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Career Advisor by Edgar Saadi

Stock options: Is there a magic number?

Negotiating your pay package with a startup -- Edgar pinpoints 5 major considerations and provides sound advice for budding sysadmins

April  1999
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Wondering what to do when it comes time to negotiate your salary? How much stock is adequate in a startup situation? Interested in a career as a Linux sysadmin? How about general system administration? This month, Edgar and company shed light on these issues. (1,700 words)

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Startup fever

Dear Edgar,

I recently received a master's degree and have been interviewing with several Bay Area startups. What I want to know is, how much stock can a person with limited experience, but lots of knowledge expect? Does 5,000 shares out of 10 million sound reasonable to you?

New Kid on the Block

Dear New Kid,

When considering stock as part of your total compensation, you have to look at a number of variables.

First, what stage is the company in? How far along is the startup? How many rounds of funding have there been? How many employees are already on board? Often, people think they are getting in on the ground floor of a company, not taking into account all the vision, organization, risk, investment, and hard work that it took to raise the venture from simply an idea to a functioning entity.

Second, what is the nature of your compensation package? Are you being paid primarily with salary, stock, or both? In the flexible structure of early startups, people are often compensated in different ways. Some require a good salary (immediate gratification); others prefer to defer payment for a bigger payoff down the road and ask for more stock. If the company has the funding to pay salaries, it may not want to compensate you with much stock.

Third, what is your level of experience? What are you bringing to the table, and what kind of an impact will you have on the organization? Just because you've joined in the early stages, doesn't mean you're entitled to a lot of stock. The people who are going to take the larger shares are those who come with skills and really help build the company.

Fourth, you should also take into consideration your geography, realizing that startups in more competitive environments (Silicon Valley, for example) usually have to be more aggressive in their hiring, because they are vying for talent that is in high demand. Competitive environments allow much more room for negotiation.

Fifth, the amount you receive now may not necessarily be the end of the story. As time goes on, the company may decide to offer shares in lieu of bonuses or salary increases. On the other hand, your equity percentage may be diluted if there are further rounds of funding and more investors come on board and more stock is issued. This does not necessarily mean that your stock will be worth less, as the infusion of new capital could make the entire pie worth more -- but it is something to keep in mind.

Evaluate all of the factors described above and how they relate to your situation. But, considering that you are fresh out of school, I would say that 5,000 seems like an outstanding compensation. When you're finished doing back flips, I would take a moment to think about the people, the vision, and the work environment -- then sign on that dotted line.



What about Linux?

Dear Edgar,

Do you have any information about Linux system administration? Linux support is growing by leaps and bounds, and I would like to find out more about this OS and the possibilities of a career in Linux system administration.

Linux Hopeful

Dear Hopeful,

When it first appeared on the scene, Linux was viewed as an interesting piece of freeware. Since then, however, it has gained sophistication, tools, popularity, and tremendous momentum. A wide installation base and the attention and/or support of all the industry heavyweights -- including Dell, Compaq, HP, and Oracle -- attest to its viability.

According to a recent article in the New York Times, Microsoft even expressed worry about the OS in its antitrust trial proceedings. The article also cited an internal memo that quoted a Microsoft engineer describing the possible ways that "Linux can win." What started as an interesting piece of freeware is now clearly something to be reckoned with.

Created eight years ago by Linus Torvalds, a Finnish programmer, the OS has been collectively evolved by developers working all over the world -- most of whom contribute as a labor of love. Although it runs on only 7 million computers worldwide (as compared to 250 million plus that run Windows 95, 98, or NT), Linux is the only OS outside of the Microsoft product line that is gaining marketshare.

Another recent article quoted America Online's new CTO, Mark Andreessen: "It's better than Windows NT, it's faster, and it's free. What more do you want?"

In relation to the other Unixes, he said, "Linux has captured the mainstream of Internet development at the operating system level, clearly. It's benefitting from all the tools, 30 years of development. I think it's going to consolidate the Unix market around itself. Every Unix maker is going to become a Linux vendor."

Collective Technologies CTO Jeff Tyler says that in terms of system administration, Linux doesn't represent a whole new skill set, rather "it is a very 'Unix-like' system; if you know a System V Unix, you pretty much know Linux with the exception of the 'value-add' stuff that the major distributions toss in to sweeten the pot for new users."

Jeff says that at Collective Technologies, a leading system administration consulting company, "We just treat it like another flavor of Unix and assume that everyone knows it (or can pick it up very quickly when they need it). A high percentage of our people run it at home, but from a training standpoint we regard it as 'free.'"

If you're a system administrator, looking into Linux would be a wise move.


Where should my career go?

Dear Edgar,

I am currently employed as a Unix system administrator for an East Coast company. Other than a couple of weeklong courses on topics such as shell scripting, I have no formal educational background in the computer field (I have a degree, but in a totally unrelated area). Most of my sysadmin training was on the job -- high-pressure, but I learned a great deal.

Recently, we hired a contractor from Collective Technologies to help with our increased workload. Working with him has made me realize how much I don't know.

Because I have such a hodgepodge of training, it's hard for me to know where to begin on expanding my skill set and filling in the gaps in my knowledge -- sometimes I don't even know where the gaps are! (This also makes it hard for me to expand my capabilities from books alone.) I'm not really sure if I want to work as a sysadmin internally or work as a consultant for a firm like Collective, but I do know that I need to find some sort of formal study program that will help me advance my skills.

Are there any testing and training programs you can suggest? Where do I go from here?

Getting Better

Dear Getting Better,

Who better to respond to such an inquiry, than Jeff Tyler, the CTO of Collective Technologies:

I don't know anyone who went to school specifically to study system administration -- and I know a lot of sysadmins -- but I do know a few folks who completed a BSCE (and to be honest, I'm not sure that the degree gave them any advantage over my sysadmin friends who majored in music).

I, incidentally, learned system administration by doing it, supplementing my knowledge with several courses. Courses I've found useful include those that covered the Unix kernel (Learning Tree and Sun offer such a course), sendmail (a conference favorite), and basic networking (it's hard to beat Cisco for courses in networking, and many schools now offer Cisco companion courses).

USENIX and SAGE events such as LISA and the SANS conference often have excellent "short courses" that can serve as useful introductions to the various functional areas of the profession. And, of course, buy all of the Nutshell handbooks you can get your hands on.

Beyond that, you've provided part of the answer in your own question: your job can and often does provide the stimulus to grow into being a senior system administrator. The four years I spent in Digital's DECathena group, dealing with multiple Unixes, were a major factor in my personal technical growth. It was strictly a perform-or-die environment.

My advice to you is to take the leap and do some job hopping, or become a consultant. Both of these avenues will help you broaden and deepen your experience. If you're in a job with a high comfort zone, you're most likely not growing.

If you decide to move on, find challenging work where the people know more than you do. Any shop worth working at will consider a good journeyperson who has the basics down and shows a desire to learn.

Jeff Tyler, CTO
Collective Technologies

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About the author
[Edgar Saadi] Edgar Saadi is senior vice president of Pencom Systems Inc., the largest open systems/advanced systems recruiting firm in the US. In his many years in high technology staffing, Edgar has helped guide the careers of thousands of open systems professionals. Visit the Pencom Career Center and the new 1999 Interactive Salary Guide, featuring the new online trends magazine Tech-It-Out!.

[Pencom Interactive]

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