Jobs2Web: This time it really is different

Jobs2Web: This time it really is different

Internet-based tech businesses remain a hot commodity, but there’s a rationality to the feeding frenzy.

The co-founders of Jobs2Web Inc., an online recruiting tool acquired last December by SuccessFactors for $110 million, had previously launched a company in the Twin Cities called techies.com. It was one of Minnesota’s highest flying stars during the dot com startup craze of the late 1990s. I remembered techies.com as having been acquired, but it’s more like the bones were acquired long after the company was effectively dead.

Tony Abena recalled the techies.com experience in a telephone conversation I had with him about the Jobs2Web deal. He is a former techies.com executive who served as an independent director of Jobs2Web. The point he made to me was not about the importance of picking the right window to sell or get public, since techies.com had just missed going public during the Internet bubble. From inception, he says, the Jobs2Web plan was to grow revenue and accounts and make money, and only coincidently did it became something that a big Silicon Valley software firm like SuccessFactors would want to buy.

Techies founder Doug Berg confirms Abena’s point of view: “No question that [techies.com] had some impact on our decisions regarding expectations on this deal—but we didn’t rush to sell just to redeem the techies.com deal. If anything, it had more to do with how we started and ran the business from the beginning.” Jobs2Web raised a fraction of the capital that techies.com had, he says, tried to grow fast at no worse than about break even on cash flow, and added staff as it could afford to do so. In other words, they ran it like a business.

In defense of Berg and others associated with techies.com, its history did reflect the times. Raising a slug of private capital (some $70 million as of its January 2000 initial public offering filing), spending it like the Kardashian sisters, and then going public at eye-popping valuations was how sane, sober dot com executives and investors did things in 1999 and 2000. The techies.com team expected to net more than $60 million in early 2000 by selling a very small slice of the firm to the public. It received nothing, as the internet bubble burst, the NASDAQ cracked, and the offering was pulled. The last remnants of the company were sold in a 2006 asset sale. By then, Berg and his co-founder Peter Brasket were long gone, having started a firm in 2003 called HotGigs.

HotGigs was set up to help match information technology staffing needs at large companies with services and expertise offered by small IT staffing companies. Berg describes HotGigs as a “shoestring operation,” but promising enough that the firm received its first and only venture capital funding in 2006. It was $5.3 million from Updata Partners of New Jersey. Updata knew HotGigs’ market, having earlier invested in CareerBuilder, LLC.
 
Berg carried the job title chief gigster, and the CEO role was filled in June 2007 by Ken Holec, who had led Lawson Software for eight years and was an early HotGigs angel investor. Jobs2Web was the name of a product that was launched in 2007. Over time that became the name on the front door.

Berg describes the evolution into broad-based Jobs2Web like this: “We would show up at these businesses and help them solve their contract labor challenges, and they always talked about these other things, such as recruiting across the enterprise. I would say, ‘Well, I would do that but it will probably cost you at least a hundred grand,’ and they would say, ‘Done, when can you have it to us.’ We were working really hard at trying to get HotGigs going, and here this other stuff was falling off the tree.”

By late 2007, Berg was speaking at global conferences about their clients’ successes using Jobs2Web tools to recruit from sites like Google and Yahoo. LinkedIn, Facebook, and Twitter have made recruiting more complex and at the same time more productive, Berg says. Now a client, using software like Jobs2Web’s, on a monthly fee model, can send out job openings and have them simultaneously propagate across the Web. Candidates and inquiries can be tracked and aggregated, and all of it reported in any way a client wants. The strategic swing to Jobs2Web changed its client base, too, from mom-and-pop IT staffing companies to Fortune 500 giants such as Microsoft and Best Buy. The firm has grown aggressively, to $9.9 million in 2010 revenue with Berg suggesting that the “700 to 800 percent” annual revenue growth rate continued in 2011.

Berg’s company is far from the only success story in its industry; of the ironies of the Great Recession is that the job market may be terrible, but the market for recruiting software and services is booming. In that way, maybe it is a little like 1999 again. Software companies like TribeHR, Dayforce, and Workday are among the HR software firms that raised VC money in 2011, with Workday closing on an $85 million round last fall amid talk of an upcoming $2 billion-plus IPO. Even techies.com wasn’t that hot.

Berg, Holec, and the other leaders of Jobs2Web could not help but note all of this enthusiasm for cloud-based HR software such as theirs. In mid-summer of last year, they elected to “test the market” with strategic players in their industry, with the possibility of selling a minority stake or selling the company. Raymond James was hired as advisor, and they quickly learned from their investment banker that there were going to be multiple bidders for the company. Says Berg: “It was really exciting to be thought of as valuable as a company, and not just a product.”

As a last point of contrast from the dot com era, the sale to SuccessFactors was far from a take-the-money-and-run transaction for Berg and Brasket. They and all of their 120 or so employees are still at work after the closing.

Jobs2Web’s buyer turned out to offer an even bigger platform than Berg had counted on. On the Saturday before they were to execute merger documents, they learned that SAP was going to buy SuccessFactors in a $3.4 billion deal. No one on either side of their transaction knew that was coming, and Berg says he quickly realized that somebody at SAP had already blessed the deal.

Berg today has more money, greater scale, the imprimatur of a great brand, and 150 additional SuccessFactors salespeople he helped train the week after closing. “Here I was fishing in Lake Minnetonka for awhile, then it was Lake Superior, and now it’s the deep blue sea. I could not be more excited.”

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