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Tough Money: Technology

So You Want to Work at a Software Start-Up?

Industry consultants offer a reality check for those wanting to get in on the next Netscape.


You are a brilliant, young computer software code writer, or a public relations specialist, or a marketing expert, and you have heard the stories. People like you are being snapped up by wildly creative yet casually managed software start-ups that are springing up across the nation like mushrooms after a hard rain.

Your future, should you hook up with one of these companies, is assured. You will go to work in jeans, at no set hours. You will be part of a team composed of equally brilliant young people. Together, you will work night and day in a collegial atmosphere. After a few years in this heady environment, your company will go public. The generous stock package you accepted when you took the job is now worth a fortune. At age 30, you have achieved financial independence. Nirvana, right?

Not exactly, says a chorus of high-technology employment agencies and industry analysts.

"The number of people I see who walk in and say, 'I'd like to get in on the next Netscape,' " sighed Susan Flesher, founder of Flesher & Associates, a Los Altos, Calif., employment firm that specializes in placing people in the high-tech industries of Silicon Valley.

Flesher spends a lot of her time doing reality checks for people who say that all they want to do with their lives is work for a software start-up company.

Work in such companies can be rewarding, both intellectually and financially, Flesher and others said. But it can also be grueling, and is unlikely to make most employees millionaires. She and other specialists offer the following myths and realities of working for such firms.

MYTH: I will get rich, rich, rich: "People think that they are going to make a bunch of money and change the world, while wearing cutoffs," said Greg Cobb of KN Bender & Associates, a Phoenix-based merger and acquisitions firm specializing in software companies.

REALITY: Many start-up firms offer no stock packages at all, Cobb said. Even when one is offered, the chances that those stocks are going to make start-up employees millionaires are slim. In 1996, there were fewer than 90 initial public offerings for software companies nationwide. Much more common, Cobb said, are mergers and acquisitions of small start-ups. Nationwide in 1996, there were 500 mergers and acquisitions of software companies, up from about 350 in 1995.

"Mergers and acquisitions of start-ups has been accelerating for the past three years," Cobb said.

Technology in the software industry changes so rapidly that most companies cannot hope to keep reinventing themselves to keep pace, Cobb said. Instead they angle to be acquired by a larger company. A small company positioning itself for acquisition or merger does not offer stock packages to its employees, Cobb said.

MYTH: A start-up company will offer higher beginning salaries to attract the best and the brightest.

REALITY: Even in the highly competitive software technology market, where firms are scrambling to find top-flight computer engineers, start-ups usually offer lower starting salaries than large firms, even when they are trying to lure mid-level people.

"Some of the more sophisticated mid-level code writers can expect to be offered between $45,000 and $55,000 by a start-up," said Nancy Devlin, a partner in Smith, Hampton & Devlin, a San Francisco employment firm that specializes in high-tech jobs. The same code writer would be offered between $60,000 and $75,000 at a larger, more established firm, she said.

Some start-ups sweeten their offers with stock packages, but an employee needs to astutely value the worth of those options and gauge the chances of the company ever going public, Devlin said. Start-ups also sometimes offer less attractive benefits packages than larger companies, she said.

MYTH: In a start-up, I will work as part of an integrated team that gives me a chance to work closely with representatives of various departments. Engineers will be brought together with marketing people, there will be no barriers between departments, and there will be tremendous creative synergy.

REALITY: Some companies do put together exciting, well-functioning teams. And it is essential, Devlin said, that anyone contemplating working for a start-up company be flexible and willing to jump in where needed, because job descriptions--when they exist at all--tend to be fluid as the company expands.

But sometimes, the pressure of having to perform at the breakneck speed the high-tech world demands is just too stressful.

"People just don't know what they are getting into," said Betsy Collard, program director for the Career Action Center in Cupertino, Calif., a nonprofit center with 7,000 members in Silicon Valley that specializes in career counseling.

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