Startups court big-name CEOs

James Sherriff spent 19 years at Hewlett-Packard Co., working his way up to head of HP's worldwide consulting group.

James Sherriff spent 19 years at Hewlett-Packard Co., working his way up to head of HP's worldwide consulting group. But near the end of his career there, as he watched the Internet change business models and create millionaires over night, Sherriff decided he'd try "driving a speedboat rather than driving a battleship."

"I really got the bug to get into a smaller environment ... where you can drive change much more rapidly," he said.

So when Sherriff was courted by startup Stonebridge Technologies Inc., a Dallas-based systems integrator, late last year, he jumped, becoming CEO in January.

Startups are going after—and getting—larger vendors' CEOs and top managers at an increasing rate. This week, in fact, Intershop Communications Inc. will name former Compaq Computer Corp. chief Eckhard Pfeiffer as chairman. For startups, putting a well-known industry leader at the top of their organizations gives them almost instant credibility and a reputation as a company to watch. For the CEOs, startups provide the promise of big money through IPOs (initial public offerings) and the chance to run a company involved in cutting-edge technologies or innovative e-commerce initiatives.

A pair of recent moves, both in the same competitive market, highlight this trend. Andersen Consulting CEO George Shaheen last month left to take the top post at Webvan Group Inc., a Foster City, Calif., online grocer. And Bill Malloy, executive vice president of wireless operations at AT&T Corp., last week announced that he will become CEO at Chi cago-based Peapod Inc., another online grocer.

Both companies want to expand their services and now have high-profile management at the helm. However, that kind of leadership does not come cheap. Webvan, for example, promised Shaheen a base salary of $500,000; a target bonus of $250,000; and 1.25 million shares of common stock, or about a 5 percent stake in the company. When Webvan goes public at $11 to $13 a share later this fall, that could mean $15 million for Shaheen.

Shaheen, through Webvan, declined to comment pending the company's IPO.

Martin Lee, an analyst with Dataquest Inc., in Mountain View, Calif., said Webvan is banking on Shaheen's reputation from his days at Andersen translating into big business. His arrival has already upped the company's name recognition. "This gives Web van a name all over the place," Lee said.

As customers of other startups have found out, however, a big-name CEO doesn't guarantee success for a young Web technology vendor. Shaheen, for example, may be well-known in corporate IT circles, but that won't necessarily draw consumers to Webvan's site.

"The people you want to sell the service to are not people in the industry. I don't think people on the outside of [IT] know of [Shaheen]," Lee said.

While money is a powerful incentive, high-level managers jumping to Web startups are also looking for the challenges that come with being top dog, even at a small company.

Gary Moore earlier this year left a 26-year career in high-level management at Electronic Data Systems Corp., of Plano, Texas. Moore had just been named to lead EDS' high-profile group before he left to become CEO at Enterprise Networking Systems Inc., a network services startup in Redwood City, Calif., that has Cisco Systems Inc. as one of its major financial backers.

Moore said he wanted to be at the forefront of networking and network services, which are becoming increasingly vital in the age of e-commerce. In addition, at EDS, Moore said he was "in the position of not being able to move quickly or make decisions on a day-to-day basis that I felt needed to be made in a world-class business."

"I wanted to build a company, and I was not going to be CEO at EDS," he added. "This is exactly where I wanted to go."