he was taking a job at a major telecom company and that he will no longer be a partner with the development shop. Despite the ink being barely dry on the development contract, my “friend” was bailing on me. He assured me he had the utmost faith in his colleague and we were in very good hands. He further told me he would be “looking in” on the development efforts to make sure things were progressing. While I was a bit stunned by his new revelation, his colleague did seem to be on top of things. He was also a seasoned engineer who worked for really good companies.

This was perhaps our biggest colossal blunder!

The development effort began in earnest in early June of ‘08 with the goal of launching a beta in late August. We had already moved into a small office in a McLean, VA. Our days were filled with product refinements, investor pitch decks, spreadsheets, budgets and other things we thought nontechnical startup folks should do. We would grab coffee at the local Starbucks in the morning and grab lunch at a variety of restaurants and sandwich shops. We talked endlessly about how smart we were and how successful we would be. Once a week we would have an update call with our development partner who would tell us how the “guys” were doing. The summer was truly grand.

In July we engaged the services of a former AOL marketing executive, Maggie Hatfield, to help us craft our marketing strategy. This was perhaps the smartest thing we did. The BusinessElite concept resonated with her and she completely understood what we were trying to do. As a side benefit, Maggie had first-hand experience launching major consumer technology products. It was refreshing working with a real professional, gaining a different, non-recruiting perspective. Maggie joined our team as a consultant, helping us with marketing and product management.

The Autumn of our Lives

The summer of 2008 quickly turned to autumn. We missed our end of August “alpha release”. Instead of alarm bells going off alerting us to the complete and utter incompetence of our development “friend”, we accepted his excuses. We were told the “guys” were busy and that problems kept arising. We were told all of this was “typical” for a startup. Money was still coming in through my retained search efforts but it also was also rapidly streaming out.

Development was obviously off the rails. We needed to get some new perspective on things. Together we made the decision to find and hire our own technical “lead”, someone who was a technology generalist who could work with our development firm and report to us what was going on. We reached into the AOL network and found a person who at the time, seemed to fit the bill.

We hired our first “real” employee in mid-October. He would start by the month’s end and work from our new offices (located in the basement of my house - we left our plush McLean office for a shorter commute). In the interim, our “alpha release” was now pushed to November 1. Little did we know things were about to implode.

The October Surprise

I’ve always enjoyed Halloween. There is just something about kids running around in costumes asking for candy that brings a smile to my face. I had no idea at the time the day before Halloween 2008 would be a major turning point for me and my BusinessElite colleagues. It all started around 3 PM Eastern when I was given the login information to our development server.

Before getting into the details of this catastrophic moment it is important to note that we discarded the third party matching engine as we found it lacking in accuracy at the executive level. We created our own matching and assessment engine that was the core of this entire development phase. I was about to test the inner workings of our matching algorithms. It was a very exciting moment given the amount of time, energy and money that had gone into (and out of) the company by this time. The room was noticeably quiet.

I logged into the server as a “Talent” without a hitch. OK, the site was clunky and the graphics were not really right - annoying but not a show stopper. I entered in “my” career information, preferences and took our Impact Assessment. I logged out and then entered another “Talent”. I took care to make certain both “candidates” were identical in every way. I then logged in as a recruiter and entered in a sample job spec that was tailor made to match the backgrounds of the 2 entered candidates. I hit the button to see the match results.

Now, I don’t really consider myself a violent man. Yes, there were episodes in my younger days I wish I could take back but, in general, I don’t really believe violence ever solves anything. That said, when I saw that not only the match results were WRONG but the entire application was broken, I think I would have slammed our development “friend” through a wall. I gathered the team.

We all stared at my monitor in disbelief. Only 1 candidate matched and only at 63%. The other candidate was nowhere to be found. It was clear the site did not work at all. The matching was so wrong it made no sense whatsoever. We tested the site for hours, NOTHING worked the way it was intended.

Now, this was not the first time we saw the site. We actually had weekly update calls and screenshare sessions where our development partner showed us the progress they were making. We all knew that site would need some “fit and finish” work and UI enhancements but this was the first time we would see the heart of the entire BusinessElite enterprise and it did not work.

Subject Line: STOP ALL WORK

It goes without saying I was furious. Yes, I was upset that we had already spent lots of money (hundreds of thousands of dollars - - don’t ask). But what bothered me the most was all of the months we lost. I sent an email to our development “partner”. What you are about to read below is from the actual email:

“XXXXX” (person’s name)

You are FIRED.

After spending hours and hours today to evaluate the basics of the matching engine we now see that the coding and matching does not work. DOES NOT WORK at all. I am so angry I cannot even speak. We are just starting to look under the hood and our worst fears are now realized. We have no technology platform and now, our entire business is at risk - not just missing our launch date, but the entire company. I now have to hire an entire dev team to take over this project and spend tens of thousands of dollars seeing if anything you’ve developed is even salvageable - money that was earmarked for marketing and other operational expenses.

