Wanted: investors for online job board
“They don’t like to be part of the masses,” explained Ivy Exec founder Elena Bajic (read her entrepreneur journal) about the site‚Äôs 25,000 members. “They’re looking for a way to differentiate themselves, an exclusive club and a network of peers. So the fact that they have to get approved to be members of Ivy Exec is very important to them.”
Initially free to join, Ivy Exec recently started charging a monthly fee that ranges from $22-$42 depending on the package. On the corporate side, Bajic charges an average of $8,000 for her selective recruitment services, which include pre-screening all job applicants to find a better match. In this way Ivy Exec operates more like a dating site for job seekers.
The recession has been both helpful and hurtful for Bajic. It slowed her growth as firms cut back or stopped hiring altogether, but allowed her to take advantage of lower infrastructure costs, like rent, furniture and office supplies, to streamline her business. When the economy picks up and companies start hiring again, Bajic hopes Ivy Exec will be well positioned to cash in on the abundance of over-qualified candidates looking to land high-level jobs.
To facilitate that Bajic is seeking to raise $1.5 million in funding to assist Ivy’s sales and marketing push and to upgrade the website. Bajic said she wants to boost Ivy’s membership to 100,000 by the end of 2010, which would significantly increase revenues.
“We started fundraising a month and a half ago and we already have commitments from several investors,” said Bajic, who is primarily talking to angel investors in the New York area. Bajic hopes investors see Ivy Exec as a kind of Web 3.0 job board. “In the past decade there has been little innovation and most job boards follow the same model and cater to a very broad market. Few job boards are trying to change the way recruiting occurs and that’s what we do at Ivy Exec.”
TAKING IT TO THE EXPERTS
John Younger, the founder and CEO of California-based recruitment outsourcing company Accolo, was confident that Bajic will attract enough investors to get funded, but was less optimistic about her company‚Äôs staying power.
‚ÄúShe is swimming in the circles where you have access to a lot of money,‚ÄĚ said Younger, who anticipated that most of Ivy‚Äôs membership would hail from Ivy League universities and therefore have the means and connections to help Bajic attain her funding goal. ‚ÄúThere‚Äôs a really intensive ethnocentric ‚Äėwe‚Äôll go out of our way to help each other‚Äô vibe to the Ivies that is going to serve (Bajic) well.‚ÄĚ
However Younger pointed out that this ‚Äúsnob appeal‚ÄĚ would ultimately hurt Bajic‚Äôs business growth, as the talent pool is finite and her service to employers is predicated on the assumption that effective executives do not come from the University of Nebraska or that ‚Äúmorons‚ÄĚ don‚Äôt come from Harvard. ‚ÄúThe underlying assumption that people who go to Ivy League schools are categorically smarter or better for the jobs is simply false. The hiring manager wants the best possible person and does not really care where the right person comes from, as long as that person walks in the door.‚ÄĚ
Mark Suster, a partner at Los Angeles-based venture capital firm GRP Partners, said Ivy Exec needs to show some real innovation beyond the exclusivity play in order to make it more attractive to investors.
‚ÄúThere is a real need for innovation in the way that executive recruitment works,‚ÄĚ said Suster, who added that niche online recruiting has already been mined by companies like Doostang and TheLadders and that Ivy Exec needs to create a platform that ‚Äúdramatically improves recruitment quality and lowers costs‚ÄĚ in order to raise VC money.
‚ÄúHiring managers don‚Äôt want to pay the traditional 33 percent compensation model of the past,‚ÄĚ said Suster, who feels the solution lies in a new kind of social media site beyond what LinkedIn and Craigslist are doing, as neither addresses the problem of sifting through thousands of applications. ‚ÄúSomebody is going to create a better way to recruit through social networks and this company will likely make a lot of money.‚ÄĚ
Suster said Bajic is better off asking for less and hitting up angel investors for $500-750,000, which should create more opportunities down the line to raise larger amounts of capital. ‚ÄúIf it stays small they can still run a nice business with annual profits that get returned to shareholders. If they find a source of rapid growth and true innovation then they can always raise VC money later on.‚ÄĚ
Tim Berry, founder of Palo Alto Software and an adjunct professor of entrepreneurship at the University of Oregon, said Bajic should stay away from investors all together and focus instead on doing what she‚Äôs doing and growing more organically. ‚ÄúThis is one of those cases in which the old watch-what-you-ask-for-because-you-might-get-it motto holds true.‚ÄĚ
Berry said that due to Ivy Exec‚Äôs elitist business model, which by nature shrinks the revenue stream, it‚Äôs hard to imagine a way for an investor to get a significant enough return on their $1.5 million, without them demanding a sizeable chunk of equity in return. Berry added that this scenario would likely not help Ivy‚Äôs future growth.
According to Berry, an investor would likely expect a return of $15 million on that kind of stake, and assuming they get half the company, would need Ivy Exec to eventually become a $30 million business.
‚ÄúI like what they have now very much, except the need for $1.5 million to be ‚Äėblown‚Äô in marketing attacks the credibility of what they now have,‚ÄĚ Berry said, pointing out that with 25,000 members each paying at least $20, that‚Äôs $500,000 in revenues for Bajic without changing anything. ‚ÄúIvy Exec is in danger of turning the golden egg of an attractive small business, with a great niche and good focus, into a mushy and limp and less likely attempt at something a lot bigger.‚ÄĚ
Do you agree with our experts? What do you think about Ivy Exec’s business model and founder Elena Bajic’s attempt to raise $1.5 million to grow her company? Would you invest? Post your comments below: