Sramana: There are a lot of angel investors who are also great business mentors. I think turning to VCs was the right move because typically angel investors do not invest in companies that already have over a million dollars in revenue.
John Berkowitz: That is true. We did not have to raise a large amount of money, and we had the opportunity to take some angel funding instead. That would have allowed us to raise less money and grow the company more before entertaining VC funds. Our choices were to raise VC money and grow faster or raise angel money and get by until we got to the next level.
Ben Rubenstein: When we were trying to grow at the speed at which we were growing, and we looked at the type of people we needed to hire, we realized that we wanted a significant amount of cash.
Sramana: So you raised $3.5 million and brought in a CEO. You are obviously three very capable founders. What was it like to bring in an outside CEO?
Ben Rubenstein: It was interesting. I had a professor who once told me “cash flow over ego.” In some ways it is an ego hit to hire someone who can make very important decisions about the company. I also think it was necessary. We started the business when we were 21. We were capable, but there are a lot of mistakes that we could make and we did not want to make them.
Sramana: There is a tendency in young founders to not accept that. It sounds like you had some awareness that others don’t have.
John Berkowitz: It was not a no-brainer. There were a lot of late-night discussions, and it was not an easy decision. We all recognized the opportunity and value that someone with experience would bring. We were willing to give up control and take the ego blow. It was not an easy decision, but when you evaluated the options, it made a lot of sense. It was also a big requirement of the VCs. We could have found a VC that did not require that, but we knew it was the right thing.
Ben Rubenstein: We raised the money in the fall of 2006. The CEO did not start until April of 2007. We were running the business, and it was growing significantly during the time we ran the business.
Sramana: How did the new CEO handle you guys? Is there anything that you think the incoming CEO did exceptionally well?
John Berkowitz: We were all equally excited about it. He complemented us in many ways. He absolutely respected us and the success that we had. He respected our knowledge and passion. Our work ethic was very similar. We quickly formed a team. By the time he was there we were excited to have him. That created a good working relationship. He trusted us and knew that we were all striving for the same goal.
Ben Rubenstein: We interviewed a number of people as well. That process is critical. Our CTO at the time had joined us in November and he had worked with [the current CEO,] Court Cunningham before, which gave us a strong reference for Court’s personality. We spent a lot of time making sure we had the right CEO and I think we have a strong team.