http://www.nytimes.com/2005/11/24/business/24sbiz.html

In 1996, Derek Mercer founded Recruitmax Inc., a maker of software for human resources professionals, with $100,000 in capital and the conviction that his product's simple design would make it a winner.

He was right: within a year, the company in Jacksonville, Fla., had turned profitable, and by 2003, it had grown to $8 million in revenue and 90 employees.

At that point, like many entrepreneurs who thrive in the hurly-burly of starting a business but falter at the everyday task of running it after it becomes successful, he faced a stark choice: cash out or hire a manager to take charge.

"I knew that if I wanted to grow the company to $100 million, I was at the top of my limit," said Mr. Mercer, now 37.

It is a classic quandary, and one that is playing itself out more frequently as the many start-ups that began in the early years of the current four-year economic expansion come of age.

"Many entrepreneurs begin to think about selling their businesses because they have become convinced that they don't have the right stuff to lead businesses to realize their full potential," said Bill Lee, president of Lee Resources Inc., a consulting and training firm in Orlando, Fla.

In many cases, he says, his advice is to maintain ownership but recruit a seasoned professional to run the day-to-day operations.

That is what Mr. Mercer did. He toyed with the idea of selling the company to an outside investor, calculating that he could walk away with more than $5 million and start another company, a common entrepreneurial strategy.

But, he says, he could not bear to part with the business that he worked so hard to build - and one that he believed was at the threshold of a growth spurt that could lead to an initial public offering and a much bigger payoff.

He needed, he said, to hire "someone smarter than me" to run the show.

"That's what Jack Welch says: He's never 'the smartest person at the table,' " Mr. Mercer said.

He set out to find a chief financial officer, networking with friends and hiring an executive search firm, and finally chose Jim Philip, an investment banker in Jacksonville, with an M.B.A. from Stanford.

Impressed with Mr. Philip's background in both technology start-ups and mergers and acquisitions and won over by his outgoing personality, Mr. Mercer named him president instead of finance officer, and limited his own duties to product development and customer relations.

"He didn't have an understanding of how the game is played," Mr. Philip said of Mr. Mercer. "He said, 'I've got to figure out how to take this to the next level. I know we can be a dominant player in this market, I just need some help getting there.' "

"The first challenge was to stop thinking like a private company and to start thinking like a public one," Mr. Philip said. "Making sure all the controls are in place in the post-Enron world of public companies, making sure we've got a management team that would play well in front of Wall Street analysts."

Mr. Philip's mission was to build up the company and then take it public. Shortly after he came on board, Recruitmax raised $17.2 million, its first infusion of outside capital, and used the money to expand overseas by opening offices in London and Sydney, Australia.

It subsequently acquired two companies: KnowledgePoint in California, a provider of software for managing human resources, in 2004, and InfoTechWorks in Pennsylvania, a developer of payroll management software, in 2005.

In the 28 months with Mr. Philip at the helm, Recruitmax's work force has quadrupled to 350 and its revenue is up nearly fivefold, to about $40 million this year. Both he and Mr. Mercer declined to discuss prospects for a public offering.

And how does Mr. Mercer feel about the power-sharing arrangement? The experience has been both liberating and wrenching.

"Before Jim came on, I was the guy," he said. "I was responsible for the decisions and for the vision. Bringing in Jim required trust in someone else to see and execute the vision. You've got to relinquish some control of the company, just like I did with my kids when they got older. And that's hard to do."

Sue Welch understands the wrenching part. She lost control of the first two companies she founded, and now is two years into running her third.

But, she says, she has learned from her mistakes and is confident she can chart a happier outcome this time.

Ms. Welch started her first venture, IMC Systems Group, a software developer in Waltham, Mass., in the mid-1980's. Venture capitalists were impressed by IMC's technology and provided millions of dollars in several rounds of financing, eventually gaining a majority interest.

Then, when IMC failed to turn a profit, they cut her out of the picture.

"I wasn't quite sure what a V.C. was, but I sure liked the idea of someone giving me millions of dollars," said Ms. Welch, 53. "In 1992 they took control of the company, and I was out on the street."

The day after leaving IMC, she founded her second company, RockPort Trade Systems, a maker of software that competed with IMC.

It became the top provider of global sourcing software, she says, and in 2000 she sold it for $100 million to the QRS Corporation, a large company that manages electronic commerce. She stayed on, but soon grew disenchanted at her diminished role.

"I now worked for someone else, and they owned the rights to my vision and more importantly, they had their own vision of it," she said. She left in February 2001.

When she started her third company, Tradestone Software, in 2003, she promised herself that she would go into any strategic partnership with her eyes wide open. She says she has been approached by venture capitalists and other investors interested in acquiring all or part of Tradestone, a maker of software for retailers, but has turned them all away.

Instead, she is looking for a smart No. 2 to help build the company into a major player. Already it has grown to 43 employees, and Ms. Welch expects to hire 20 during the next few months.

She says Tradestone has ventured into the European market and will expand to Asia in January and perhaps later to South Africa. She would not disclose financial results but said that the company was profitable.

Whomever she chooses, she says, she intends to give her new lieutenant as much power as she deems necessary. "I need someone who can share the vision and the travel," she said, and who can "unify the company so we can all be in multiple places at multiple times."

She added that "one of the things with getting older is you no longer think you need to do it all."

Of course, it is not always easy to sit back and watch someone else swoop in and overhaul the company that is your pride and joy, even if you invited them.

Before Wayne McVicker and his partner, Jeff Kleck, took their four-year-old software company, Neoforma, public in 2000, they agreed they should hire a battle-hardened corporate chief executive.

It was an easy decision, "but the process was not necessarily so," said Mr. McVicker, 46, who interviewed dozens of candidates before selecting Bob Zollars, a senior executive at Cardinal Health in Ohio, a provider of health care products and services.

"The slow, almost imperceptible shifting of control out of our hands and into others was really difficult," he said. Mr. McVicker even wrote a book about the experience, "Starting Something," published in October 2004 by Ravel Media.

It all worked out in the end - sort of. The company went public in 2000, making Mr. McVicker and Mr. Kleck wealthy men (on paper, anyway).

Both stayed on through April of 2001, then left to start Attainia Inc., another health care software company. (About six weeks ago, Neoforma was acquired by GHX, a competitor.)

"To me, Neoforma was like a child," Mr. McVicker said. "I had loved it and nurtured it, but now it was growing up. I still loved it, but I didn't necessarily like everything about it. It wasn't as cute anymore."

Today, the two partners say they are less likely to feel the need to bring in someone else to run their new company, although they would not rule it out. This time, Mr. McVicker said, "we have more experience."

About TradeStone Software, Inc.
TradeStone Software enables retailers and manufacturers to plan, design, collaborate on and purchase goods from across the world as easily as from across the street. TradeStone's Unified Buying Engine uses Web services technology to layer across an organization's existing infrastructure while its modular software fills in buying process gaps to provide a single view, access and interaction across the entire procurement process. The first and only complete solution for global sourcing, product lifecycle management, and unified order management, TradeStone's intuitive "No Training" technology helps people throughout the supply chain to collaborate globally, enabling users to focus on speeding innovative products to market. Marquee customers include American Eagle Outfitters, The Children's Place, Deutsche Woolworth, Ocean State Job Lot, Pacific Alliance and Federated Department Stores. TradeStone Software is based in Gloucester, Mass. and can be found on the Web at www.TradeStoneSoftware.com.

Contact:
Chuck Tanowitz
Schwartz Communications
781-684-0770
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Tania Stockbridge
TradeStone Software
978-281-3723
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