'A dotcom dream,' Act II

To say business changes quickly in the Internet world is like saying Olympic sprinter Michael Johnson runs fast.

Remember Handshake.com?

Six months ago, we spent a day with the Internet start-up, which links consumers with local service merchants. The company was founded in May 1999 by four guys in their twenties (the CEO being 23). When we arrived on the scene, Handshake was flush with $4 million in venture-capital money and had recruited 25 employees, most of whom came straight from Cornell (two of the founders' alma mater). Half slept on air mattresses - if they slept at all. And it wasn't hard to find someone to challenge you to a game of office hockey.

Fast forward six months.

They're not playing hockey anymore.

For starters, Handshake has moved to a 13,000-square-foot converted warehouse, triple the size of its former space in quaint Fullerton, Calif. The new digs, dubbed "the airport" because of the echo inside, are near Marina del Rey, a hip part of the Los Angeles area that is home to a handful of Internet start-ups.

The company's garage-sale look (a signature of most start-ups) is long gone. Plywood desks have been replaced with matching Ikea-like furnishings. Bare feet are out, so is hockey - and nearly half the workforce now has an address in expensive Manhattan Beach.

On the business side, Handshake has earned its second round of venture-capital funding, scored an important partnership with an online yellow-pages directory, and in the past month has signed on a handful of new senior managers - including a new CEO, Michael Barton, who came straight from Ticketmaster Online-CitySearch, in the Los Angeles area.

"It feels less like a school project and more like a real business," says Jade Chang, who has worn many hats (also common at start-ups) including content provider and public relations representative. As a result, titles tend to fall by the wayside. Who can keep up?

Indeed, this company has grown up since we first took a look around. No longer do people roll in at 10 a.m. New partnerships on the East Coast have workers at their desks as early as 7:30 a.m. (Except for the "devs," program developers who still often keep "vampire" hours.)

And management is more careful in how its answers questions. (The 10 a.m. steering-committee meeting that the Monitor sat in on six months ago is now closed to the press.)

Hours the average staff member spends in the office are down slightly - note the emphasis on slightly - from 100 per week to 70 or 80.

And while the devs usually inject a little rowdiness into the place, playtime is now primarily reserved for outside of work. That's not to say the atmosphere isn't still fun. It's just that, to quote one new hire, "the fun is the job."

"The spirit of the culture is still the same," says Matthew Ruzz, a member of the business-development team who graduated from Cornell two years ago. "But certain elements of the culture that were conducive to getting through 18-hour days weren't conducive to necessarily growing a company."

That doesn't mean change is easy. For example, when the founders sent out a memo stating that pets were no longer allowed on the job, the news was met with some resistance - even among those who didn't have pets. Many saw it as a move toward "corporate bureaucracy." Assigned parking spaces received a similar reception.

At the same time, the number of employees has risen to 40. The company hopes to double that number by the end of the year. And no one we talked to took a pay cut to join up.

Handshake's expanding head count has already altered the company's communications, meaning there's less of it, workers say. While some are still trying to adjust, most concede that it is unreasonable and unproductive to expect everyone to be briefed at the same level as when the company first started.

"When we were only 10 people, we all had such a big role in every decision," says Tanya Weisheit, a market researcher. "But you can't have a company of 40 people where everyone is [in on] every decision."

Adds Mr. Ruzz: "I used to never hear the phrase, 'I don't feel comfortable discussing that with you.' Now [I] do."

All in all, however, turnover has remained low. Since Handshake's inception, it has lost only four full-time employees (also, two developers returned to college after temporary stints).

Indeed, the four founders - and the entire company for that matter - are close guardians of the culture at Handshake, which prides itself on an ego-free environment that is open and respectful - and still a fun place to work.

New CEO, Mr. Barton says the found-ers spent a lot of time quizzing him about workplace culture. "There aren't a whole lot of companies that go into that," says Barton, who looked into 40 Internet businesses before joining Handshake.

And what about the new CEO? Most seem extremely supportive of the move: "It's nice to have someone who is somewhat of a boss," says Dave Makharadze, vice president of business development, who sits just feet away from the new boss. "That wasn't necessarily there [before]."

Yet a new CEO is just the beginning. Handshake is in the process of bulking up its senior-management ranks - adding experience and age. Melding the two groups will be one of the biggest challenges by far that the company will face.

In the past month, the start-up has been recruiting a string of vice presidents for such positions as marketing, business development, and sales and relationship management. That means many of those who built the company have taken demotions in the name of "moving the company forward." Most, however, don't seem to be taking it too hard.

"It's not enough to work 20 hours a day anymore," says co-founder Dan Sommer, formerly chief operating officer, now vice president of people. "We knew enough to know our limitations."

Former CEO Ajay Shah, now vice president of strategy, says the fact that he's so young has actually made the move easier. "We don't have to go through the ego trip that someone who has had years of experience might have to go through."

"They have so welcomed us in," says Deb Brewer, executive vice president of marketing and product, who is on her third Internet start-up and intended to stay only for "a day or so." "No one feels they are stepping on other people's toes."

While privately employees (most of whom are still in their twenties) are watching the senior appointments closely, most openly welcome more experience. Many say they've been missing professional role models. They also know experience is the key to driving the company forward. Says Mr. Makharadze, who's also expecting a title change soon. "We are tripping a lot less."

On the business side, things are in constant motion. Handshake has completely redesigned its Web site twice since it debuted back in October. And it plans to roll out a third complete redesign later this month. In addition, a second round of funding has left the coffers full, so money "won't be an issue for many more months," contends Barton.

The business plan has been scrutinized and revised numerous times, with more changes on the horizon. And finally, there's talk of an initial public offering. No one's disclosing dates, of course. And Handshake is in the hunt for a chief financial officer - one, employees say, who has plenty of experience taking start-ups public.

Handshake, then and now

Handshake.com obtains bids from local service merchants and passes them along to customers via the Internet. Here's how the company begun in May 1999 and on the Web since October has changed in the past six months:

THEN NOW

Headquarters Fullerton, Calif. Los Angeles

Start-up money $4 million Landed second round of venture capital from SBC Venture Capital Corp. and idealab Capital partners (Undisclosed amount)

Profit $0 $0

CEO Ajay Shah, 23 Michael Barton, 36

Employees 25 40

Women employees 4 15

Average work day 16 hours 13 hours

Dress code none business casual

Shelley Donald Coolidge

Editor's note: Shelley Donald Coolidge, a regular contributor to the Monitor, maintains her own start-up Web site aimed at online shoppers for children's goods. She has had no business dealings with anyone in this article.

(c) Copyright 2000. The Christian Science Publishing Society