Henry Bar-Levav launched Oven Digital in 1996 with one contract: to design a website for New York City's Museum of Modern Art. His start-up was turning a profit within two weeks. Three months later he had four more big-name clients, and the money was rolling in. Only then did he realize that he was losing control. Important details--like filing the necessary paper work to incorporate the firm--were falling through the cracks. "We had stacks of checks piled up on our desk," Bar-Levav laughs, "and we couldn't cash them." It was his first clue that he needed more than just top-notch designers. He needed someone watching the store.
In the grand old days of the New Economy--say, the late '90s--it seemed all you needed was a good idea and some venture capital and you were on your way to Internet riches. The brave new world belonged to the young and brilliant 19-year-olds in jeans and sneakers who could see the future; everybody else was a suit. But at the end of the day, business is still business, whether you're selling data streaming or dirt bikes. An increasing number of Internet start-ups working to build sustainable enterprises are realizing that managing day-to-day operations and mushrooming staffs is a lot trickier--and more important--than they thought. They're finding that the good ideas and the VC money only get you so far, and that sound management is critical for long-term success. So welcome back, suits, though in this world, formal wear is optional.
Internet entrepreneurs have been left with the task of figuring out what sound management means, exactly, for unique companies in a burgeoning field and then hiring the manpower to carry it out--or standing aside while their backers do it for them. It's a daunting job, no matter who does it, considering that so many dotcoms are doing things that have never been done before while expanding at light speed.
With so much money flying around these days, there's no reason Internet companies should necessarily be cutting corners, experts say. The problem has more to do with attitude and lack of managerial awareness than available resources. Here's a look at some of the more common missteps and how to avoid them:
HOW HARD CAN IT BE?
Many start-up founders have assumed that management could be learned on the fly, or that somehow it would take care of itself. Big mistake. Dean Daniels, 42, president of Theglobe.com an online community, notes that management is a learned skill. "When you've got some of the most creative people on the planet," he says, "trying to get them all to move in the same direction takes expertise. I don't care how smart you are; unless you have done it before, you can't do it." Daniels is still cleaning up the management mess left behind by Theglobe.com's founders, whom industry insiders have criticized for paying more attention to their ad campaign than to building a solid management structure. Among other things, Daniels is working to separate company performance from an unnervingly low stock price.