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Behind 'Dot-Coms,' a Silver Lining

Many seasoned professionals are leaving their jobs and moving to the Web. They're guiding young start-ups in the tried-and-true ways of the 'old economy.'


The "dot-coms" are going a little gray.

In an economy chastened by spring's Nasdaq meltdown, start-ups are filling out their organizational charts, from chief executives to accounts payable clerks, with seasoned professionals hired to implement standard business practices, land clients, deliver the goods--and lend legitimacy.

"It's just not enough to have a great idea," said Dee DiPietro, chief executive of in Northern California. "To be fundable, you have to have a great idea and the ability to execute."

Enforcing this new paradigm are venture capitalists, who, acting a bit like good bartenders carding youthful-looking patrons, are asking to see some seasoned hands along with the idea kids.

"You don't go grab a couple of MBAs and spend all your money on marketing, billboards and Super Bowl ads," said Jim Armstrong, managing director of Idealab Partners, a Pasadena-based venture capital firm. "You find someone who has worked in the 'old economy.' "

Someone such as Peter Fuchs, a managing partner and 35-year veteran of New York-based Andersen Consulting, who, nearing the mandatory retirement age, got a call from a Santa Monica-based start-up that needed a chief executive.

"Peter had the tremendous experience in building a business. He had an outstanding reputation. He [could give] the company instant credibility," said Randall Kaplan, who runs Jump Investors, a venture capital group backing TheBrain Technologies Corp.

Sure. But why would Fuchs, 58, leave a prestigious $6.6-billion management consulting firm for a start-up founded by a college dropout the age of his youngest child? Why would he want to run a business where four dozen employees wear T-shirts and Birkenstocks, chase Balance bars with Snapple at IKEA desks and then knock off for Foosball at 2 a.m.?

Fuchs wasn't looking to start anything new, and the timing could not have been worse. The Nasdaq Stock Market was plunging 25% into bear territory and scores of start-ups were collapsing. More than 11,700 dot-com employees eventually lost jobs.

Yet the shakeout intensified the demand for seasoned business help and has accelerated the stage at which many start-ups are bringing in executives and experienced managers, say venture capitalists, recruiters and others involved in start-ups.

"Twenty-four, 36 months ago when this whole wave began, we saw the very green entrepreneurs with great ideas, tons of energy and vision hiring in their own image--wisdom and gray hairs be damned," said Kevin Rosenberg, managing director and partner of BridgeGate, an Irvine-based executive search firm.

If start-ups had any business expertise, it tended to be limited to board members and advisors, which left them short of hands-on guidance, Rosenberg said. About a year ago, the pendulum began to swing toward getting business pros on staff.

"The writing was on the wall. April was just a very blunt reminder that companies can't continue without good cash flow and earnings potential," he said. "Despite the hours and the entrepreneurial spirit of the start-up, there's no substitute for experience, wisdom and a few gray hairs around the temple."

In late June, Rosenberg lured Richard Kish, chief information officer for General Motors' eGM division, from Detroit to El Segundo to serve the same role for, a corporate benefits software start-up. "He saw this as an opportunity to apply big business expertise to the fun and excitement of an Internet start-up," Rosenberg said.

Alison Gregg made her jump to the "new economy" five months ago, joining Embion Inc. as vice president of human resources for the Irvine-based business-to-business start-up. At 50, she is 16 years older than the founders and feels, well, "old . . . in this business."

"But," she said, "with my 20-plus years in HR, I can handle anything. You have a wisdom that you don't have when you are 34 years old."

Jerry Feigen, a venture capital and new-enterprise consultant in Maryland, said the pressure to hire experienced businesspeople is also coming from investors.

"They are trying to figure out where the bottom line is coming from. That takes somebody, an operating person," he said.

As Steve Patchel, a Watson Wyatt consultant in Santa Clara, Calif., put it: "The business plans are no longer on the back of an envelope."


After 24 years in human resources and recruiting at old-economy firms, most recently accounting giant Ernst & Young, Bruce Ferguson said he joined Exult Inc., an human resources outsourcing start-up in Irvine, after it went public two months ago--but only after some serious due diligence he believes was warranted in the wake of the dot-com shakeout.

Now, as Exult's chief people officer, Ferguson aims to hire about 350 people by the end of the year, and he expects to bring many of them from old-economy companies. But it is no longer a headlong rush to imagined dot-com riches.

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