CoolAvenues follows a startup through its early stages as it confronts the challenges faced by all startups: how to raise funding, protect intellectual property, and recruit.  Zefer, is a Boston-based provider of Internet consulting services and solutions
Time of Story: September 1999:

This is the third column written by Anthony Tjan in Red Herring's series of insider perspectives on the struggles facing all startups. Mr. Tjan cofounded and is executive vice president of Zefer, a year-old Internet consulting and implementation services firm. This column in no way represents an endorsement of Zefer or its services.

 Acquisition, of course, has become a competitive maneuver for fast-growing companies. But though acquisitions can bolster capabilities quickly, they bring the challenge of creating a one-firm mentality. As other players in our Web services space roll up dozens of startups in rapid succession, we question how they can effectively integrate so many companies. Real integration is a time-intensive, evolving process that goes beyond having the same email system and drinking from coffee mugs with the same logo. Before we even considered making an acquisition, we grew Zefer organically for one year.

The key to successful integration is a careful screening process. The motivation for an acquisition should be driven by customers and based on capabilities. What customer problems will the acquisition solve, and how does it solve them better than you and your competitors?

Many of Zefer's clients were asking us to help them create seamless online and offline brands when in November one of our employees, Mundi Morgado, spammed the staff with a one-line email, "Now this is a cool Web site -- www.spyplane.com." We took a look and agreed that the San Francisco-based digital branding services firm Spyplane was indeed impressive.

We went for a visit. Spyplane's San Francisco loft space felt like Zefer's own open-plan environment. When Spyplane cofounders Jason Zada and Greg Hipwell came to our Boston offices, they took digital pictures just to show the striking similarities to their colleagues. This was a good start.

PLANE SPEAKING

We have five questions to help us decide whether a company is a good acquisition candidate, and Spyplane's profile was strong:
(1) Are our two cultures compatible? We had an immediate connection with Spyplane.
(2) What's the leadership like? Spyplane was excellent at design, but we'd need to add business elements.
(3) What's the fit with our strategy and methodology? Spyplane could give us a West Coast presence and strengthen our design competency.
(4) Who are its customers? Spyplane had great clients, including Sony and Novell.
(5) How risky is the integration? The company had just 15 people and a similar culture, so the risk was low.

There was a clear case that we could help each other grow and that we could jointly expand -- not just integrate -- our companies. In May we completed a cash-plus-equity deal for Spyplane. (Sorry, we can't disclose the figure.)

Then the real work began. Spyplane had a great reputation for digital branding and multimedia Web talent. Without losing that asset, we needed to round it out with business and technology offerings. We dispatched "assimilation ambassadors" to explain new roles, responsibilities, pay scales, benefits, and corporate structure to our new team members and to implement common financial and reporting systems.

ART OF THE DEAL

But in addition to addressing such concrete issues, we had to smooth over some subtler differences. This has required working together over time. Case in point: in June Stephen DiMarco, one of Zefer's senior partners, asked to work with a Spyplane business development person. He quickly realized that what Spyplane called "business development" referred mainly to fielding phone leads, as opposed to Zefer's consultative, relationship-building approach. We had to form a common corporate vocabulary and methodology. When Zefer's Boston office wants to staff a "Phase I diagnostic," our San Francisco office has to know exactly what that means and who can help. Zefer and Spyplane have weekly integration meetings to address these issues and have cross-staffed internal and client projects.

We are far from knowing exactly what makes an acquisition work, but we know our goal: to shape a single Zefer philosophy, brand, and way of doing things. With Spyplane we are on our way to doing this while also tripling its staff to make it a full-fledged unit of Zefer. Which brings me to the subject of next month's column, a problem faced by all of today's high-tech companies: recruiting and retaining talent.

Source: This month's writer is, again, Anthony Tjan, a cofounder and executive vice president of the company.
From Red Herring.com