My broker just offered to get me into some Internet initial public offerings (IPOs). Maybe I'd have been more excited if I hadn't already worked for four pre-IPO high-tech companies. Don't get me wrong - everyone should work for a startup at least once in his or her career. You may discover, as I did, that startups are often the quickest route to an interesting job in the hottest new technology areas. You'll have the opportunity to become involved with real business decisions more than you ever would have at a larger company. Startups bring constant variety, glamour and adventure. I've gnawed on smoked mutton in Norway, ridden in a rickshaw in India and stood five feet away while Microsoft chairman Bill Gates inspected my company's booth at a trade show. I've also lived through a lot of chaos and disappointment.
My first pre-IPO experience was at a software vendor with a staff of about 600. Between attrition and rapid growth, it only took six months before I was more senior than half the staff. It didn't require all six months to discover that none of the marketing or finance techniques I learned in business school were going to be useful. I was too inexperienced to appreciate that, in comparison to most privately held high-tech companies, this one was relatively sophisticated. (Ten years later, I have yet to see a business case for a new product that even attempts to use net present value analysis, although friends of mine in more mature industries, who have MBAs, assure me that they actually use what they learned in school.)Working for a company in which everything is new is a heady experience, but how do you know if the company is ever going to make it? You don't. The venture capitalists don't, either - they assume that only 10 to 20 per cent of the companies they back will ever succeed. The work experience of the CEO is important, but his/her motivation is most crucial. Companies that make it - and those that make satisfying employers even when they don't make it - are run by founders who are motivated by the vision of a superior product. And they have the ambition to make that dream come true. CEOs whose business plans are to sell out and get rich can be pretty hard to work for.
Find out who is putting up the money. Quality backers mould clever technologists into successful CEOs. Investment by big-name venture capitalists indicates that a company has been carefully evaluated by professionals, those experienced in finding promising entrepreneurs. Inexperienced backers who have never invested in a successful startup venture are a danger sign.
IPOs also require sacrifice; don't live through one without options. Shares might be recast before your company goes public, so there is no guarantee that you'll end up with the same percentage of corporate equity that you anticipated. Remember that your stock won't exist until you are vested and the company has had a successful IPO, which will take three to five years. Is the company based on a hot buzzword that will cool off before then?
Don't count on becoming rich from stock options. Get your money up front, and make sure the job comes with full benefits. You'll be shocked at the cost of long-term disability insurance. Make certain your family understands you'll be working long, often frustrating hours for an unprofitable company with limited flexibility. Prepare for the best and worst of times. Avoid any high-tech company with a product named after the founder.
Constant variety and a drive to be successful builds camaraderie. The co-workers you stuff envelopes with one evening will be with you tomorrow when you make a critical presentation to a CIO, analyst, or venture capitalist. Your odds of making large sums of money on stock are slim, but I guarantee that time spent with a startup will be a wealth of experience. If you want to be rich, work for a visionary with good backing.