Not that he wasn’t grateful, but by the end, Rich Milgram had lost patience with Safeguard Scientifics, the investment company that had saved his business. And it was tired of him, too.
After all, if it weren’t for Safeguard, Milgram’s company wouldn’t have its chief financial officer and chief operating officer. Both were crucial to the success of the $27 million company Milgram started by noodling around on a computer in his spare time.
In March 2007, when Safeguard put $13.5 million into Milgram’s online recruiting business and joined its board, Milgram needed Safeguard’s money and, just as important, its smarts. “I realized I could not by myself expand it. I needed smart people around me who could guide me in next steps,” he said.
But by mid-2013, the relationship had become strained. Safeguard, which invests in businesses in order to grow and sell them, wanted a return on its investment sooner rather than later.
Six years into the deal, it was more later than sooner. But Milgram was adamantly opposed to selling, which would have been the only way to get Safeguard its money. Milgram would have had to walk away. For Milgram, who started the business in 1998, that would have been unacceptably painful.
Yes, he would have been wealthy, but what worried him was his team. How would the workers fare? “You know how you hear in these deals how all the executives made out and the financial guys made out, and then the team got screwed? Well, that was never going to happen,” he said. “I’m not like that, and I am the majority owner.”
You may have noticed, in reading this, that Milgram’s company has not been named. And that’s deliberate.
In order to keep his baby, Milgram had to sell the baby’s name. A big company ” kept raising the price until it became absurd,” Milgram said.
In 2005, when he bought his company’s former domain name, Beyond.com, for $150,000, it was his company’s biggest purchase, shockingly so. “My dad said I was crazy,” Milgram said. In those days, it amounted to three months, three months, of revenue.
Now that name belongs to Bed Bath & Beyond, and Milgram’s company — once Beyond.com — is called Nexxt.com. As Beyond.com, Milgram’s company created job boards with positions listed by geography, Phillyjobs.com, or by profession, EducationJobSite.com, or by demographic, AsianAmericanJobSite.com, or even by sexual preference, LGBTJobSite.com.
None of that changed under Nexxt.com. What’s next on Milgram’s business front is more of an emphasis on helping employers sort through candidates and reach the best ones via text, email, or social media.
By contract, Milgram can’t and won’t say how much Bed Bath & Beyond paid for the name.
But the infusion helped Milgram pay $15.5 million in cash to buy his freedom from Safeguard. “I was getting rid of them, and there was a large bunch of cash that I was able to put down,” Milgram said. “I was able to get Safeguard to exit. It gave me the funds to do what I wanted to do to secure the future for us.”
On March 2, 2017, 10 years after Safeguard put its money in, it got its money back, although Milgram still has to pay it $10.5 million more in three years. “They have no involvement in the company, they have no ownership of the company. They aren’t on the board anymore,” he said, but paying off the balance may require him to find a new private equity partner.
“We were able to ultimately develop a solution where Rich bought us out of our position — part in cash and part in a three-year note — resulting in a very nice profit for us,” Stephen Zarrilli, Safeguard’s chief executive, wrote in an email.
“While we were frustrated with the lack of an exit, it was no reflection on the value of the business or Rich as an owner/CEO,” Zarrilli wrote, describing it as a company with market relevance. “We invest with an eye towards an ultimate exit.”
Ordinarily, Safeguard likes to be out of its investments in three to five years. But the timing wasn’t good.
Could Safeguard have known in March 2007, when it bought into Milgram’s recruiting business, that one of the worst recessions in the nation’s history would begin eight months later, crippling the employment market? Could it have known that in three years, in March 2010, just about when it hoped to collect, that the jobless rate would have skyrocketed to 9.9 percent, up from nearly full employment at 4.4 percent in March 2007.
By March 2012, five years out, the employment picture had only marginally improved with the jobless rate at 8.2 percent. Still not much need for a bunch of recruitment job sites. Companies, reluctant to hire, were rejecting applicants in droves.
And so, Safeguard, or, rather, the economy, gave Milgram a little leeway.
But by 2014, with the unemployment rate steadily falling, Safeguard “was salivating” for a sale, Milgram said. “It was coming up on 10 years and they wanted out in five years. We had offers to sell, and Safeguard would have loved me to take them.”
Most times, he said, private equity firms such as Safeguard come in as the majority investor, “and the owner doesn’t have a choice,” but Safeguard had a minority position in Milgram’s company.
Just about then, as Safeguard was getting increasingly persistent, a lawyer contacted Milgram, reaching him in November 2014. His client wanted to buy Beyond.com. No, the lawyer wouldn’t say who, just that it was a multibillion-dollar, well-respected, publicly traded company.
“The first six or seven times,” Milgram said, “we told them to fly a kite.” Why would he give up his company’s name? But, each time, the offer increased.
Eventually, a light bulb went off, dimly at first, to be sure.
What if he could rebrand his company, give it a new name and reconfigure its purpose? Could the company survive without its old name?
Just as important, could Milgram survive emotionally without his company? What makes a company a company? Is it the name or the founder? The pressure was on. To keep Safeguard happy, something would have to give.
“Without me selling my company, this could be like a sale — a sale without selling the business,” he said.
He and his wife, Marla, who serves as general counsel and human resource director, turned it over and over in their heads. Day and night, it preyed on their minds. They couldn’t tell friends, colleagues, anyone. It was just them, and a few top executives, talking and getting nowhere.
He and his wife had been in it from the beginning. She’s gregarious; he’s an introvert who had to train himself to chit-chat. She was the one who knew which employee was getting married or having a baby. He was the one who dealt with the banks. She was the one who kept working her day job while Milgram, at night, assembled the rudiments of their business.
In every way, they were partners, but this decision tore at them. “You can imagine our bedtime chat was not what you’d want it to be in a healthy marriage,” he said.
Could their baby survive? What is the value of a name on a website? Did it matter, for their company, that job-seekers didn’t usually turn to Beyond.com, but instead turned to individual job boards?
“There’s no metric in the world that says this amount of money is the right amount of money for a website,” Milgram said.
As the price for the name rose, Milgram became convinced that selling Beyond.com was the right decision to get out from under Safeguard. “I was spending too much time managing Safeguard, as opposed to sinking my teeth into the next part of my business.” His wife wasn’t so sure, particularly since they didn’t know who was buying the name and would not know, not even on the day they signed the paperwork.
“The math worked, so I could handle the emotional risk,” he said. “My wife was livid at me for signing a document and I didn’t know who I was signing it with. It took a lot of conversation to get that done,” he said.
If only to mollify her, on the day he signed the document, he crossed out the negotiated price and added another million to the tab, to be removed if he could learn the company’s name.
The company wasn’t happy, but it paid the price.
“It’s a crazy story,” he said.
On Jan. 3, 2016, Milgram closed the deal, with the buyer giving Milgram a license to use the name for two years so he could rebrand.
“Realistically, the money Bed Bath & Beyond paid for Beyond.com was significant,” Milgram said. “And it was significant to us, more than they could imagine.
“If I sold it, I could start again.”