Corrections or additions?
These articles by Barbara Fox were published in U.S. 1 Newspaper on June 30, 1999.
All rights reserved.
Web Start-Up Job: For Real, or Pie in the Sky?
Out of the blue, a headhunter calls you. You have a
comfortable job with a comfortable salary but now you are being offered
the moon. Come with us, says a young high-tech firm, and you will
be rich. You won’t make much more than you are making now, but we’re
going to go public, and you will own stock. And even before we go
public, we might get bought out by a public firm — the 900-pound
gorilla of our industry. Either way, you will be a millionaire many
Wait a minute. What is really being offered here? Is this offer a
sure thing, or pie in the sky? How would you proceed if you were entertaining
such an offer? We asked career counselors, venture capitalists, corporate
consultants, and professional negotiators for their advice.
Research is key, says Susan Guarneri, who has a career counseling
practice on Lawrence Road (E-mail: email@example.com) If you
don’t know how to do the research, through public means and networking,
find someone who does.
public and you don’t have any means of investigating the financial
background of the firm, you can investigate the industry," says
Guarneri. "Contact people in the industry with a heads up on this
particular kind of product or service and whether they think it will
competitively fly. Or lurk in chatrooms and put the right kind of
question out there."
If the potential buyer is named, check in the Edgar database to see
what is happening. Look at how the potential buyer treated its other
in people and not the financial analysis," says Stephen Shaffer
of the venture capital firm Penny Lane Partners LP (609-497-4646).
"Know the people you are talking to. You need to be comfortable
with those people. Be cynical. Entrepreneurs are very difficult people."
Do research on the backgrounds of the principal parties involved.
"See what their track record is. Everyone leaves a paper trail,"
says Guarneri. Ask for referrals realizing that the direct referrals
will give glowing remarks. "But then the second level of referrals
— that’s when you may start hearing things."
You can probably believe them, says Shaffer: "We hire professional
recruiting firms to tee up the best people possible and we tell those
people what we think."
"If the firm has credible venture capital, that’s a big plus,"
says Wood Tate of Development Management Inc. (E-mail: firstname.lastname@example.org
Tate is a consultant on corporate strategies for technology companies.
"What you can believe depends on the credibility of what the venture
capitalists are saying. If somebody has a really insightful idea that
looks quite defensible, that could fly 100 percent."
is a penny stock investment, says Niels Nielsen of Princeton
Management Consultants (E-mail: email@example.com). He notes
that the issue of whether stock options should be charged against
company assets is being argued, and companies are very apprehensive
because they have a tremendous potential liability.
"What you are really doing is making an investment decision,"
agrees Lee E. Miller, author of career strategy books. "Ask,
is this a company I want to sink my money into? In essence, you are
taking less of a salary in hopes that down the road you will make
money in terms of stock equity. Make that decision with whatever appropriate
advice you need — an investment advisor, an accountant, or a lawyer
to protect you in case you are laid off before you are vested."
Watch out for the "lock-up" periods that forestall quick profits.
"If you do an IPO today it is doubtful anyone can exit before
six months," says Shaffer. "For insiders who are managers
of the business it could be considerably longer." As for the buyout
that could replace an IPO, he cautions against buyers with inflated
stock prices; they want to use this stock for the acquisitions.
search firm will keep the jobseeker’s best interests at heart. "The
search firm is clearly being paid by the company but is a resource
for the individual as well. It is not in the search firm’s best interests
to put someone at a company who will be unhappy or leave in a short
time. There will be a definite desire on the part of the search firm
to make sure that the technical, professional, cultural, personal
aspects — all of that has to be right."
But Guarneri, the job counselor, says she wouldn’t trust the headhunters:
"Probably all are honest except one, and all you need to is to
be stuck with that one."
works at a consulting firm in Westfield (E-mail: firstname.lastname@example.org ),
says that to use a negotiator might cost $350 an hour for consulting
on getting the best deal for a mid-level position, or several thousand
dollars to work on a CEO’s behalf — or $14.95 to buy his bestseller
on Amazon’s career list, "Get More Money on Your Next Job:
25 proven strategies for getting more money, better benefits, and
greater job security" (McGraw Hill, 1998).
flops or the top people are let go, you can be sure they will have
gold-plated exit strategies in place. Make sure you do the same. Among
the points to ask for:
other issues nailed down," says Guarneri. But most of all you
should listen to your gut instincts. "Keep track of what people
are telling you. Write it down, not just the facts but the impressions
you are getting."
