The mantra among many high-tech professionals is "Pre-IPO, Pre-IPO, Pre-IPO." The stories of technologists hitting the "big one" with pre-IPO stock options are legendary. The current market for technology IPO's has been compared with the Gold Rush of the mid-1800's.
Unfortunately, like the Gold Rush, very few walk away with vast amounts of wealth. The Microsoft, Netscape and Yahoo stories must be compared with the many forgotten names that failed.
The Technology IPO Yearbook, Spring 1999, from Morgan Stanley Dean Witter was a study of the 1,243 technology (non-healthcare) companies that went public from 1980 to 1998. According to the study, these companies generated $1.9 trillion in market value. As expected, the top three segments of the market, in terms of investment and profit, were software, networking, and the Internet. Looking at the distribution of the $1.9 trillion gives a less enthusiastic impression.
To the few go the riches. The study shows that 86% of the market value generated since 1980 was created by only 5% of the IPO's. While 58% of the IPOs are up in terms of market capitalization since their IPO, 42% are down to flat for the same period. Additionally, of the 969 companies that were not acquired, 49% have had rising stock prices since their IPO date. The means the majority has had declining or flat stock prices.
To be fair, the gains made by the 50 best tech IPOs significantly outweigh the losses of the 50 worst IPOs. The 50 worst IPOs lost $17 billion in the markets, which is about 1% of the value created by the 50 best IPOs.
Other factors to consider.
While pre-IPO companies are less than a sure thing, there are other factors that may make employment less attractive:
- Long hours. Think of the 90-hour weeks. Time to dust off the sleeping bag.
- Little or no pay. Hitching your wagon to stock options is a financial risk.
- Inexperienced management. Most of the folks in this world with great ideas are not the best managers. The situation can be brutal for the employees.
Living the good life in Silicon Valley is a challenge. Buying a house seems almost impossible without hitting the jackpot. If joining a pre-IPO company does not guarantee rewards, what's a high-tech professional to do?
The post-IPO option.
Since Netscape went public, there have been 96 Internet IPOs. Of those, 82% have gone up in market value. The post-IPO increase in market capitalization for these companies is $374 billion compared with the pre-IPO increase in value of $40 billion. There is still much money to be made after the IPO date. Additionally, there are other advantages to post-IPO companies:
- More stable work environment. Post-IPO companies have stockholders to be accountable to.
- Less stress and shorter work hours.
- Steady income, not including profits from stock options.
There are more fortunes to be made with pre-IPO companies; however, the odds are in favor of post-IPOs.
It's in the Cards
If you are looking to cast your fortunes with a pre-IPO company, the question remains; which company will succeed?
Thomas Scoville, a 15-year veteran of Silicon Valley, has developed a "fool-proof" method for predicting the future of IPO's: Silicon Valley Tarot. Point your browser to www.sjgames.com/svtarot to run your company's strategic plan through the tarot deck. For those wanting a hands-on experience, a physical deck of 70 cards is now available with a 44-page guidebook.
Scoville is surprised by the response to his site that spoofs the workings of Silicon Valley. "The frightening thing about it-some people don't get that it's a joke. I get messages congratulating me on my spiritual insight."
Opening Doors to Opportunities:
User Groups and Professional Organizations
User groups and other professional organizations can serve as a step towards the ideal job. Most careers are made through the professional networks we create. Many times it's not so much what you know as who you know.
Being actively involved with a group associated with your technical specialty may open doors to new opportunities. Fellow members get to know your expertise, experience and your personality. As members get to know you, they may want to work with you. Make a good impression!
One user group offering many features to aid in your career development is the Software Development Forum (SDF). (www.sdforum.org) Activities include:
- Monthly Dinner Meetings- Each month a new speaker is featured.
- Special Interest Groups (SIGs)- 12 different groups on such topics as Open Source, E-commerce, Java.
- One-on-one Meetings- Schedule a meeting with a Venture Capitalist to pitch your idea or get feedback on your business plan.
- Testing & Porting Labs- Test out your ideas.
- Other Seminars and Events- Usually targeted towards start-ups.
In addition to SDF, there are many other user groups and organizations. Some of the Silicon Valley based groups include:
- NT Engineering Association of Silicon Valley- www.ntea.net
- San Francisco Perl Users Group (AKA Perl Mongers)- sf.pm.org
- Silicon Valley Java User Group- svjug.org
- Society for Technical Communications- stc.org/region8/svc/www
- BayLISA- Systems and Network Administrators- www.baylisa.org
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Tech-Notes
EDITOR: MICHELLE OGBURN
Albin Engineering Services, Inc.
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