the first day Google's stock was publicly traded on the NASDAQ,
approximately 1,000 (or, almost 50%) of its employees were estimated
to be "paper" millionaires. That day the stock price closed at $100.34.
As of the January 18, 2005 close, the share price had just more
than doubled - closing at $203.90. With the stock price so high,
it's likely that more than 1,400 Google employees are now millionaires…on
let's look at what happened at Google. Google, was originally formed
six years ago, literally in a garage after the founders had done
about three years of research as graduate students at Stanford.
Between the and when the company filed for its IPO with the Securities
and Exchange Commission it had hired approximately 1,900 employees,
all of whom shared in the ownership of the organization through
either stock or stock options (as of the actual IPO, that number
increased to 2,300). Months prior to the actual offering, there
was speculation that the price might be $40-$50 per share. During
the hectic days immediately before the offering, the projected share
price was varying between $85 and $135.
August 19, Google shares closed trading at $100.34. We estimated
that at that price, Google had created between 950 and 1050 "paper"
millionaires among its employee ranks; with the meteoric rise in
the stock price, the estimated number of "paper" millionaire employees
had increased by about 50%. Equally interesting is the fact that
the average value of employee holdings is now $4.2 million, which
doesn't include the two founders and 3 other executive officers
who's IPO stock holdings are valued at $18 billion.
dramatic increase in the stock price is of particular importance
to those employees who joined Google in the few months prior to
the IPO. Many of these 400 employees received options with strike
prices between $60 and $85 per share because that was the estimated
value of the stock when they received their options. On the day
of the IPO, when the stock closes at $100.34 per share, only about
25 would have been millionaires and the vast majority would like
have had a paper gain of less than $100,000. That's not nothing,
but it's not in the millions like their coworkers' gains. The current
$200 stock price has significantly increased the wealth of this
group because their average paper gain increased from about $33
after the IPO to about $133 now-that's a 400% increase in 5 months.
been calling these people "paper" millionaires because they owned
stock or had options they could exercise to buy stock (and sell
for cash) that would make them millionaires, but they did not have
the money in the bank yet. That has started to change. The SEC requires
certain employees and shareholders to disclose their stock transactions.
Since November 16, 2004, more than $12 billion dollars of Google
stock has been reported as sold by this group - including $7.5 billion
sold by the two founders and other 3 top executives.
important part of the Google perspective is that the people who
are millionaires are not just the founders and executives; they
are people like you and me. (And for the record, the founders are
not merely millionaires, they are each billionaires…almost eight
people have asked Salary.com, "How can I find a job that will make
me millions like those Google people?" The answer is that it is
not that simple. Of course, if it were, everyone would do it. The
reason it is not so simple is that the question is more like one
an investment banker or stockbroker would be asking. What you really
want to know is how to assess the potential future of an early stage
company and then how do you maximize your own value within that
organization. (Somewhere in there you will also need to get yourself
some interviews and a job offer.)
look at how an average person could find a job at the next Google.
Think like an investor, because in effect, that is what you are
doing. Rather than money, however, your investment will be your
time, your career, and perhaps some of your current earning potential
(if you take a lower salary to work at a startup).
are some steps of how to act like an investor in your job search:
to find a job at the next Google: [Part 1]
Identify your skills and what types of companies may
be interested in hiring you. Keep in mind that the broader your
skills, the broader your target employer market may be.
Take a look at where the top venture capitalists are putting
their money these days. Most publish the names of their portfolio
companies, even including the date of their most recent financing
round. The more recent the investment, the better.
See what the Wall Street analysts are saying regarding the
industry(ies) you are focusing on. Look at their target prices,
buy/sell ratings, and analysis of leading industry players.
When you have developed a prospect list, be thorough in your analysis
of your "investment decision."
Update your resume on your favorite job boards- employers
look for recent postings. Use both national and niche job boards.
The national boards get you a lot of exposure, but startups will
also look at targeted postings. Use both to make sure you get seen.
this is a good strategy to try to identify the up and coming businesses,
keep in mind that in many respects, the level of risk you are taking
on is greater than the venture capitalists. While they may be less
risk averse than many, the cornerstone of many VC's strategies is
still to diversify. As an employee, you do not have this option--all
your eggs are in one basket.
do not forget that the earlier the stage of the company, the more
risk you are taking on. This is likely to result in perhaps a greater
number of stock options, but it is also more likely that the company
will not succeed because the likelihood of success increases as
the company and its products grow and mature. Remember, the rewards
are generally concomitant with the risks.
next thing to keep in mind is that identifying the opportunities
is not the ultimate goal--it is a step en route to your goal. Once
you have some potential companies in your sights and you have found
that there is a potential spot for you in those organizations, it
is time to do the real digging.
to find a job at the next Google: [Part 2]
Look at the research on comparable companies. Go to
brokerage sites that provide access to their investment research.
Many of these sites, such as SmithBarney.com, are free. Go
to an investment research site like AOL Personal Finance to apply
other measures of success/failure to comparable companies.
Evaluate the management team, products, and vision.
If possible, talk to people who have had direct contact with
the company (good examples are employees, clients, investors,
Check the company's job postings for positions that may be
suitable to you.
Check your gut.
sure to apply other filters such as to whether the company is right
for you. After all, this is not JUST an investment decision; it
is about your career, lifestyle, etc. As a result of many early
stage companies using equity as a significant part of the total
compensation package you should also make sure you understand the
implications of receiving stock or stock options. You should also
know what questions to ask.
value of a stock option, particularly in an early stage company
is difficult, if not impossible, to estimate. An important metric
is to know what percentage of the total shares of the company your
ownership will represent- now and in the future. Watch out! The
percentage will be small. Back at Google, the average employee (other
than the top 5 executives) held less than 0.01% of the shares of
the company--that is one one-hundredth of one percent. The cut-off
to be a millionaire at Google is less than half of that, about 0.004%--that
is four one-thousandths of one percent. Early stage companies could
have several financing rounds after you join the company. Those
rounds could dilute your shares by 5% to 50%, or more. In other
words, by the time of an IPO, your ownership percentage could be
half of what that percentage was when you were hired--or even less.
However, ideally the value of your shares increase because of the
before thinking you have hit pay dirt with your stock option grants
from your well-researched new startup employer, talk to your financial
advisor and do some other reality checks. What kinds of things should
to find a job at the next Google: [Part 3]
Know how stock options work. In particular, make sure you
know how your stock options work.
Know whether they are ISO's or Non Qualified stock options
and know how the tax implications for each in good and
Know what you can do with them if you leave the company before
it goes public.
Know what you can do with them if the company does not go public.
Know whether and when you will get more.
Know when the best time to exercise your options is (hint:
it might be before the IPO).
should definitely make sure you have a good understanding of the
nuances of your ownership as you try to evaluate your job offer.
But you should also be sure to stay in touch with your financial
advisor periodically to stay on top of your situation. Options are
tricky things and you may end up losing some of your gains by not
making the right moves at the right times.
know how much money is 'a lot of money' for you. There has been
so much talk about the Google millionaires, but many seem to have
lost focus on how much money a million dollars is. As one of our
site visitors pointed out: "I had a chuckle that employees were
called 'rich' who had received $1M or $2M when they live in Mountain
View, California where starter homes are selling for $600k. I figured
that, after taxes, those folks were lucky to pay off 1/2 of their
mortgage--they'll all be back to work on Monday!"
how long it will take you to become a millionaire with Salary.com's
-By Bill Coleman, Senior Vice President of Compensation, Salary.com