[buug] Pre-IPO companies

[f.johan.beisser]

On Wed, 5 May 2004, Bill Honeycutt wrote:

> I know many BUUG'ers have had experiences with IPO's and pre-IPO's.
> I'm looking for your input regarding the good, the bad and the ugly side
> of working for them (or choosing which ones you might work for).

oh man, this is an ugly question.

> If you are being courted to take a position with a startup company:
>
>   - What are the good/bad things to look for?

the bad, way more stock than you think you want in an offer. giving out
large amounts of options in liew of cash/pay is a big warning sign imho.

take a look around and see how much space they have. has there been a
large hiring spree? if you know anyone in the CO, find out if there's been
a freeze or word of one in the grapevine. find out how many hours a week
they work.

The good.. After having worked for multiple start-ups in the last 6
years.. here's the good. The good to find is enthusiastic workers. people
who like the product, know what it is, and can explain what's happening in
teh company to you. Look for some communication between executives and
employees. This is mostly (sadly) appliciable to smaller companies, since
the larger ones will depend on the group you work for.

Managers in start-ups are usually fresh fish to the job. They tend to
suck, and some just don't know it. look for them being able to do the job
they were initially hired for.

A rule i've encountered: the smaller the startup, the more confusion there
is as to what it is you do. collarary: the more focused the initial
employees/founders are, the less confusion there is during first wave
expansion.

The pre-IPO company is a little different. There's a large, and evil, gap
between the startup (10/20 people) and the pre-IPO company (200? 300?
people). this gap is in behaviour to meet financials to have a good
opening. it seems to be: massive hiring of new employees, lack of
infrastructure, and then layoffs to meet stock expectations or keep
listed. these are not always in line, mind you.

>   - What are the best questions to ask?

- business plan? where is the company going to be in 5 years?
- who are the current execs? who's on the board? what's their background?
  what other companies do the execs work for? on the board with?
- who is auditing the company? who's handling the IPO (if imminent)?
- who is issuing the VC (if any)?
- what hours are common for the average employee?
- what are the stock purchace rules (once stock is involved)?
- what are the cash reserves?

>   - What percentage earn payback for everyone -vs- making you broke?

i know very few people who've jackpotted off of an IPO. one of the big
headaches is that most employees have to hold the stock for 6 months
before being able to sell. the other, of course, is that by then the IPO
blitz has gone off and the initial high is done, the stock may be worth
less than the paper it's printed on (which has happened to other friends).
in most cases, though, people have NOT come out ahead despite having many
thousands of options (this happened to me, twice).

the 6 month moratorium on sale doesn't seem to apply to board members or
many execs, and that is something to remember. the behaviour of the board
and executives can make or break a company rather quickly. especially
right after the IPO.

also, remember that options are NOT stock. don't be fooled. options are
rather like a carrot at the end of a stick, designed to keep you around.

>   - Where's the "IPO Employee Hazards FAQ"?
>   - How long should you make the barge pole when getting close? : )

very, very, long. remember that corparations are not people, and are only
as ethical as their employees, managers, and executives.

> I'm sure this could draw out some grusome war stories.  IMHO, we're not
> so far away from a day when seed money begins to creep out of hiding and
> techies will again be invited to become grist for the mill.

it's already started again, in a few cases.

-------/ f. johan beisser /--------------------------------------+
	The other day I asked former Yankees pitcher Jim Bouton
        what he thought of our great victory over Iraq, and he
        said, "Mohammed Ali versus Mr. Rogers."
		-- kurt vonnegut, 5.9.03