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What to do when the headhunter for a Net startup calls

January 18, 2000
Web posted at 12:45 p.m. Hong Kong time, 11:45 p.m. EDT

Picture the scene: you're happily working away in your office, the phone rings and it's a headhunter on the other end of the line.

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"I have a client," she coos down the phone, "who's interested in having you join his firm. It's an Internet startup."

You've read in the press about the instant squillionaires suddenly rich beyond their wildest dreams--at least on paper. But what the newspapers don't always report is the companies that don't make it. Both go through your mind, almost like the proverbial devil and angel sitting on each shoulder listing the pros and cons.

You contemplate your lot in life: mid-career, good salary and benefits, attractive pension plan, foreign travel, upward mobility. It's a comfortable life, the headhunter agrees, "but will it make you rich?" This is a dilemma many are now facing as the Internet cements itself into the mainstream mindset. For employees, it's creating new opportunities ... and new risks.

Net companies are keen to promote the seat-of-the-pants excitement of the industry. In the U.S., they've tended to be generous on stock options and lighter on cash. Asia may yet follow that model--if the old patriarchies are willing to give up control--but it remains largely unproven across the wider Net sector still preparing companies for public listings.

So what to do when the headhunter calls? Your instinct is to match your salary, and then some. Net companies like to offset the cash with stock options because cash is something in pretty short supply until (unless?) those blue-sky profits roll in. The headhunter asks the crucial question: "How much would you want?" More than likely it's a question you've never confronted before. For an indication as to how much the startups are paying in the U.S., log onto American VC firm Benchmark Capital's site and work from there.

Regional Net analyst Greg Tarr says 3-5% of the firm's capital should be the absolute base for a senior just-under-board-level position in a regional startup. Tarr says that if the entrepreneur is serious about his company, he should not be reluctant to let stock go to other employees. He adds, "That's the enlightened approach, but it will be interesting to see what will transpire in the region."

Consider the ownership of Yahoo founders Jerry Yang and David Filo. Each holds about 11% of the firm they founded. Each stake is worth some $10 billion. But if they had been reluctant to part with shares to bring in good people like chief executive Tim Koogle, they might now not be worth anywhere near as much.

Consider too the experience of The backers weren't keen to part with stock early in the picture and some key people threatened to walk. Management finally understood that a firm is mostly as good as its staff and stock was shared around. It's the old story: 5% of something is better than 100% of nothing.

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