3/2/98 Fortune 217+ (See bold below)
1998 WL 2501004
Fortune Magazine
Copyright 1998
Monday, March 2, 1998
Issue: March 2, 1998 Vol. 137 No. 4
Smart Managing/Special On Careers
Is It Time to Bail From Big-Company Life? More executives are trading their
megacompany pay and perks for the risky world of startups. That life isn't for
everyone--but it has never been more inviting.
Eileen P. Gunn
Pacific Bell president David Dorman wasn't happy. When SBC
Communications bought his company's parent last year, he faced his
third corporate move in four years. His family had grown to love the
San Francisco Bay Area and was grumbling at him about their imminent
departure to San Antonio. So after a bit of soul- searching, he
summoned the courage to jump ship. Now he's CEO of a small Bay Area
Internet information services company called PointCast. He's earning
about 30% of his former salary, but he has a pile of stock options
that could make him a multimillionaire someday. "The business model
for phone services is proven," he says of the move. "But no one
knows where the Internet will go. I thought this would be fun."
A growing cadre of corporate defectors like Dorman are thinking
small these days, and many are finding a ready market for their
services. That shouldn't be surprising. Last year alone, reports
San Francisco research firm VentureOne, venture capitalists invested
$6 billion in about 1,100 PointCasts--young companies founded by
engineers and software gurus who know nothing about running a
business. Not long after (sometimes before) their patents are filed,
they need CEOs, financial officers, marketing experts, and other
management types. So these bootstrapped, fast-growth companies, once
cool toward pampered big-company executives, are seriously courting
corporate refugees. Dorman, for example, got at least 30 inquiries
from small companies after the SBC takeover.
For managers being wooed by the startups, some of the attractions
are obvious. The pay and perks may be relatively skimpy, but there
are compensations: the psychic value of being in on the ground floor
of a new venture, plus the possibility of a massive payoff if it pans
out. As John O'Neil, a San Francisco consultant who often advises
executives on jobs, puts it, "There are very few companies where
people feel they have security anyway, so why not try a job that
offers adventure and equity?"
Still, executive coaches regularly warn that such a leap into the
unknown is not for everyone. The financial risk is chillingly real;
stock options in a startup are typically worthless for years, and
many never pay off at all. Also, a lot of corporate managers aren't
as ready as they imagine for the uncertainties of a smaller outfit.
Experts say the corporate defectors happiest at small companies are
those who took the time to find partners they could get along with
and a company that's doing something that stirs their passions. And
it goes without saying, or should, that job jumpers have to be
entrepreneurial--committed to the idea of having a personal stake and
a hands-on role in building a company.
Jesus Leon is a classic big-company expat. Just over a year ago
he gave up a senior-executive slot at Alcatel Alsthom Group, the
global telecom giant, that came with a $200 million budget, two
assistants, six weeks of vacation, a luxury car, and a posting in
Madrid. Now he co-heads product development at Ciena, a recently
public Baltimore-area company with products that increase the
capacity of fiber-optic cables already in the ground. Leon took a
25% pay cut, now takes one week of vacation, drives his wife's
14-year-old Mercedes, and has virtually no budget or staff. He hopes
his stock options will make him rich someday, but meanwhile he revels
in the entrepreneurial challenge. "I love it," he says. "Instead of
looking after 1,200 people whose names I don't know, I get to be an
artist. I get to paint what Ciena will be."
Sound good? Well, if you're a corporate type yearning to be free,
it may be time to figure out if you've got what it takes to make the
move. In some cases, such as Leon's, a firm grasp of specific
technology issues is mandatory. More commonly what you need is a set
of general entrepreneurial skills. Jon Bayless, a general partner
with the Dallas venture capital firm Sevin Rosen, says he likes
"nuts-and-bolts people," those who know how to work within a small
budget and how to bring a new product into the marketplace. Along
those lines, the successful corporate candidate often has
"intrapreneur" experience, such as a key role at a division that's
strategically or geographically separate from the parent.
Another strong plus is a corporate background in the markets that
a startup's trying to crack. Take, for example, Myra Williams, the
new CEO of a Palo Alto startup called Molecular Applications Group.
