Bubble Notes 2: Guru.com burns $63 million!

Bubble Notes 2: Guru.com burns $63 million!

At first I went to guru.com and I thought, “oh, somehow these guys survived?” But then I looked it up and remembered that the company’s assets were sold for pennies on the dollar, and the domain name was purchased by a Pittsburgh-based rival company fka eMoonlighter who had raised less than $1 million, that very slowly but surely actually built a real business (over $23 million in revenue by 2008 according to Inc.) under Inder Guglani. The original Guru Worldwide Inc. raised $63 million over several rounds of funding from Investor Growth Capital (part of Swedish Investor AB), Credit Suisse First Boston, Greylock, August Capital, Texas Pacific Group, WR Hambrecht, American Express and RedHat.com as well as angels Sandy Robertson and Bill Draper.

Below were the notes from a meeting I had with Jon Slavet on May 22nd, 2000, just before they closed their HUGE round of funding:

Guru.com is: Leading exchange for independent professionals focused on being a market maker to match projects with independent contractors and professionals.

  • Also providing products and services through their GuruShop from partners like Amex, Home Depot etc.
  • Tools for independent consultants/professionals: Time and Billing application to manage financial aspects and collection activities
  • Have created an information exchange for peer knowledge sharing. This will have ranking and reputation functionality.

Traction: 170,000 registered ‘gurus’, with 20,000 buyers. 85% of projects are US-based (spread fairly evenly across the country), 15% international, with an average $15,000 project size. Have completed thousands of projects. Buyer pays the fee upfront (matching fee is in the hundreds of dollars).

Competition: Believe they are the leading market closest competition is FreeAgent, which is part of OPUS (public) who deals with enterprise software (have some legacy issues, are not purely focused). Other competitors include eWork, SkillsVillage (more temp-based, handholding as opposed to an exchange). Haven’t bumped up against the staffing players very much, see it more as a partner opportunity. Most of these guys are just flooding the online classifieds job players with listings. They have a 50% unplaced rate, are different in being place-based.

Focused on adding value around their core market-making focus:

  • Will partner for non-core products and services
  • Outsourced with eForce (also backed by Greylock) to build the Time and Billing application, but wanted to own it since they see it as very valuable as being able to be inside Gurus’ financial information

Distribution: Distribution started through friends and referrals. 24% of their registered users came through referrals, have some good incentives for referrers; a lot of independent professionals have friends and colleagues who do the same thing. Their focus has been on cost-effective promotions, have done some offline events to build brand / offline schmoozing. These events have attracted over 10,000 attendees. Are tapping into corporate alumni networks (eg. Microsoft) which are pretty powerful and have lots of qualified people. Distribution agreements with FastCompany.com, The Industry Standard, MacroMedia (being integrated with their 1 million+ developer network), IBM Small Business.

Financing: Are about to close a $40-50 million round which will include strategic and financial backers, $200 million post-money valuation. First round was $3 million angel round including Sandy Robertson and Bill Draper, with Series B at $16 million in November (August Capital, Greylock).

Are matching people and projects, feeding data back into Guru profiles. They use private bidding for matching (not apparent to everyone). Powersearch allows saving attributes and pushing qualified leads to buyers. They are providing tools to get at quality and rankings for buyers.

  • Will introduce a voluntary 3rd-party screening, in addition to ratings in their profile
  • Ratings will be Guru:Guru as well as post-project ratings (the latter are problematic because of liability issues, but they are working at addressing this)

Market: See it as a $30 billion market doubling in the next 5 years, encompassing the projects themselves, matching fees, advertising etc. Believe this is conservative as they’re serving a wider constituency, including small firms and businesses, outsourcing and so on. The government data on this area is spotty. For more information we should contact Edie Rasell at EPI in Washington DC. She has done work on nontraditional work.

Data points from her study: 75% of independent workers chose to leave their companies, and 92% are much happier working independently. On average, contractors are earning 15-20% more than their equivalents, and this is a group of 6-10 million people. They believe this style of work is going to be growing quickly.