Aug22011

“But if the choice is between having insurance and not having enough money to get to profitability, that’s a pretty easy choice.”

PhillipThune
Phillip R Thune
Textbroker.com & HireMeNow.com
CEO-Americas

Interview by Mike Sullivan

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Phillip R Thune is an experienced entrepreneur. He helped grow FindWhat.com (a NASDAQ-listed paid search company which changed its name to MIVA in 2005) from 35 people and $500,000 in revenue to over 500 people in Europe and the U.S. and close to $200 million in revenue in five years. He also created HireMeNow.com, LLC as its CEO and Managing Member. HireMeNow.com is the first self-service online temporary staffing firm. This service allows companies and temps to find each other without the middleman and significantly lower costs incurred by the companies.

Phillip also makes it easier for people to connect in his new position as the CEO-Americas for Textbroker.com. Textbroker.com is a marketplace for unique and exclusive written articles created to your specifications. Clients can place multiple orders quickly and easily. It caters to businesses who need a quick article for a website, a well-researched white paper, or a perfect press release. Textbroker uses contracted writers rated on a 2-5 star scale to cater to its clients’ content needs.

MO:
Both companies you are currently involved in focus on connecting people who can help each other get work done more efficiently. Can you talk about the concept of HireMeNow.com and what the process was like to get that company off the ground?

Phillip:
The concept for HireMeNow.com came from my partner, Allen Bornstein, who has been in the recruiting and staffing industry for over 20 years. He was consulting an online job board when the idea hit him that there is no website where you hire a temp, or be a temp – start to finish – completely online. A mutual friend introduced us, and my first step was to analyze the market, write a business plan and create an Excel model. I had not realized that U.S. companies spend $70 billion on temps each year, and on any given day, there are about three million people working in the U.S. as temps … it’s just a huge market.

I brought the expertise of how to set up an online business, strategy, pricing, raising money, etc. I thought the opportunity was big because traditional temporary staffing firms don’t use the Internet to run their business. They all have websites, but they don’t give clients online access to all of their available temps, and vice versa. There is a long list of successful Internet businesses that disintermediated a traditional middleman – stockbrokers, travel agents, matchmakers – and passed on the savings. So that is our model – remove the traditional temp agency, creating a marketplace for temps and companies that need temps, which should result in both lower prices paid by clients and higher pay for temps.

Getting it off the ground took about a year. First we scoped out the website. There is a lot of back-and-forth in hiring a temp – especially if the client wants to interview the temps (for example, “can you meet at 3pm on Tuesday,” “no, how about 4:30pm”, etc.). So we had to make sure our website could handle every step in the temp hiring process and time card approval process without needing one of our people to sit in the middle. Once we scoped out the website, we started talking to vendors – providers of online skills tests, background checks, payroll, credit card processing, workers comp, and, of course, programmers to build what we wanted.

At the same time we began an angel funding round, with a good sense of what it would cost to get the site launched based on our vendor conversations. We closed an angel round of $1.25 million in five months, hired an outside programming firm, and then it took another five or six months to build the website, get all of our insurance in place, and launch, which we did in January 2008. In the end, we got it all built faster and for less money than we expected. But even though that was about four years ago, it’s amazing how much less it would cost to build today.

MO:
You had quite a successful career with MIVA, formerly FindWhat.com. It appears from your bio that you grew this company quite rapidly. Can you talk about what your largest challenge was in growing this startup?

Phillip:
FindWhat.com did grow dramatically – $500,000 in revenue in 1999, then $2.7 million in 2000, $20 million in 2001, $42 million in 2002, and $72 million in 2003 – all from organic growth (no acquisitions). There were three major challenges. First, we were not profitable until Q2 2001, so we had to raise money in late 2000 and early 2001, which were terrible times to ask investors to put money in a “dot-com.” Despite all the Internet companies going out of business, we were growing quickly, with a service (search engine marketing) that made sense and had a clear path to profitability. Ultimately, we were able to convince angel-type investors to give us $2 million in August/September 2000 and then another $1.25 million in March 2001.

