The competition also signaled that Guru.com could not afford to waste time seeking venture capital. Even if the Slavets found a VC willing to take them on, doing a venture deal could require three to six months. "So much about the Internet is about speed that if there's any way that you can jump-start your company, you should do it," notes David Hornik, a San Francisco lawyer and business adviser to Internet start-ups. "If you are even a short time ahead of the pack, you will simply expand your lead over time because the growth is exponential."
"Everything conspired to make it very clear that we should go angel," concurs James. The Slavets and Yau hit the streets, asking their old bosses and colleagues for advice, for money, and for leads to angels who would not only invest but also add genuine strategic value -- through experience and through relationships with companies that could become Guru.com's partners.
Among others, Jon brought aboard Wired Ventures Inc. cofounders Louis Rossetto and Jane Metcalfe. Yau roped in Yahoo's Rightmire and Steve Rehmus, an angel and start-up adviser he had worked with while at Goldman Sachs.
Rehmus agreed to back the Guru.com team and gave the Slavets entrÉe to two other heavy hitters: former McKinsey partner and managing director Gluck and CitySearch cofounder Layton, who has invested in a total of 32 companies so far. "When Steven calls and says he's got a company that he believes in and wants me to see, no matter how busy I am, I'll find the time to see them," comments Layton.
The founders followed the same systematic approach with all their prospective angels, relying on personal contacts to introduce them to Internet heavyweights such as former Amazon.com VP for business development George Aposporos, two-time Net-business founder Ariel Poler, and even Allen & Co. managing director Stan Shuman. "We didn't call anyone blindly," notes Jon.
The Slavets followed up every contact with a letter that reiterated their connections, identified their existing backers, and included a four-page summary of the business plan. "It gradually got easier as we had more investors come in," notes Jon. "The last few investors said, 'Wow, I know five of the people on your list."
From an investors standpoint, the brothers are an appealing partnership, "the yin and yang of management."
Of course, the founding team's personal strengths were also a big draw. "I was willing to do this because I believe in James," explains Mark Silverman, a Drugstore.com vice-president of business development and Guru.com investor. "It's not because I perceive it as a great economic opportunity."
In at least one instance, though, the system failed. After spending eight hours in pitches to a husband-and-wife angel team, the Slavets were shut out cold, Jon says. "They wouldn't return our calls."
By mid-July, just two weeks after completing the $3-million angel round, Guru.com had erected an elegantly designed "preview site." The main page introduced Guru.com as "power for independent professionals" and defined guru as "an expert, a resource to others." But for all its attractive look and feel, and lively, entertaining content, the site offered not a smidgen of job matching or other services. "It's a juicy promise," acknowledges the site's designer, Steve de Brun. "It's all about managing the perception." Adds content director Lappin, who has stocked the space with a question-and-answer feature and guru profiles: "I'm like the guy in the circus who juggles flaming bowling balls until the elephants arrive."
Worried that the site might appear "half-baked," two of Guru.com's angels argued in a strategy meeting last July that the Web site should come down. It was a heated discussion, according to three people who were there. It also illustrated the degree to which Guru.com's angels have been willing to get involved with the company, as well as the Slavets' willingness to follow their own instincts.
The Slavets opted to keep the preview site alive, a decision they now consider one of their smartest early moves. By September, Guru.com's site had attracted some 20,000 users and had generated feedback proving that the company had hit a nerve with its audience. The 230 E-mail messages reviewed for this article were overwhelmingly positive, describing the site as "brilliant and indispensable" and "a fantastic idea for the Net." One true believer gushed, "I have been waiting for more services like yours."
"The feedback almost seemed like it was scripted, it was so positive," observes Bhusri, who reviewed E-mail responses as part of Greylock's due diligence.
Indeed, several Internet entrepreneurs interviewed for this article emphasized that having a bona fide site, as well as a loyal customer following, is crucial to attracting VCs. "You have to get an initial proof of concept," says Alan Warms, whose Participate.com, which helps companies set up and manage on-line business communities, received more than $13 million in September.
To be sure, Guru.com's preview site generated great buzz. After it posted a press release under the headline "Guru.com Announces First-Round Financing from Leaders of the Internet Economy," for example, CBS MarketWatch featured the start-up as its lead "Executive Briefing" item of July 26, highlighting the names of the company's angels. Soon thereafter, a venture firm came calling, this time waving a term sheet and "trying to take a deal off the table preemptively," says James.
The Slavets and Yau turned down the offer, flat. Relying on the advice of their angels, they instead identified six "dream firms," distinguished by partners and portfolio companies that Guru.com wanted to have involved with its business. The strategy was to have in-depth discussions with every firm on the list, get offers from three or four, and then choose two.
The founders also made it clear that they would not use an offer from one firm to drum up higher offers from others, as some Internet entrepreneurs do. Instead, they proposed to "front-load the due diligence," as James puts it, with a goal of both sides' attaining an intimate knowledge of their prospective partners and reserving discussions of the deal's terms for later.
