Jim Barnett is co-founder and CEO of Turn, a three-year-old online advertising firm that uses an eBay-like auction to improve the way advertisers are matched to web publishers. Previously, Jim was president of AltaVista, and later, of Overture’s search division, which Yahoo bought for $1.6 billion in 2003. Jim talks to us about why he finally became a founder, why bootstrapping is not always the answer, and why sometimes co-founders need to part ways.

F|R: When did you first get the startup bug?

Barnett: Unlike some of your contributors, I’m a serial CEO. Historically, my passion and expertise has been taking entrepreneurial companies and scaling them into professionally-run companies. I did that with several companies, but ever since I was a kid I wanted to run a company from scratch.

F|R: Many founders find themselves in David vs. Goliath contests. Conventional wisdom is the only way to win is with superior technology. Turn is in a space dominated by DoubleClick, aQuantive, Advertising.com and Google. How do you compete?

Barnett: The Internet space doesn’t require you to have dramatically better technology, but there is no question that you have to be exponentially better at something. It might be technology, or maybe just a better product strategy.

In the ad space it depends on what part of the market you’re going after. Better technology is Turn’s approach because we’re going after the broad, more developed market in display advertising – it’s worth $30 billion now, and growing 20 percent annually. If you’re going after emerging categories, like mobile or video advertising, a lot of innovation comes from strategy; it is not necessarily a requirement to have better technology. Personally, I like to attack mature markets because even a small piece of a big market can lead to a big company, and I always want the vision of a big company. But for most startups, pursuing an emerging market where there is not an entrenched Goliath is a better path. So it’s about finding a new market (eBay, Yahoo, Netflix), a different product (Facebook) or simply a better product (Google).

F|R: Many of our founders are fond of bootstrapping. You’ve raised $22.5 million in venture capital for Turn. Why was this necessary?

Barnett: Bootstrapping is a fine strategy for consumer applications that don’t require deep technology or where a lot of your technology will be off-the-shelf. At Turn, we had to build both a team of PhDs focused on ad-selection algorithms and a best-in-class ad serving platform. It was capital-intensive. Whether you bootstrap or not, keeping your staff small until you get it right is absolutely the right thing to do. The truth is most startups struggle. Very few open their doors and experience life “up and to the right” every day afterwards. Often you have to evolve your strategy midstream, and that almost always requires tremendous persistence and time. We changed our strategy at Turn. If you don’t have capital, you won’t have the time to get it right. Selling equity to get some runway is the right thing to do.

F|R: How did Turn evolve its strategy from Plan A to Plan B and why?

Barnett: When we started we were focused on the long tail in advertising, but around year two, we changed our strategy to focus on larger advertisers and publishers. The problem with the long tail is that it’s the tail, it’s not the heart or the body…it’s not where the mass is. Our service is about aligning advertisers’ needs with publishers’ needs. Higher-quality advertisers want to be on higher-quality publishers and vice versa. The long tail gets a lot of visibility, but the real tonnage in terms of users and revenue is with the larger players.

F|R: Was this change difficult? What consequences did it have on Turn?

Barnett: Initially I had a co-founder at Turn. He’s a brilliant technologist, and he focused really deeply on our technology. But at a certain point I wanted to aggressively move to our new strategy and he had different opinions. So we parted ways. The lesson there is sometimes you have to make a change for change’s sake.

F|R: How do you know when change for the sake of change is what’s needed?

Barnett: You don’t know — you’ve got to trust your instincts. Most of the time there is no proven path, particularly if you’re in an emerging space. You want a collaborative environment, but at critical junctures most organizations ultimately need one leader to make the call, to stand up and say, “Nope, this is what we’re doing and here’s why…” That’s what good CEOs need to do.