Today’s testing failure was the last straw. We literally put in 2 identical Talent into the system. IDENTICAL. I then put in a spec that they should have matched to 100%. Matched on EVERY factor. You know what I got. 1 match at 63% and the other - - DID NOT SHOW UP AT ALL. This is on top of seeing the OLD Impact Survey is back again - - that’s right - the one that should have been (and was in some other versions) fixed. Do you know what shows up in the interface under Industries - - the boxes checked are the industries from the 1 matching talent. Can you believe that? From the Talent not the Spec. Did your dev team ever understand what business we were in? They’ve only been working on this for 5+ months. BTW - on the dev server…they spelled BusinessElite WRONG - - I mean the name of our freaking company!!!!! “

Picking Up the Pieces

With our 2nd development team now fired, big decisions needed to be made. We still had some money in the bank - but by this time we had spent a lot of money. Since relying on outside development teams did not work, we decided to hire our own team of coders - contractors. Our new Tech Lead was going to be thrown into the deep end of the pool and needed to constitute an entire development team within 4 days. Calls went out to local technology staffing firms: “Wanted, Java Developers who know what they are doing”.

It was now November 1st. As we feared, the entire codebase was unsalvageable. Our Tech Lead made calls and immediately found a person who seemed at the time to be a fairly senior level engineer with a lot of startup experience. It would be her job to develop the overall system architecture, do the database work and select the various technology frameworks our contactors would use. Since our team was starting to grow, we moved out of my basement to 2 small offices in Ashburn, VA.

Given the need to rewrite the code, we decided we would also change the entire look and feel of the site. We hired a freelance designer to build an entire new theme for the site along with all of the corresponding 60+ pages. Work was being done. Things started happening. The plan was to be in a position to launch before the holidays.

Hiring contractors, paying lawyers, blowing thru money on bad development along with other operational items were really starting to add up. I had already sunk more money into the company than I care to admit and the bank account was dwindling down. The Holidays were going to be fairly bleak at the Fox residence (and we celebrate Xmas and Chanukah).

Our new team had been working throughout November into early December. At one time we had nearly 7 people packed into a small office. While progress was being made, it was becoming very clear that we were, once again, going to miss our targeted launch date. Tension was mounting as I watched our bank account rapidly empty. Tom, Maggie and I huddled in a room. The reality at this point was our Technical Director was not cutting it and we needed to let him go. We parted ways right before the holidays (something I really hated to do).

All of our hopes now depended on the 1 senior engineer and a small group of programmers. Relying on 1 person was/is risky - especially given her unique idiosyncrasies. It was now January and we were again about to see how our matching platform worked.

I sat in our conference room with our senior engineer. We were about to test the matching algorithms. Things were working - although very buggy - - but “talent” was matching. I was ecstatic. Perhaps we finally cracked the code.

During the following few days, we continued to test the site. Lots and lots of bugs kept popping up. For some strange reason, the matching only seemed to work on our senior engineer’s computer and not on our development server. Something was very fishy and time was running out. AND, we were nearly out of money.

Rolling the Dice

It is now mid-January, 2009 and things were very bleak. Tom, Maggie and I completely lost faith in our 1 senior developer and our remaining front-end coder. By sheer happenstance, I identified a local development firm that claimed to have done work for AOL and VeriSign. I contacted the CEO. We met in his office and I told him about what we were trying to do how our development efforts continued to fail. He suggested that perhaps his firm could help. We held a meeting at our offices where he came down with a team of his engineers to look through our code and give us an honest assessment of its condition. The news was not good.

After reviewing our codebase, this new development firm found lots of items not working. The recommendation was to simply gather all of our bits and bytes and see if we could at the very least, cobble together a working prototype of our matching engine. After all, it was our unique matching and assessment algorithms that made BusinessElite unique. Their cost to do this project was $15K and they committed to deliver a prototype in 2 weeks.

And Then There Were 2

By this time I made the personal decision not to invest any more money into BusinessElite. I already invested every dollar generated from doing several senior level retained searches into the company. I announced to the team that February would be the last month any salaries would be paid. I hired the new development team and hoped for the best. Their task was to do everything possible to simply get a workable prototype built so that we could at least launch a Beta product and start gaining some traction.

Our contractors were gone. The team was down to me, Maggie and Tom. We all agreed it was time to start brushing off our own resumes and go out to find whatever consulting gigs we could.

The new development firm, as promised, delivered us a working prototype towards the end of February. Amazing! The matching not only worked, but seemed to work well. In early March, we engaged them to enter 2,000 test profiles into the database so we could demonstrate the site to potential partners - Venture Capitalists, private investors, potential strategic investors. Our goal was to raise a small seed round so that we could finish the site, launch and start generating revenue.

