Seeking out the next big start-up opportunity
If you spent 10 years of your life starting and building a market-leading business, few would begrudge you leaving, especially if you received a reported $40 million pay-out for your shares.
But Matt Rockman, who co-founded online recruitment giant Seek with brothers Paul and Andrew Bassat in 1997, didn’t opt for the easy life when he left the business in 2006.
While his work/life balance has improved, he has jumped straight back into the world of start-ups, becoming a leading investor and mentor to around a dozen businesses.
StartupSmart took a trip to Rockman’s cosy office in South Yarra, Melbourne, to get his tips for the next generation of pioneering entrepreneurs.
What inspired Seek?
Well, it seems so obvious now, to post jobs online. So obvious. I’m not sure there is a secret to how we got there.
What made us successful was that it was very hard for the incumbent recruitment classifieds. Fairfax and News Ltd faced very difficult challenges, with the old style mentality and culture of an offline newspaper.
We were a disruptive challenger brand. It’s hard to eat the lunch of the legacy companies, but we had the freedom to be disruptive.
We weren’t first to market, which is something a lot of people mistakenly think.
But we were first to do mass marketing and get scale. We out-executed everyone.
We ensured every core function of the business – whether that be product, distribution, alliances with NineMSN and Telstra, sales and marketing, customer support – was as good as it could possibly be.
We were acutely aware that we needed to build scale or die. Having the Fairfax and News organisations come after you when you are three blokes in a small office in St Kilda is pretty daunting. It certainly kept me awake at night.
We were very aware the job classifieds market works on scale, like any classifieds market. It works with the buyer and seller community coming together. We needed critical mass as quickly as possible.
So, how did you do it?
Unless you’ve got a quality team, you can’t execute.
So, first and foremost, you could say 50% of our success was attributable to the quality of our team and their ability to communicate, execute and deliver.
History records that our marketing was good, people liked the brand and the way we delivered it.
Andrew very quickly worked out that online distribution via the web portals was in vogue. Today it’s Facebook and Google, but back then it was the web portals, and we tapped into those guys for online traffic.
I was in charge of rapidly building a big sales force.
We gave our ads away initially, then monetised them by going to the IT community and saying “hey guys, why not try us?”
We were pretty aggressive both in pricing, and in pointing out the benefits of online versus print. We were able to grow our ad volumes and traffic pretty quickly.
When you’re in a start-up like that, you’ve got big, angry competitors. You also have shareholder money in a competitive market that you’ll live or die by.
You don’t stop to contemplate things, you have to just keep running.
While you do have to check to make sure you are running in the right direction, we spent more time moving forward than wondering where we were.
How did the three of you work together?
While it was unusual to partner with two brothers as the “third wheel” – or the “third Bassat” – it ended up working really well.
I compare us very humbly to Google, but if you look at a lot of successful online businesses, they are founded by more than one person. This allows for each person to focus on a core area without looking over their shoulder all the time.
We just got on with the job. Matt delivered ads and revenue, Andrew delivered some business from distribution, Paul held the operations and finances together.
What were the biggest challenges you faced?
We nearly listed in 2000 and then the tech crash hit us. That ran us pretty close to the wire in our finances.
We also had a couple of major outages, where the site went down for a period of 12 to 24 hours and we couldn’t work out what the issues were. I’ve tried to shut that out of my memory.
Stuff like that is pretty frightening, as is waking up and hearing that a rich and powerful competitor is coming into the market.
We found out one day the biggest recruitment company in Australia at the time, Morgan and Banks, had been acquired by TMP, which in turn was a division of Monster, which was then the number one player in the US.
We had just pitched to Morgan and Banks. So what was potentially our biggest client was becoming our biggest competitor.
We were like “okay, great”. You just have to stay loyal to your strategy and out-deliver and out-execute. You just keep going.
You have to respond to what the market is telling you. Customers have an interest in keeping competitors equal as it drives up services and, arguably, keeps the prices down.
You can’t ignore your customers – you’ve got to distil what’s happening and decide how to react.
Because we’d established a beachhead of market leadership, we tended to be followed rather than copying others.
One of the interesting things about the early internet back was that it confused a lot of business strategies.
We had a government department in Canberra saying that it had a website where all the government’s jobs would go. Effectively, they wanted to compete in the online jobs space, which was bizarre.
Why did you walk away from Seek?
I felt I had enough. I wanted a change in my life. I had a young family and I was working super hard, did well financially.
I found that the company, when it went public, was bigger and culturally didn’t really align with where my sweet spot was.
