November 30, 2000, 3:07 PM — ADDING THE PHRASE "pre-IPO" to any want-ad turns a ho-hum job into your shot at
millions -- or so it seems.
No doubt, the meteoric climb of Internet start-ups has captured many people's
imaginations. In an era of irrational market valuations for some rather dubious dot-com
companies, it's difficult to maintain perspective and rationally evaluate the potential
profit of working at a start-up vs. sticking with a more established company.
But if you're trying to choose whether to stay the course at your current
company or brave the waters of a start-up, it's crucial to consider the entire
landscape of compensation and career growth.
Start with salary.
Once upon a time, you could expect to work at a start-up for a pittance -- if
you got paid at all. Most senior managers and founders lived in their parents' garages
while building a company into a real business.
The billions of dollars in venture capital being poured into start-ups has
changed all that, giving many start-ups enough cash to pay competitive salaries.
However, if you join a start-up early on -- which increases the likelihood of getting a
large amount of stock -- you may still end up going without a paycheck.
Consider the hours you'll be expected to work.
The defining characteristic of a start-up is working long hours. In the first
year of a start-up's life, it's not uncommon to work 12-hour days, seven days a week.
If you're working double the hours that you now work for the same salary, you've
effectively taken a 50-percent pay cut. And the time that you spend working could very
well have been used for other things.
It's hard to measure the opportunity cost of giving up all your free time. Maybe
you would have spent it on the couch, but then again, maybe you would have taken a
class or written that novel. Those with families have to consider the toll work will
take on their personal lives. (For a financial comparison of the risks and rewards of a
start-up vs. those presented by an established company, see box, below.)
What benefits do you have or will you get?
You need to accurately assess the value of benefits other than salary and stock,
including health insurance, flexible work hours, telecommuting, day-care subsidies,
discounts on health club memberships, and subsidized education.
What kind of long-term stock programs do you already have?
Does your current employer already have some kind of stock program? Employee
stock ownership programs are not uncommon and can create significant wealth for
employees. They don't have the flash of an initial public offering (IPO), but they
often have real value.