We launched a crude “private beta” of BusinessElite in early March. We had hired a PR firm with the hopes of getting some publicity and it actually worked. I was interviewed and quoted in The Wall Street Journal Online as well as Fortune online. We were profiled in the Washington Business Journal and in the Washington Post’s business blog. We started getting feedback from friends and colleagues that the feedback was overall positive. At the concept level, our message seemed to resonate. For the first time in months, perhaps our fortunes were changing.

We met with our law firm partner who was very connected in the venture capital community and asked that he help us get introductions to venture capital firms. He and one of his colleagues made a few introductions and within a few weeks we started discussions with a few VC firms. The feedback fell essentially into 2 categories: Interesting idea but we were in a “crowded space” or, we were way too early stage for an investment. The feedback did not really throw us as we already knew we were attempting to raise capital at what is now generally considered the worst economic condition since the Great Depression.

We were now well into March. Unfortunately, Tom made the difficult decision to leave BusinessElite to focus full time on finding a new, fulltime position. It was very painful to see Tom go. It had been quite the year but economic realities are what they are.

BusinessElite was now down to me and Maggie. We were still getting feedback from the Private Beta we launched. I had additional meetings with VCs. In March I picked up a new retained search - actually part of a search. I decided to put those limited funds back into the company so we could at least cover operating expenses. Maggie picked up a few marketing consulting gigs but still worked tirelessly for BusinessElite. By the beginning of April, things were starting to go our way.

Finally, Some Good News

I’ve been very fortunate over the years to have worked for and with some truly amazing people. A handful of my closest friends were aware of the BusinessElite saga. By the second week in April, two of my friends indicated they would consider investing in BusinessElite. It was very gratifying to me how much they both believed in me and what we were trying to do with the company. My energy was renewed. It looked like we may finally be able to raise a small seed round of funding. And, more good news was coming in.

One of my “soon to be investor” friends was a very senior executive at AOL who I had known for years. He was extremely well connected in the UK. He mentioned BusinessElite to a friend of his - who turned out to be a partner at one of Europe’s largest venture firms. His friend was very interested in hearing more about BusinessElite. On top of that great news, there was more.

I reached out to some of my friends at the larger recruiting firms. Given the malaise in the recruiting industry I had a hunch that some of these firms may be interested in partnering with an upstart like ours - targeting the executive level. I was right. We quickly got meetings at the highest levels with 2 of the top retained search firms.

All of the meetings were very productive and enlightening. It was refreshing to hear a VC firm start out the discussion by saying they thought the online recruiting space was a great place to invest and that they were actively looking to make an investment in the space. Meetings with the search firms also went well. We were finally talking about the concept, the technology and the business model with people who understood the potential. Through these discussions, however, we did find flaws in our business model that needed to be addressed.

After the rapid fire succession of meetings it became very clear that we had some major holes in our strategy. Maggie and I went back to the drawing board and spent the rest of April and all of May thinking through the issues. While I forget the specific day it happen, we actually had the big “Ah Hah!” moment. BusinessElite would not simply leverage my executive recruiting experience alone but we would leverage Maggie’s deep social media experience. BusinessElite would become the Social Recruiting Platform!

As I think back on it, May, June and July were a complete blur. During that time we completely overhauled the BusinessElite model, closed an equity seed round of funding, hired a qualified user interface designer (UI), developed detailed wireframes, hired an amazing freelance designer and developed a really cool set of site designs. We interviewed and assessed 5 development firms and ultimately selected the local shop that developed our prototype. On July 6 we went back into development for what was scheduled to be an 8 week development phase for a completely new BusinessElite site.

BusinessElite Live and in Beta

BusinessElite finally launched a proper beta on September 23, 2009. The site was delivered, albeit late by 3 weeks; and, as of this writing, there are still portions of the back-end that are not finished. While this latest round of development was far from perfect, the important fact is we are now out in beta and the feedback has been better than we had hoped. The viral marketing components of the business model seem to be kicking in. Development continues with feature enhancements and site optimization.

Epilogue

It’s taken nearly 2 years and hundreds of thousands of dollars to build and launch BusinessElite. Sacrifices were made by lots of people - including my family - and I hope they know how much I appreciate their efforts.

I made lots and lots of mistakes along the way and wasted tons and tons of money. I learned a lot about myself and a lot about others. Many lessons were learned. A friend recently asked me if I have any regrets. The honest answer is yes. I regret not being smarter about managing the company. I regret putting my trust in some people who clearly let me and my colleagues down. Would I repeat this experience and go through it again? At this point, I am really not sure. But I still believe that BusinessElite can and will re-define the executive recruiting process and bring it into the 21st Century. After all, a 54-year-old business model cannot survive in a rapidly changing industry. BusinessElite aims to change that, and its time we did.

Please visit BusinessElite