By Jim Turner
The dot com bloodbath isn’t over. More Internet start-ups are expected to be bought out or go bust in the coming months. Many are laying off workers and redefining their mission in order to survive. By the time the shakeout is complete, it’s likely that 90 percent of all dot coms will go under, according to predictions from Gartner, a business technology advisor based in Stamford, CT. (TechRepublic is a subsidiary of Gartner.)
The dot-com death watch is in the news almost daily—so IT professionals obviously know that taking a new job with a start-up is a risk. Yet some are willing to accept this uncertainty because a start-up may offer them a position that’s high on the corporate food chain, comes with a bigger salary, or has an employee-friendly work environment.
Dawn Haden is an example of a dot-com worker who is glad she took the risk. She recently took a job as human resources director for Headhunter.net, a job directory Web site. It’s her second dot-com job and so far she’s happy with the move.
“I decided this was an awesome company,” she said. “And when you look at all of the important things—[the stage of] development, the product, the management team—it’s just a wonderful place to come to work.”
But before she took the job, Haden did her homework and you should, too. If you are considering a job with an Internet start-up or an established dot com, this article will outline some of the questions you should ask before you take the plunge. Dot coms have been around long enough that you can learn important lessons from the veterans of the New Economy and the experts who have been studying it. Here are five questions you should ask:
1. Ask tough questions about money
It wasn’t long ago that revenue projections weren’t all that important for free-spending e-businesses unconcerned with the bottom line. The mid-April plunge of the NASDAQ reminded investors and business leaders that profit does matter. Though many dot coms are still nowhere near profitable, they are expected to have a roadmap to get there.
You need to know if the company “has made the leap to a sustainable company,” said Faye Sutton, a cooperative education and career services professor at the University of Louisville in Louisville, KY.
Among the financial questions you should ask:
- Have you reached your third round of funding?
- How much funding is available at this time?
- If the company is in the red, when does it expect to have a positive cash flow?
- If the company is profitable, are profits meeting projections?
- How many employees were there at the start and how many are there now?
- Have there been any layoffs? If so, why?
- What is the financial background of the company’s founder and key investors?
- If the start-up is associated with a traditional brick-and-mortar company, will that relationship ensure the future of its dot-com partner?
- Contact a credit agency and have the agency run a credit report on the company. Find out if the company is paying its bills on time.
- Ask the company’s customers questions to determine if they are pleased with the product or services.
- Talk to the company’s competitors. If anyone is willing to dish the dirt on a company, it’s a competitor. Again, you should have a healthy dose of cynicism when weighing information from this kind of source. During interviews with your prospective employer, you should give the company representatives a chance to respond to any damaging information you may have learned because it may be inaccurate.
- F*****Company: This Web site allows dot-com workers to provide inside information on start-ups. However, keep in mind that this is a site that critics consider irreverent and not as reliable as established news organizations. The site clearly labels some information as rumors.
2. Who’s running the show?
No offense to Generation X, but you can trust people over 30. In fact, if you look around and see no one with wrinkles, watch out. You’ll want to see experienced hands to guide the business, or at least help navigate it.
“You have to look hard at the management team. I think in the past, people have had really good ideas. But there hasn’t been the management structure to make things happen. You want people who know what it takes to be successful,” said Haden.
TechRepublic columnist Tim Landgrave advises you to look for indications that management has a personal stake in the company.
“Never invest in or partner with any start-up company where at least one of the founders hasn't started a business using his or her own personal capital—charge cards, second mortgage, or family money…,” said Landgrave.
3. What is the company’s business plan?
Web sites with revenue from advertising alone will not likely sustain the business, according to many analysts. Content-based dot coms were among the first to announce layoffs and failure. But this idea should be extended to other Internet businesses, too. You need to question the company’s business plan to determine if they are providing a product or service with a real value proposition.
”Also, you should know what their vision is. If they can’t articulate [their business plan], you need to think long and hard if this is the company for you,” said Sutton.
4. How fast has the company grown?
Darwin Networks, a provider of high-speed Internet access, recently laid off more than half of its workers nationwide, including the company’s top two officers. The Louisville Courier-Journal reported that CEO Jon Spector told employees that the company grew too rapidly and opened too many offices.
If you are considering a job with a company that appears to be successful and growing quickly, you need to ask if there is evidence it has grown too fast.
Some companies “don’t know how to manage growth…tremendous growth can be healthy, but it can also be the demise of a company as well,“ Sutton said.
5. Do the benefits offset the drawbacks?
Casual dress codes, quick promotions, and the opportunity to take on important projects are among the benefits of working for a dot com. Haden enjoys a corporate culture at Headhunter.net that emphasizes the importance of every employee.
“We have almost 400 employees now, and even at this size we’ve maintained a start-up atmosphere...and you’re able to make an impact on the organization in a very short period of time,” said Haden.
However, these advantages need to be weighed against the increased workload that is common among IT pros who work at start-ups. Consider these questions:
- What is the typical workweek? Is there any “comp” time or other bonus if you work exceptionally long weeks or months?
- As the company grows, is it willing to outsource certain job functions if the IT department becomes overwhelmed with new responsibilities?
- If the company pays for training, is there a “training reimbursement policy,” an agreement that requires you to remain employed for a certain amount of time or else pay back the cost of training?
- Will certain benefits that employees enjoy now remain in place as the company expands? (For example, will you have to share office space when there is a hiring surge?)
Jim Turner is a freelance writer who lives in Louisville, KY.What questions would you add to this list? What’s the best way to find out what’s really going on inside a company? Post a comment to this article or send us a letter.