When the CEO Is Too Good to Be True
For a company started by two teens in boarding school, Pinpoint Networks Inc. seemed on its way to becoming the great American success story: In the two years since Judson Bowman and Taylor Brockman devised a new approach to building an Internet search engine, the two founders had landed more than $5 million in venture funding and high-profile contracts with the likes of Net portal Terra Lycos (TRLY ) and cell-phone giant Verizon Wireless Inc. And with the hiring of Anthony J. Blake Jr. as its new chief executive in February, the company thought it had secured the final piece of the puzzle--a seasoned exec who could open doors not only to more telecom giants but to venture capitalists as well.
But instead of riding in as Pinpoint's savior, Blake quickly became every employer's worst nightmare: an executive who made seemingly exaggerated claims about his career successes, his industry contacts, and his true age. After several incidents in which Pinpoint officials concluded they had caught their new CEO in a web of inconsistencies, Blake and the company parted ways--a mere 13 weeks after he arrived. Once you believe "someone has misrepresented himself, you can't work with him anymore," says Bowman, now 20. Blake could not be reached for comment after repeated attempts by phone, pager, mail, and visits to his home.
Although Bowman insists that Pinpoint's prospects remain bright, the Blake affair came at the worst possible time for the young company. Pinpoint Networks, based in Durham, N.C., blew its chance to bring aboard an exec with the clout to attract more funding before the capital markets slammed shut. In May, the company was forced to lay off a third of its 45 workers, and it has only enough cash to operate for six or seven months. In the meantime, Bowman has taken the reins.
Headhunters think Pinpoint's experience serves as a cautionary tale for startups everywhere. With gobs of young companies struggling to stay afloat, many are rushing headlong into hiring experienced execs who can give them the credibility and stability they need in turbulent economic times. All too often, though, the upstarts are bypassing the painstaking due diligence that averts hiring disasters. That can be dangerous: Kroll Associates says that of the 70 background checks it did on job candidates for dot-coms last year, 39% turned up serious problems--from insurance fraud to bankruptcy to SEC violations. "The rush by companies to attract marquee talent meant that a lot of corners were cut" in hiring practices, says Wayne Luke, a managing partner at recruiter Heidrick & Struggles International Inc.
LOOKIN' GOOD. When Pinpoint started its search for a CEO, the company looked promising. Bowman and Brockman founded the company two years ago, when both were seniors at the North Carolina School of Mathematics & Science. Their edge: Pinpoint uses a network of low-cost PCs running the free Linux software. The networked approach means Pinpoint's database of Web sites can be revised piecemeal instead of all at once, which is what most search engines require. That makes it easier to update and expand Pinpoint's database. Over time, Pinpoint focused on the mobile Web, selling its search technology to wireless providers such as Verizon. "Pinpoint customized its service to our needs," says Peter Grubb, director of Internet development for Verizon Wireless. "We're very happy with the relationship."
Still, to some venture investors, Pinpoint's management seemed too green. "They needed more grey hair," says John Richardson, a senior managing director at Mellon Ventures, which passed on funding Pinpoint in January because of the managers' youth and doubts about the future of wireless. Pinpoint's board already realized age was an issue, so the previous July it hired Christian & Timbers, a Cleveland-based recruiter that has handled such high-profile CEO searches as Hewlett-Packard Co.'s (HWP ) hiring of Carleton S. Fiorina. By November, Christian & Timbers gave Pinpoint a half-dozen candidates--with Blake as its top choice, Bowman recalls. "On paper, [Blake] looked very successful," says Pinpoint Chairman Steve Nelson, a former IBM vice-president and a partner in Wakefield Group, a venture firm that invested in the startup in March, 2000.
SHORT HONEYMOON. Blake's resume and experience made him look like the perfect match for Pinpoint. An engineer by training, he claimed to have played a key role in the development of MCI Group's Friends & Family marketing program and AT&T's Digital One Rate plan. Pinpoint also was betting that venture capitalists would appreciate Blake's record of selling startups for a profit: Blake, who was then chief executive of ObjectStream Inc., a Pleasanton (Calif.) maker of telecom software, told Pinpoint it was an opportune time for him to make the jump since he was closing a sale of his company to WorldCom Inc.
Pinpoint offered Blake the job and, at first, company officials were bowled over by his high energy and sharp mind. "Conversations that could have taken two hours took 15 minutes," recalls Nelson. When Blake gently quashed plans to issue a press release trumpeting his arrival, staffers interpreted it as a sign that their new CEO didn't crave publicity.
The honeymoon didn't last long. A few weeks into Blake's tenure, Bowman says he was taken aback when, in a phone chat with an AT&T (T ) executive Blake had claimed to know well, the exec paused, then said: "I don't know any Tony Blake." Other Pinpoint managers reported similar responses from people Blake said he knew, Bowman says. Pinpoint staffers did another double-take when they checked a copy of Blake's passport: It showed he was born in 1953--making him 47 at the time, not 41 as he had claimed. Bowman began to wonder why he had never seen reports of ObjectStream's sale. In early May, he called an industry source, who dropped a bombshell: WorldCom had looked at ObjectStream, but no acquisition was made. ObjectStream's board closed the company's doors for good on Jan. 26.
Pinpoint's six directors, including Bowman and Nelson, quickly huddled. The revelations, they say, had shattered their confidence in Blake's ability to lead the company. The board agreed on May 8 to part ways with Blake.
Pinpoint concedes hiring Blake was a mistake--but it also blames Christian & Timbers for not screening its candidates better. "We view this as a failed search," fumes Nelson, who says Pinpoint may ask Christian & Timbers to "make good" with a new search. The recruiter acknowledges that Blake was among the candidates it gave to Pinpoint. But Gary Roberts, who handled the search for Christian & Timbers, says Pinpoint was so eager to move that it told the search firm its own board would "take over the pursuit of Tony Blake." Roberts says he told Pinpoint's board late last year that Blake hadn't yet provided him with references. Bowman confirms that the directors took over talks with Blake but says it wasn't clear that Christian & Timbers hadn't fully vetted the candidate. "We felt they were selling us someone they had worked with in the past."
Pinpoint executives remain bullish about the company's prospects. In coming months, Pinpoint expects to unveil its new technology, which it says will let customers create new wireless Web applications, such as "buddy finders" that help users track the location of friends. "There's going to be plenty of good news ahead," says Nelson. And, Pinpoint hopes, no more hiring surprises.
By Dean Foust in Durham, N.C., and Spencer E. Ante in New York, with Brian Grow in Atlanta