But in the meantime, we had to hold down every possible cost. For example, we had all of our servers in one room in our office, and there were sprinklers in the ceiling of the server room (we didn’t have the money to build a proper server room). Also, I don’t think we had insurance. If something bad had happened, and the servers got ruined, which would have brought our entire business to an end; everyone would have said how could you be that stupid? But if the choice is between having insurance and not having enough money to get to profitability, that’s a pretty easy choice. The good news is that today it’s so inexpensive to do cloud computing, or rent a server from a web hosting company, that at least that issue isn’t a major one.

The second challenge was managing such rapid growth. That manifests itself in a lot of ways – maintaining the quality of new hires, communication/goal setting across more and more people, restructuring the org chart, updating compensation packages, especially commission plans, maturing from a culture of “save at all costs” to being more grown-up and prudent. But I would say the single toughest thing to manage, at least for us, was space. If you lease space directly from a landlord, typically you need to commit to a 5-year lease; maybe 3 years if the landlord is flexible and you don’t need a lot of changes to the space. When you’re doubling employees each year, it’s tough to make that commitment, given that rent is one of your biggest fixed costs, because very few landlords have adjacent space that they will hold for you if/when you keep growing. Also, moving into a new space requires some time and planning, and it can be scary to assume that just because you just added 20 people last quarter, that you will need to do that again next quarter.

In summary, we did a bad job planning, and ended up cramming desks into conference rooms, and leasing some additional space a few miles away, which left those team members cut off from the rest of the company. We struggled with space for two years until we committed to be the anchor tenant of a new building that had a lot of space for us to grow. At Textbroker, we have offices in NYC and Las Vegas. In both places, we took shared space (where lots of companies are in the same building, sharing a receptionist, conference rooms, etc.). That costs a lot more per square foot, but for a rapidly growing company, I think it’s the smartest move.

Finally, the biggest ongoing challenge at FindWhat, and at almost every Internet company I’ve ever advised or managed, is the struggle between the business operations and the programmers. As a business grows, managers in customer-facing roles, or accounting, or general management have an increasing need for new features, reports, innovations, etc. They don’t necessarily understand the pressures and workload of the programmers, and often don’t care. Figuring out how to prioritize the product pipeline, balancing short-term needs with strategic, longer-term development, and balancing small, annoying issues with larger projects, all while figuring out how to communicate the pain of the business team to the programmers, and vice versa, always seems to be one of the top issues for any fast-growing Internet business.

MO:
Tell us about Textbroker.com from a company looking to use it standpoint?

Phillip:
Approximately 100,000 U.S.-based freelance writers have signed up at www.textbroker.com to write articles, blogs, product descriptions, newsletters, press releases, white papers, e-books, or any other unique, custom content that our clients need. So, essentially, Textbroker is a better, faster, easier, and far less expensive way for companies to buy freelance writing. It’s better because the content is guaranteed; our clients pay only if/when they accept the content. It’s also better because every submission by our authors is checked for plagiarism by CopyScape and Textbroker’s proprietary software, and because we have a team of editors in our Las Vegas office reviewing every submission by our authors to categorize them as either a 2-, 3-, 4- or 5-star writer; so our clients know beforehand the quality of writing they can expect.

It’s faster because we have so many authors; so we’re bound to have a great writer who is an expert on almost any topic. Our turn-around times are as little as one day from the time a writer begins an assignment, and we can handle even thousands of content orders very quickly. It’s easier because we’ve streamlined our clients’ workflow with bulk ordering and automatic exporting; and we can provide project managers for big clients and even an API for clients that want to integrate the ordering, reviewing and posting of their content into their own administrative interface or content management system – one of our clients showed us how he can order thousands of articles from Textbroker from his iPhone. Finally, it’s far less expensive: our pricing starts at 1.2 cents per word ($1.20 for 100 words). Even our best authors, who I think are as good as any professional freelance writers out there, cost 6.7 cents per word ($6.70 for 100 words).

MO:
Tell us about Textbroker.com from an author’s viewpoint?