I’m probably an earlier stage, cut and thrust, raw entrepreneur than someone happy in a big, serious business with compliance and governance issues.
It didn’t bode well for my nature and I wanted a break after 10 years of a pretty hard slog. I thought it was time to change the chapter.
I don’t think I’ll ever have another Seek experience. I certainly don’t expect one, nor am I looking for one.
I can enjoy that for the rest of my life. I don’t feel I need to get out another number one hit song again, if you know what I mean.
I’m involved in other things, but for now it’s about work/life balance. I’m in a fantastic position where I don’t have to work quite as hard as I used to.
So, why did decide to become a start-up investor after leaving?
Firstly, that that is where my domain and network is. When you have a Seek or something similar, you create a bit of a brand and a lot of young entrepreneurs want to tap into that.
I understand what the ingredients are for success as I’ve been through it myself. I know what it’s like to commercialise a business plan and to create a listed company.
Also, there are fantastic investments to be made if you get them right, because of the margins and growth profiles.
What are the key tips you’d pass on to start-ups?
Put 80% of your effort into building a quality team. Give me a great team in a terrible market any day over a great market and a terrible team.
It’s about the power of a collective team to execute and move according to market changes. I can’t overstate that.
The other part is to not be greedy. A lot of entrepreneurs starve themselves out of growth opportunities when raising capital because they want to protect and retain their share.
The other thing I learned from Seek is that it always takes longer than you think and it always costs more.
I can’t count the number of entrepreneurs who have told me the cost and delivery time for their businesses. I can guarantee it will take twice as much and take twice as long, whether that’s due to marketing, tech problems or another reason.
You were in charge of sales and marketing for Seek. Is sales an art or a science, in your view?
A bit of both, but I’m more art driven on the human capital side of things.
Get a great sales team that is passionate and you’ll get great sales outcomes.
Customer Relationship Management, incentives, goals and performance measurements are all important. But, unless you have a committed, engaged, thinking sales team, that entire infrastructure won’t get you anywhere.
We were an employer of choice year after year. As a job site, we understood serendipitously that we had to be a great employer, but over time it became so obvious to us that you only have great outcomes with great people.
Especially with Gen Y, it’s less about salary and more about the whole package of the career path and the work environment you offer.
News and Fairfax would regularly call my sales guys to try to take them and they couldn’t do it.
They’d do it continually. Continually. They were throwing money and lies at them.
I think we kept it real. We were a real company, the executives were engaged, everyone had a share of the profit, we were independent and could move fast.
We weren’t some juggernaut corporate that doesn’t know if it is a dog or a cat from one day to the next and has huge staff turnover.
How do you get traction in the early days?
It’s hard. We just believed in the vision and product and we knew the internet would be a better mousetrap than print.
We just wouldn’t let go. We’d get knockbacks – the conversion rate for every 100 sales calls would be shocking. People just didn’t want to know.
The sales pitch was “this is the future and if you develop these skills as an organisation, you’ll be ahead of the curve and fish where the fish are – people are moving online".
We spent a lot of time investing in our pitch and story. We were sales and marketing fit. There were a lot of sceptics, so it was hard, but we were persistent.
What kind of businesses are you looking to invest in now?
I take a two-step approach – the more mature asset classes and also start-ups which have great upside, great management teams and occupy an interesting space.
I invest in Pollenizer – I like the model and the guys. I’ve got an investment in a successful PDF business based in the US, called Nitro, which is a challenger to Adobe.
I’ve also got NextHire, which is an interesting play in recruitment and Vertex, an Israeli VC tech fund.
The universe (of investments) is probably 10, and in there are some dogs, there are some that are in-between and there are some that will hopefully shoot the lights out.
I’m not going to pick the next Facebook, but if you get things right, you can outperform traditional asset classes, such as equities and bonds.
I tend to steer away from just business plans, I’d rather they be a bit more than that, and given the post-GFC environment, it pays to be a bit more conservative.
I’d like a product in Beta mode or beyond that. I don’t tend to fund ideas, I fund businesses looking to expand and grow.
I see two deals a week every week. I’ve got a reasonable network and therefore I don’t really need to get out there and activate deals.
One thing I’m particularly passionate about is social start-ups that have more of a community or philanthropic angle.
That’s more where my passion lies – I don’t need to make the money and I’d like to do more of that kind of work.
If I’m sitting in front of two equal entrepreneurs and one is commercial and the other is social, I’d probably go for the social one.