Market10 takes $13M

By Clifford Carlsen

Online job listing startup Market10 raised $13 million in a second round that founder and CEO Rob McGovern will use to take on his first creation, CareerBuilder Inc.

Menlo Ventures led the round, which also included New Enterprise Associates. The funding brings Market10’s total capital raised to $21 million, including $1 million in seed money put up by McGovern when the company was formed in April 2004.

Market10 will use the new capital to move beyond its first metropolitan market of Washington and roll out a national system to compete head-on with the big three in online job postings: Chicago-based CareerBuilder, New York-based Monster Worldwide Inc. and HotJobs.com Ltd. of New York.

McLean, Va.-based Market10 landed the round after Menlo Park, Calif.-based Menlo approached the company pre-emptively, with the proverbial offer McGovern said the company couldn’t refuse.

McGovern, who also serves as a venture partner with Baltimore-based NEA, said the company talked to one other venture capitalist but did not take the round to others or use any independent valuation mechanism.

’We weren’t raising capital, but we knew we were going to do a round when they came in with a proposal,’ McGovern said. ’I had a pretty good sense of what valuations are and told Menlo that a pre-emptive deal has to give us a pre-emptive price.’

McGovern would not disclose precise terms of the deal, but he said the premoney valuation was in excess of $20 million and that the deal represented a substantial increase over the company’s $7 million first round from NEA in February 2005.

McGovern, who founded CareerBuilder in 1995 and continued to run the company for two years after selling it to newspaper companies Knight Ridder Inc. of San Jose, Calif., Gannett Co. of McLean, and Tribune Co. of Chicago in 2000, said he formed Market10 to take advantage of new Web technology to bring innovation to online employment listings that he believed the big-three sites were not pursuing. He said that CareerBuilder, Monster and HotJobs.com had revolutionized employment advertising in the rise of the Internet, but they have largely rested on their laurels as new Web services technology has evolved and broadband capabilities have become ubiquitous.

’Three big things happened in the industry, with our sale, HotJobs sale to Yahoo! [Inc.] and Monster.com founder Jeff Taylor leaving the company,’ McGovern said. ’There really wasn’t any innovation after that, because big companies don’t think about innovation the way a startup does.’

McGovern said that when he first built CareerBuilder he designed the site for users accessing it by dial-up Internet connections, and that the basic legacy technology of incumbent sites is an obstacle to innovation. He saw an opportunity with Market10 to take advantage not only of greater bandwidth, but improved services made possible by Web services innovations such as asynchronous java script and XML, or AJAX, and other new Web technologies.

In forming the company, McGovern said founders defined 10 dimensions of a good job fit and defined them under the headings of work environment, travel, industry, work authorization, target income, skills, education, years experience, location and benefits. The company derived its name from those categories and built its site around technology to match employers with employees using those criteria.

Sonia Hoel, a managing director with Menlo Ventures, said the firm frequently sources deals pre-emptively, using an internal process it calls systematic emerging market selection, or SEMS, and that the decision to contact Market10 emerged from that process.

’We approached them early this year after looking at the next generation of job boards,’ Hoel said. ’Most employment sites are still just a place to post resumes, but they have the methodology to better filter applicants and qualify them for specific jobs.’

McGovern said this round will fund a rollout of an unspecified number of new markets this year, though he declined to discuss where or how many, to keep competitors from beefing up advertising in advance of Market10’s launch. He said it is likely that the company will be able to fund additional expansion from operations without raising additional equity, but he said Market10 will consider another round if it decides it can expand more aggressively.

He said launching Market10’s debut service was dramatically less expensive than his prior experience with CareerBuilder because of word-of-mouth and consumer familiarity with online job searches, but he declined to say how much the company expects to spend in launching each new market.

Market10 had legal representation in closing the round from Mike Lincoln of Cooley Godward LLP in Reston, Va. Menlo was represented by John Bautista of Orrick, Herrington & Sutcliffe LLP in Menlo Park.