Hotdispatch Goes West

Is Mike Kaul flat-out crazy?

Kaul is CEO of HotDispatch, an online exchange for technical expertise. HotDispatch had a terrific start-up pedigree: the perfect niche (technology expertise), heavyweights Mitch Kapor and Stuart Alsop as angel investors, Sun as another backer and pilot partner, plus an affordable headquarters in Boston.

Then Kaul went and moved the whole schmeer to Mountain View, Calif. Why?

"The business is here, the industry is here, " Kaul says. "The people we need to be affiliating with are here. "

Whatever the price of real estate or the employee turnover rate, this points to what many Valley companies see as the critical factor: there's no substitute for face time.

HotDispatch is experiencing all the usual Valley-related headaches. It has grown from seven employees to 23 since February, and Kaul is familiar with staffing problems. "I'm sitting here looking at the heart of Silicon Valley, " he says from his office. "San Francisco is only 45 to 60 minutes away. And yet I have qualified candidates saying, 'I won't come down there.' "

HotDispatch is paying through the nose for three headhunting firms, plus what Kaul calls "all the online job sources. We're paying $5,000 a month for just that. " Bottom line, Kaul says: "A [venture capitalist] asked me, 'What's your No. 1 problem?' I said, 'Recruiting and keeping good people.' "

Then there's his No. 2 problem: office space. "We're hunting, " Kaul says. It's not just a matter of finding sufficient square footage (although that, in and of itself, isn't easy) - with super-picky job hunters, a hot location is a vital recruiting tool. Very small companies may want to be in San Francisco's hip South of Market area. Start-ups looking to grow want to be near relatively affordable housing or maybe a train station.

All of which costs money, although nimble entrepreneurs can still get a deal. One friend of Kaul's spotted a defunct car dealership, bought it and converted it - garage and all - into corporate headquarters. Another "found an old warehouse that was a fish outlet, " he says. "He said, 'Sure it stinks, but it looks kind of cool.' "

For HotDispatch, it came down to being close to the money, the talent and the partners. "There's a powerful infrastructure for raising capital here, " Kaul says. "There are so many [venture capitalists] here, I can screen the ones that are the best fit for the company. We can cull through [them and] create a short list. "

He illustrates how important proximity is: "We've been trying to set up a meeting with this [venture capitalist]. Yesterday, he said, 'I'm going on vacation for three weeks, but if you can get over here by 4, we can meet.' " Now that's something you can't do in Boston. Or Tampa. Or Cincinnati.

Then there are the partners. "Now that we have deals with [Sun and IBM], we need to make sure those partnerships are successful, " Kaul says. Let's face it, big companies are big companies. . . . When you're a little company, it's incumbent on you to meet their timetable. Well, we can be over there in 20 minutes. "