Adding the phrase "pre-IPO" to any want-ad turns a ho-hum job into your shot at millions - or so it seems. 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 growthSure, some of the current crop of IT professionals will undoubtedly make their fortune by leaving their existing organisations to work at such start-ups. Fledging Internet companies know they have to wage war to attract staff if they want to succeed and prosper, and one way they're doing this is by offering stock options to people likely to be instrumental in the success of the company.

Adam Weatherley, e-commerce recruitment consultant with Morgan and Banks Technology, has already met several IT professionals who are desperate to leave their new dotcom start-ups before they founder.

"They're saying ‘listen, I think I need to get out quick because I need this, this and this to make our Internet site look good and function properly, and it doesn't seem to be forthcoming, and that tells me that there's a financial problem'," Weatherley said.

Yet the risks should never be ignored. The cold facts are not very comforting when it comes to IPOs.

Historically, initial public offerings (IPOs) are a terrible investment, as they often take years to show any significant increase in value. That means that before you join an Internet start-up you need to think long and hard and do a careful evaluation of its prospects of survival.

"There's been this mad initial frenzy over start-ups and some of them have translated that into substantial earnings, but most people have come to the view that most start-ups won't necessarily be successful financially, they won't yield a profit," said Ken Love, a senior manager at Deloitte Consulting.

"So there's a real risk of getting caught up in this feeding frenzy only to find there's not much left worth having."

And opportunities abound. Weatherley said there were plenty of start-ups in Australia crying out for staff, in an industry that was already at least 30,000 people short and where the shortfall was projected to rise to 100,000 or even higher within a couple of years.

"In general, the start-ups are looking for Web developers, they're looking for object-oriented designers and developers, they're looking for good project managers with proven track records of delivery of large complex technical projects. There are an enormous amount of opportunities, especially in that Internet e-commerce space."

IT professionals joining a start-up before it floats can look to receive a good base salary with the usual package benefits. But it is the generous stock options that are most tempting.

"They're usually done over a three-year period, where the first year you can't realise them, the second year you might be able to realise some of them, the third year you can take the lot," Weatherley said. "And they can run into hundreds of thousands of dollars.

"It's a way of giving wealth back to the employee and showing that they have been absolutely instrumental to the success of the company and that seems to be something that's catching on very much in the Internet space."

But it's all too easy to end up losing money on stock, after having sacrificed your personal life for the company. Working for a start-up is a gamble and should always be treated as such.

"Certainly they're really challenging the traditional salary structures of the industry," said John Roberts, research director and manager of technology with Gartner Group.

"In the past you might have said the best salaries came from joining a consulting firm, let's say, that tended to have to pay fairly high dollars to get their people. Now the idea is to find a successful start-up, make your millions and retire in two years."

But stocks are only worth something if the company succeeds.

On the plus side, Roberts said, joining a start-up gets you out of all the constraints that come with being in a large company, with all the controls and checks and balances that typically implies. Suddenly you're in a place where it's all happening, and happening this week or at the very least, this month.

But the downside is serious and should never be ignored, and that's the very high risk: that the fledging business will end up going nowhere. Take CD Now, which Arthur Andersen has concluded in its latest audit may not have enough cash to last beyond September. Or which according to a report in The Age last week was looking for more cash after its expensive advertising campaigns and marketing efforts produced a total of just $40,000 in sales. Or, another local e-tailer with a big advertising budget, reportedly also hunting for a fresh cash injection, most likely for similar reasons. IT staff in all three organisations must surely be starting to rethink the wisdom of their most recent career choice.

Roberts says for those who end up joining the 10 per cent of start-ups that succeed the rewards will be enormous. But 90 per cent will fail, and IT professionals better be well aware of the risks.

"At the end of the day the only risk mitigation you can do is to do your own assessment of the idea and the quality of the people involved, before deciding whether this one will be ahead of the pack," he said.

No doubt, the meteoric climb of Internet start-ups has captured the imagination of many people. In an era of irrational market valuations for some rather dubious dotcom companies, it's difficult to maintain perspective and rationally evaluate the potential profit of working at a start-up versus sticking with a more established company.

There are plenty of dreamers out there with great plans for their companies and not more than high hopes behind them. Weatherley says horror stories have already emerged about people with the nucleus of a brilliant idea who win venture capital then hope that a major company will come along and snap them up for a small fortune. When that doesn't happen, the board's directors tend to be very well looked after while the employees are left to founder.

"Now I think, on the whole, it is a rarity. The people that are going out there to build a business in the marketplace are doing a professional job. But you do hear the horror stories, and that means you have to do your due diligence first."

"If it's a start-up situation the candidate would typically be interviewed by the general manager or the head of technology. There is no harm in saying ‘Excuse me for asking this question but obviously I have to cover myself; where is your venture capital coming from, and do you have enough?'"Start-up companies can be badly financed," according to Weatherley. "People need to find out where are they getting their venture capital from; how much capital they have.

Someone who is in the software development, application development, or Internet space knows how much it costs to even get a Web site up and running and get it running live. It can cost hundreds of thousands of dollars."

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 pay.

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-per cent 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 such work regimes will take on their personal lives.

What benefits do you have or will you get?

You need to accurately assess the value of benefits other than salary and stock, including flexible work hours, telecommuting, day-care subsidies, discounts on health club memberships, and subsidised 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.

How many shares of stock will you get from a start-up?

Just because stock is being offered doesn't mean your dreams of becoming Jess Bezos are almost fulfilled.

The more options, the better. And the earlier you join a company, the more options you're likely to get. A thousand shares of stock, while certainly useful and attractive, is unlikely to let you retire early. To make a major impact on your financial situation, you would probably need at least 10,000 shares. And even 10,000 shares of stock that are worth $1.50 each won't put you on easy street.

What will you pay for your shares?

Options aren't free money - although in some cases they can come close. Companies have a lot of flexibility in how they offer their stock to employees. Some offer employees options for cents per share, while others are closer to the actual IPO price. Find out how much you'll have to invest to make use of your options.

How long until they pay off?

It's crucial to bear in mind how long you'll have to stick around to own all your shares. This typically takes four years or even longer. A start-up is not exactly a get-rich-quick scheme.

What if the company is sold?

Many start-ups make attractive acquisitions - in fact, some are founded in the hope that they'll be acquired by one of the giants, such as or Yahoo.

But what about you, your shares, and your job? Many people who are attracted by the excitement of working for a start-up don't want to work for one of the giants. If your company is bought before you fully realise your investment, you may have to work for a company you don't especially like, or have to give up some of your stock.

How diversified are your investments?

The first rule of a smart investor is to diversify. But with a start-up and its stock, you are effectively placing all your eggs in the company basket.

Presumably, being a part of that company, you'll be working to make sure that its value increases. But all it takes is one major blow, and your investment in this company could be up in smoke.

What other opportunities does the start-up offer?

Although the lure of riches is compelling for many people, there are some other reasons to work for a start-up that don't involve dollar signs.

For example, in most start-ups, people are given greater responsibility than they would have in a more established company. For many, having start-up experience is another step on the career ladder.

What are the odds of striking it rich, really?

Despite headlines that scream about IPOs that triple or quadruple in value, in reality most IPOs settle close to the IPO price. Many actually drop below that IPO price, meaning that if you purchased the stock at the IPO price, you lost money. The accuracy of predicting whether the start-up you work for will be showing valuation in four years is daunting. Realistically, you have something like a one in 10 shot at seeing your stock options become significantly valuable.

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