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Career Advisor by Edgar Saadi

Start-Up Fever

There's an up side, and a down side. Know both.

April  1996
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Start-ups! On the leading edge, stock options, excitement, hot products! Also: round-the-clock schedules, high risk of failure, plenty of stress. No, start-ups aren't for everyone -- are they for you? Career professional Ed Saadi helps you figure it out. (1,200 words)

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Dear Edgar,

I just moved out to Silicon Valley from New York City, where I was doing distributed application programming for a big investment bank. I moved to the West Coast for a change in lifestyle and have luckily had a couple of job offers almost simultaneously. One is for a bank, doing very similar work to what I was doing in New York. The other is for a start-up company doing Web development and Java programming. I'm naturally inclined to take the safe route, but there's something in the air out here, something about the possibility of doing really leading-edge work. I'm now having serious thoughts about going with the start-up. Is this an impossible risk? What should I be looking for in this kind of a job? Signed,
Starting Again

Dear Starting Again,

Not everyone has the right personality to jump into a start-up and make it work. Most people from the East Coast are less familiar with start-up mania and are not as enthused with the whole idea. They are more traditionally focused on stable companies with predictable growth patterns. In the Valley, start-ups are all the rage. To be a part of a winning start-up, you must be dynamic, adventurous, and entrepreneurial. You have to be willing to dig in, roll up your sleeves and do anything and everything it takes to make that company succeed. Its not a simple roll of the dice kind of risk. It's a risk in which you and your colleagues set the odds.

The computer industry has given new meaning to the word start-up. Never has history seen so many companies rise up so quickly and generate such incredible growth, revenue, and dominance. Who doesn't know the story of Apple, starting in a garage? Jobs's start-up legend built this town -- it is a part of the mentality here. Now everyone is talking about the phenomenon called Netscape.


What is a start-up?
A successful start-up begins with a brilliant idea. Around this idea a business plan is built. This plan is then used to sell the idea to a potential backer. Funding is obtained from private individuals, venture capitalists, or corporations. Usually, it is a combination of all three.

Once the seed money is in, the company hires according to the business plan and sets itself on the fast track to produce -- to get a product out the door. Venture capitalists are generally playing a more active and conservative role these days. They are acting as gatekeepers -- making sure that the spending isn't getting out of hand and that the production is on track. They are holding back new monies until milestones are reached. With these milestones, you generally see first, second, and third rounds of funding. All the while, they are checking to be sure that these rounds aren't funding a cloud of vaporware.

The right balance
There are basically two classes of people who start companies in this industry: technical types and business types. Usually the initial inspiration is technical in nature, coming from someone who feels he or she can change the world. On the other hand, there are many successful start-ups which began with a savvy business type who understands the marketplace, recognizes a need, and sets out to fill it.

Ultimately, there must be a good balance. Fledgling companies too often have the brilliant engineers who create a superior product but cannot get it to market, or a brilliant idea but not the right people to turn it into a product. If either side dominates too heavily, the company will topple over.

The up side
It is exciting. Most start-ups have an air of risk and entrepreneurship -- the feeling that anything is possible. Most likely you will have the chance to work with leading-edge technologies.

You will gain breadth. As the projects stretch and expand, most employees are called on to do peripheral work -- get their hands in everything. You have the chance to learn all angles of the business.

You will gain depth. Since you work day and night, focusing on the delivery of a given product, you will certainly gain depth in the field and become an expert in what is usually a hot technology.

You could become rich. Since you are taking the risk of leaving a stable environment, they typically give you part ownership, in the form of equity options. The earlier you get in, the more you stand to gain. And if the company does take off, there are no limits. (The first two thousand employees of Microsoft are all millionaires. The first secretary of Apple is a multimillionaire.)

The down side
It is risky. In the 1980's about one in 14 of all start-ups succeeded. There is a resurgence of the start-up fever these days, with most of them centering on the Internet and client/server technologies. The majority of these companies will go through shake-ups in the next two to three years and when the dust settles, only a fraction will remain standing.

The pay is lower. You are compensated with stock options, but in the meantime, you receive lower wages -- meaning less for food and rent. And if the start-up goes belly-up, those options go with it.

The hours are longer. You cannot join a start-up, gamble on its success, and expect to simply work as hard as you ever have. The commitment is extensive and only blood, sweat, and determination will make the company fly. You are the key to its success.

What to look for
Look at the people funding the company. Some are backed by losers out for a gamble. Others are backed by winners like Paul Allen, with a record of success and deep pockets to carry it in tough times. Look closely at the stock options. It's nice if they offer you 10,000 shares, but not if they've allocated 50 million. Look at the technology. If this thing fails, will you have put some valuable work on your resume?

Look at the culture. Normally there is a tremendous amount of teamwork in a start-up -- sparks are flying. Under one roof there is one team, working closely against the odds towards one goal. There should be a tangible sense of excitement and entrepreneurship. You typically work 65 to 85 hours or more a week, pushing towards the 21st century. Do you want to devote the next few months/years to a life with these people -- pushing for greatness?

The long run
In the end, if the start-up does fail, it is not necessarily a blemish on your career. It obviously required a lot of initiative and long work hours to make that step. It is also more than likely that your work will have been centered on hot technologies. (If, of course, your record shows that you skip between companies every six months, that could be a problem.)

Even though a failed attempt may not look so bad, you should still stay alert to the signals within the company while you're working those long hours. Most good engineers with a grip on their careers are safely on board a new vessel before the old ship hits bottom. Even if you have absolute faith in the product you are developing, remember that there are many factors that go into the success or failure of a venture. The business people could be morons; the marketplace might not yet be ready; a huge competitor could step in and stamp you out.

The world of start-ups is an exciting one; but be fully aware of the kind of commitment and risk that goes along with it. It is the spring of 1996 and if you are the kind that likes adventure and new technologies, the time is certainly right. Edgar

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