In good economic times there can be a certain degree of speculation,
and everyone can get caught up in that rosy glow. One of Guarneri’s
clients took a job with a small high tech company and negotiated with
stock options in lieu of one-time bonus. "He couldn’t use it while
he was employed, but five years down the line, the company got bought
out and the stock split twice. He got better than $1 million or 10
times more than the one-time bonus."
But Miller and Tate caution against those rose-colored glasses. "You
read about all the high flyers that do so well, but what you don’t
read about is the ones that fall on their faces," says Tate.
Nielsen gives a for instance: A Princeton-based start-up firm that
went down the tubes, and "a very promising middle-aged guy"
lost his job and lost his house because the stock he was counting
on just never appeared. "Don’t get starry eyed and go out and
buy a million dollar house," says Nielsen, "Don’t mortgage
your house to buy the shares. Take all the precautions to mitigate
Consider the job as an investment, yes, but also consider the job
as a job. "Ask is this the kind of job that I want with the opportunity
that I want, with the growth potential I want," says Miller. "Taking
a job just for the money is usually a mistake. Pick a job that you
will want, that you will enjoy, that will let you grow. Then negotiate
the best possible deal you can get."
Setting salaries for high-flying web companies, says
Kevin Conner, is very difficult. Conner & Associates PC, a CPA
firm specializing in Internet startups (E-mail: email@example.com).
Conner worked with Jeff Bezos before his Amazon.com went
public and has helped a number of high-tech firms enter the capital
market. "Salaries are the biggest problem we are having. The Internet
companies are paying 25-year-old kids, $80,000 plus stock options
worth a million bucks."
If the company has yet to go public, how does the prospective employee
know what the stock options are worth? "What you are doing is
buying into a dream," warns Conner. "You are really buying
into the individuals. Look into their backgrounds, and at the venture
"If you can double your money on the stock option price, you have
a winner, but you are not going to be able to sell for from 6 to 24
months anyway," says Conner. "It comes down to the integrity
and credibility of the people you are working with."
You don’t have to be an employee of a fast-rising high-tech company
to profit from their success, says Conner. He learned this from his
otherwise unfortunate encounter with Bezos: "I read his original
business plan and was attempting to be his CPA. He decided to go with
another firm, a big firm."
As much as that hurt, Conner admits that for a company going public,
"having a big firm as your accountant is an absolute necessity."
Still, he sees a big window of opportunity. "We can provide the
back office support. At this point I am helping in several rounds
of financing and raising money from other clients."
"As a small firm we’ve taken business plans, revamped them, prepared
projections (up to and including tax returns) and then passed it off
it to the large firm." Young companies need these services for
their "red herring," the initial filing to the Securities
and Exchange Commission. "They can afford us until they are required
by market forces to go with the larger firm," says Conner. "The
larger firms feel comfortable with our passing the information on,
and they throw us the small fish. It’s worked for me so far. It’s
a good way to get into start-up and emerging growth businesses, because
I can take an equity position when I pass it off."
Conner grew up in Philadelphia, and went to West Chester University,
Class of 1984. He worked for both large and small firms and liked
small firms better, because they focused on the client rather than
on billings. His wife, a retail and marketing manager, is at home
with their preschool children. Conner founded the firm with his brother
Joseph, who is president, and they have offices in Princeton and Newtwon.
Conner, a member of the New Jersey Entrepreneurial Network, provides
corporate finance advisory services such as raising money, perfecting
business plans, coordinating bankers and lawyers. He started doing
investment banking in 1992 and has accumulated enough funds that he
can also do venture capital. "I will not get involved unless I
can become a principal," says Conner.
He suggests asking these questions when evaluating a company that
expects to go public:
a vice president of sales who has done it before. "The core part
of the group has to be good at what they do."
so instead, "spend time with them, feel them out. I have gone
as far as hiring a private investigator to do background checks."
In summary: If you are potential hire or a potential investor for a
start-up, take a close look at who is at the top. And if you are a
small company looking for business with young companies, be ready to
go bottom fishing. Look for the little fish — and be ready to pass
the business off to a mega company when the little fish matures.
— Barbara Fox
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