The Search Agency (www.thesearchagency.com), a Los Angeles-provider of search engine optimization (SEO) and search engine marketing (SEM) services and technology, announced yesterday that it has raised a round of private equity funding for the firm. We sat down with David Hughes, the firm's CEO, Friday to talk about the company.
Tell us a bit about what you do?
David Hughes: We offer SEM - search engine marketing and SEO - search engine optimization, and what's called CPO - conversion path optimization to partners. What those basically do is help people show up on the search engines, and when somebody clicks on them, helps them get the desired goal to take place.
What's your mix of people versus technology. A lot of SEO/SEM folks talk about having technology but are mostly services--what can you tell me about you?
David Hughes: I think that's a good question. There are so many competitors saying they do. We have 25 engineers in the company, out of about 80 people. A pretty heavy investment in technology. Our goal is to double that in the next 12 months. What we have done is built very advanced algorithms to help our people. The number one client for our technology is our client facing team, to help our people provide the best service and results possible for our partners. All of that is based on ROI -- if we're spending money on behalf of the client, we need to make sure that the money is spent in the very best way possible.
Tell us a little bit about what you are going to be doing with this investment?
David Hughes: We have really bootstrapped this company historically. Our intent is to put more efforts in our business development team and marketing, and really enhance what we're doing on the technology side. There will be more work across different channels. Right now we're really focused on search, and we'd like to do more.
What's your view on this market? It seems like there are hundred of people who say they do some sort of SEO/SEM.
David Hughes: It's highly fragmented, and I think that gives us a great opportunity, because of those companies out there, very few have put the effort into the technology. By combining the technology and services pieces, we think we have the opportunity to grab a lot of business--and that's what we're finding. There may be lots of companies, but typically their retention rates are pretty low. Ours is around 90 percent. It means we must be providing a good service, because if we aren't, they don't have to stay with us. We must be doing the kinds of things people want.
Having bootstrapped this business, and now having raised capital, can you talk about the advantages/disadvantages of having gone that round initially?
David Hughes: You definitely grow a lot more slowly. There's a lot of cash management strain on the company. You're trying to figure out how to grow, but at the same time getting paid by folks, and in a timely fashion. If you think about it, all of our costs happen on a day by day basis. We've got to pay people salaries, but we don't get the money for the work they've done until 45 days after. So, if you're growing very quickly, it's tough to kind of balance that. I think that's certainly the tough part of being bootstrapped. At the same time, what we did manage to do was build a company where we have a substantial amount of value before we actually decided to go out and raise capital.
If you'd be given the choice in the beginning, having known what you know now, would you still have bootstrapped it, or gotten money earlier?
David Hughes: I think we had to figure out a lot of stuff. I think if we'd gone out and tried to raise money out of the gate, I think it would have been challenging to prove that we could execute. I think I'd probably do it the same--as tough as it was.