QA With CRV’s Mike Ahearn

Mike Ahearn was recently named the first recruiting partner for early-stage investor Charles River Ventures (CRV). He has been recruiting staff for the firm?s portfolio companies through CRVelocity, which provides CRV portfolio companies with guidance on critical recruiting and human resources issues for the past year. Ahearn is now responsible for overseeing executive searches and attending to portfolio companies? staffing needs.

Prior to his post at CRV, Ahearn served as a partner with TMP Executive Search. Before joining TMP, he was vice president of human resources at Intuit.

What makes your new position different from your previous position?

I think there are a couple of different things. I had been consulting for Charles River portfolio companies off and on going back as far as 1998, so I got hooked up with them through work very similar to what I am doing now, but I was doing it on my own.

And when Charles River approached me in March of 2000, this whole notion of value services was a very new thing so when Charles River announced Velocity it was very new and big. I was anxious to be a part of it. We never talked about partners; all of the focus was on creating a value-added services group inside a tier-one venture firm that does great work for portfolio companies. And it does work pretty well. I like doing it and they like me so they made me a partner.

Why did CRV feel the need to bring recruiting in-house?

Charles River raised a big fund in 1999, which was much larger than the prior one. The larger the fund, the more portfolio companies. In 1999 and 2000, the competition for talent was ferocious and the investment pace was ferocious. The partners couldn?t possibly spend enough time on recruiting to satisfy all the portfolio companies. So I think what Charles River saw was the need to bring in someone who owned the executive recruiting efforts. It wasn?t to replace the partners? efforts, it was to supplement them.

What makes this different from a traditional search firm?

We have over 50 active companies in the portfolio right now. At any point we might be working on 50 or more exec searches. Some of those are retained searches, where the portfolio companies hire search firms we recommend them to consider. Some are done without retaining a firm and then we try to do those searches strictly through Charles River networking.

So the exec search firms are a key part of this strategy. What we have tried to do is develop a group of outside vendors that know us, know our space, we know them well and they do good work for us. They look at us as a major source of customers. We don?t do every search that way but we do use them for some of the searches.

What are your personal goals in this position?

It?s about getting the jobs filled faster and better. I do think we will always need the help of outside search firms some percentage of the time and that varies depending on the market. Now that I have some preferred vendors tied to the firm, I am spending more time doing outbound candidate prospecting, looking at people whose track records we admire, whose companies have not been a part of the Charles River portfolio.

I spend a lot of time learning about those kinds of people so we are aware of them and they are aware of us. Then when we have an opening down the road we hopefully will be able to approach them with those openings and they may become part of the portfolio too.

How do you find out about these people in the first place? Are you tracking them or do the investment partners do that?

There are a variety of ways that we track it. Each of the investing partners here has a fairly specific investment domain to focus on. Part of what they do is study the space. Then as they make and cultivate an investment they are also looking at competitors in that same domain all along, from that we develop a list of companies in specific domains relevant to our investment strategy that we admire.

There are also people that keep popping up in the news that hit homerun after homerun. And frankly, there are a fair number of people that are referred by our own portfolio companies. So, for example, a CEO or their staff in one of our portfolio companies will say ?hey you know in my prior company I worked with him or her and they were a great CEO or vice president of sales, you ought to get to know him or her.?

Are there any specific portfolio companies that need more help than others?

It varies tremendously in this market. There are some companies that may be struggling a little bit even though they have hit every product development benchmark but simply because their customer base is in trouble. And companies are in very different stages in terms of when their next funding round is going to happen and how that is going to happen.

But our services are available but not required to be used by all of the portfolio companies. On the exec search, recruiting and HR consulting side, in general, most all of the portfolio companies have used our services in the last year.

When companies have a hard time attracting management, what is typically the problem?

It can be for a lot of different reasons. For example, since we very heavily invest in early-stage companies, some candidates who were very anxious to get involved in an early-stage company a year and a half ago might be more nervous to get involved now, given to what has happened to the economy and the number of dotcom companies that have failed or are struggling. Candidates can be more risk adverse about the start-up environment.

How do you go about recruiting people for the open positions? And what positions need the most filling these days?

I have been doing this as a member of the firm for 14 months and I did this as an independent, working for several different venture firms before that, so if I go back over three years I can?t think of a period of time when we haven?t been looking for CEOs, VPs of engineering, VPs of sales and CFOs. We are always looking for that group of positions. Depending on the company, we always begin the same way, whether we?re going to try to fill it via networking or recommend a couple of search firms for the portfolio company to choose between.

And what we start with is, what is that portfolio company really looking for? Is it important that the candidate has been through IPO process before, or is that not important because the rest of the management team has? For example, sometimes some of our early stage companies in enterprise software don?t care whether a great CFO has been through an enterprise software IPO or not. They might care more about the marketing person than the CFO. It is a very customized service and it has to be to be effective. Then we target what we do based on the company?s profile.

How has the market downturn affected the pool of available human capital?

It cuts both ways. On some levels there are a lot more candidates available than there were 15 months ago when everyone was getting funded and everyone was hiring. Also Charles River has been around for over 30 years, long before they had ever heard of Michael Ahearn they had a great reputation. And it is well known and well publicized that the investing partners raised a large fund, people know we have money to invest so candidates in general look at a Charles River-backed venture as relatively secure. Those are pluses.

On the negative side of the ledger, in general, there were so many companies that got funded in ?98, ?99, or 2000 that now haven?t made it or are just struggling along. That just makes some people conservative about the whole space so that goes the other way.

In general, how do companies respond to your help?

When we have a new investment we, as a team, make a presentation to the appropriate officers of that new investment. We show them services that Charles River offers. We introduce them to the key players and then it is up to them. There is no pressure to use the services. They are free of charge and they don?t have to use them but after a little over a year, we got very favorable reviews. A couple key partners did an audit and basically, the portfolio companies liked everything. Now there are services they like more than others and some things they see as more critical but they liked everything. What we know for sure is we got off to a pretty good start and we will just continue to evolve it.

Can you give an example of a critical service?

It depends on the skill set of the founding team. If they have a bunch of folks that have been through other successful early stage companies before they may be super skilled at recruiting and getting their facility squared away and doing all the stuff that makes the place hop. But there may be no one on the team that knows about marketing.

Down the street, the exec staff may be senior folks with prestigious careers but none of them have never been a part of a start-up. It is all the early, day-one stuff related to, ?how do we get the doors open? How do we get the payroll set up?? That they need. It varies tremendously based on the collective skill sets and prior experience of the executives being funded.

Do you follow up with the companies? And what happens if the candidate doesn?t work out?

A part of early stage investing is having a consultative orientation and relationship with the investees. Different parts of the Charles River services are touching these companies over and over weekly. Is there any special attempt to follow up? Not really, but the follow up happens regularly during the course of the relationship. If the candidate doesn?t work out or doesn?t like it then we just help them fill the job again.