Phillip:
Textbroker has created one of the few, legitimate work-from-home opportunities on the Web. Authors send us an initial writing sample. We rate that between 2- and 5-stars. If the rating is 3-stars, then that author can write five assignments for us at either level 2 or 3. We then rate those five assignments, and the author’s quality level is the average of those five ratings. So if the author submits four pieces that we think are level 4 and one that is level 3, then the author’s quality level is 4. We then rate each submission thereafter, and the author’s rating is always the average of her last five submissions, so her rating can go up or down. This keeps authors trying their best, and it also quickly rewards them if they improve. It’s important to note we don’t just rate articles, we point out mistakes and try to advise our writers on how to improve. Moving from a level 3 to a level 4 is big for an author, because it not only means a higher per word price, but it means a whole new set of assignments that the author can now write. At any given moment, we have between a few hundred and a few thousand assignments to choose from. So we’ve eliminated one of the biggest issues for a freelance writer, which is where do I find my next assignment?

And if an author does a good job, there is a chance that a client will go directly to that individual author next time. In that case, the author can negotiate her own per-word price with the client. We pay our writers twice per month, via PayPal, and we’ve never been late with a payment, so that removes another issue for freelancers, which is chasing down payment from their clients. We also try very hard to maintain a great writer community through our author blog and forums. Hopefully every website gets some positive feedback from its users, but I’ve never seen the kind of effusive praise we get from our authors – some are stuck at home due to an injury, or maybe caring for their kids or a sick parent and are just thrilled that they can do productive, challenging work at their own pace, whenever they have the time, without leaving home.

MO:
What skills and experiences did you take from previous roles to assist in the startup world with HireMeNow.com, LLC and Textbroker.com?

Phillip:
As my career evolves, I appreciate how much value there is in experience, in the broadest sense of the word. I was helping to run one of the 25 largest radio station groups in the U.S. when I was 26 years old. And helping to run a NASDAQ-traded Internet advertising company with a $700 million market cap in my early 30s. I think my enthusiasm and intelligence played a part in making those companies successful, but there were a lot of decisions, management challenges, and strategic questions where I was facing a tricky situation for the first time. I’ve had great mentors in my career, but at the pace most Internet businesses move, there just isn’t enough time to stop and poll your network to see if anyone’s faced that problem before. Plus my mentors had not experienced the speed of innovation and competition that almost any pure Internet company experiences, with such small or non-existent barriers to entry.
But at this point, having helped grow four different companies, with, at various times, between two and 500 employees, I feel like I’ve seen almost everything an early-stage Internet company will face. I understand the pace at which such a company needs to move, I know roughly what challenges we’ll face, and I usually have a good sense of what the next six to 24 months will look like, including the obstacles we might face, what milestones we’ll pass, and what that will mean in terms of new hires and our org chart, our capital needs, and what we need to do to stay ahead of our competition, if that’s possible (sometimes it isn’t).

MO:
With HireMeNow.com you signed up over 75,000 candidates and over 1,000 companies despite very limited marketing. Can you tell us about some of the marketing that you did, and what kind of results you saw?

Phillip:
My partner gets a lot of credit for our marketing outreach. Our most effective marketing was through partnerships and PR. Before we even officially launched we met with the Department of Labor. We learned that they were close to shutting America’s Job Bank, which had been an offline job matching service, and then had been converted to an online job board. But the U.S. government felt it had been surpassed by Monster and other private job boards. As a result of that meeting, we were invited to submit an application to be one of the successors to AJB. We ended up listed alongside Monster, CareerBuilder, and other major job boards. That didn’t just get us traffic and some phenomenal links to our home page from a number of federal and state government websites, it also gave us a huge amount of credibility when we went to unemployment offices to suggest they tell newly unemployed that they should check out HireMeNow.com.

We initially focused on south Florida, and with the recession, a lot of news outlets were focused on stories about getting people back to work. So the major Miami, Ft. Lauderdale and West Palm newspapers each ran a big story about us, as did a couple of local television affiliates and Fox Business News. In terms of attracting companies, we benefited from the PR and the partnerships, but most of our revenue was a result of old-fashioned phone-based selling. We did an interesting partnership with OfficeDepot, who recommended that their clients use HireMeNow for temps in the same way they suggested they use FedEx for overnight shipping. So again, we were keeping some impressive company, despite being very, very small in terms of revenue and employees.

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