The company sells software that can expedite certain drug research,
and Williams' former job, director of R&D information resources at
Glaxo Wellcome, made her a prime candidate. Explains Molecular
Applications Group director Gary Morgenthaler: "She had a high-level
position within the customer group we were targeting. She understood
them, knew how to approach them and how to craft a product that would
meet their needs."
As the Internet puts a high-tech edge on just about every
industry, recruiters are also beginning to see demand for people who
can adapt their low-tech job skills to electronic commerce. Bill
Feeley was a traditional investment banker, a managing director at
Bankers Trust, until the firm's merger with Alex. Brown left him
jobless. Since he no longer had a fat six-figure salary holding him
back, he figured the time had come to indulge his entrepreneurial
interests. Rather than signing on with another big organization, he
parlayed his financial savvy into a job at a much smaller firm.
These days he's director of capital markets at Wit Capital, an online
investment bank founded with the goal of making traditional initial
public offerings and private venture equity offerings available to
the masses via the Internet. Feeley still dabbles in his former
trade, advising other businesses on their options for raising money,
but he's also helping to create a new model for trading stock. "Not
a day goes by that we're not doing something that's never been done
before. It's exciting," he says with obvious satisfaction.
In today's tight labor market, skilled corporate managers
interested in taking a small-company plunge shouldn't have much
trouble putting themselves in play. Venture capitalists and
executive recruiters will almost certainly give your faxed resume a
good look. "You'd be amazed at how accessible venture people are,"
says Bayless. "Just pick up the phone, and be ready to explain what
your skill set is." Or skip the middleman, as Feeley did, and get in
touch with companies you'd like to join. Small-business people,
without layers of assistants to screen calls and mail, tend to be
accessible.
Say you lack firsthand knowledge of how small companies operate;
you just know you don't like the way big companies do. You might
consider a more gradual transition. Kathryn Gould, a former
recruiter and a general partner with Foundation Capital in Silicon
Valley, suggests targeting midsized businesses for jobs while seeking
out seats on small-company boards. You'll probably face a less
dramatic salary cut, and you can establish yourself as a company
builder before landing in a high-pressure startup situation.
"Startups are hard," Gould says. "For people who walk right out of
AT&T or IBM to a startup, there's a history of disaster."
If you're one of those lucky corporate types who are already
getting three or four calls a week from headhunters, consider
quitting your job and taking a few months to explore the
possibilities more closely. Gould sees this move as a gut check: "If
you can't deal with the insecurity of being unemployed, you probably
can't deal with the insecurity of working at a startup."
In any event, you should stare hard at the financial risks
involved. Lonnie Smith did just that before abandoning his
high-level executive job at Indiana conglomerate Hillenbrand to
become CEO of Intuitive Surgical, a Silicon Valley firm that makes a
computer-assisted minimally invasive surgical system that allows a
wider range of major "open" surgeries to be done through tiny
incisions. Smith was not about to trade his $1.2 million annual
salary for $300,000 and a hatful of options without thoroughly
exploring the market for his new company's products. "I asked
surgeons what the implications were if they could do this, and the
feedback was very good. I wouldn't have taken the job otherwise,"
Smith says.
At the very least, say executive recruiters, don't quit corporate
life without understanding your new company's culture and the
specifics of your role. Take time to get to know the founders, key
investors, and other executives. Ask yourself if these are people
you want to trust with your career and your fortune. Stephen Mader,
a Boston recruiter with Christian & Timbers, advises thinking of each
small company as a hot tub: "After being in it for a half hour at
120[degrees], will the water feel fine or will you want to get out?"
If you think you'll want to get out, don't get in. After all, these
days if you pass on one offer, there are likely to be plenty more.
Quote: BOOTSTRAPPED, FAST-GROWTH STARTUPS ARE SERIOUSLY
COURTING CORPORATE REFUGEES. "INSTEAD OF LOOKING AFTER 1,200 PEOPLE
WHOSE NAMES I DON'T KNOW, I GET TO BE AN ARTIST."
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