When John Straw sold his stake in US email marketing start-up Revnet in late 1999, he was worth "north of $10 million". But a few months later the dotcom crash reduced his equity stake "to around $100k". That was one of many brutal "lessons in internet-based start-ups". Straw returned to the UK to "lick my wounds and start again".
His time in America had shown him the increasing importance of search engines. He was convinced that getting clients to the top web search results pages could turn a profit. So he found a "technical expert" and set up Netrank in 2000.
Straw identified his core market as "large blue chips, as they were willing to pay not to be left behind". He also realised that "a two-man-band" with no track record might struggle. He decided to partner with advertising agencies in the hope that they would give him a "piggy back" into the market. "The agencies were eager to get us on board. Search engines were being touted as the future of advertising but very few agencies had the technical nous to exploit it."
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues free
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The tactic worked. Within months of launching, Netrank had signed two partnership deals with media agencies that, in turn, resulted in three clients. More clients followed as companies became "net aware". As demand grew, Straw expanded the business and hired more staff. But he soon hit cash-flow problems as Netrank had to wait for invoices to be settled by media agencies. "It was a Catch-22 situation: I had to grow the company to take on more clients but this just left me with more costs each month."
Eventually Straw hit upon a novel solution. He decided to award key members of his staff equity stakes as bonuses. This reduced Netrank's wage bill while newly incentivised staff "pushed up company performance ten-fold". Straw reckons it remains "one of the best business decision I have ever made".
By 2003 Netrank was well established as one of the leading search engine optimisation (SEO) consultants. But the industry "started to get really competitive. In the early days getting a company to the top of a search engine simply involved using a few key words in a website's metadata. But as Google grew, it developed its algorithm and created ever more complicated search criteria". Another challenge came from new entrants. "In 2000 we had been ahead of the crowd, but by 2004 companies were piling into the sector." Luckily for Straw, "we were well established and had built up a base of about 50 blue-chip clients so were able to keep growing the company".
Straw admits that he had become a "lifestyle CEO". "I bought a Lamborghini and paid myself and the other stakeholders fat dividends I was more concerned with what Netrank could give me rather than growing the firm". By 2006 Netrank was "being stalked" by a number of media agencies and Straw decided to sell the company for £3m. "After six years I felt restless and wanted a change." His latest venture, Influence Finder, aims to "give SMEs the tools to put themselves at the top of search engines". Straw is confident: "let's just say I have learned from my experiences".
Government launches full review of parental leave and pay – what could it mean for you?
Nationwide: House prices see biggest monthly fall in over two years
