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How to find a job at the next Google
Salary.com now estimates that Google created more than 1,400 "paper" millionaires among its employees.
 

After 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 paper.

First, 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.

On 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.

The 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.

We'd 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.

An 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 times over.)

Many 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.)

Let's 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).

Here are some steps of how to act like an investor in your job search:

How to find a job at the next Google: [Part 1]

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.

2. 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.

3. 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.

4. When you have developed a prospect list, be thorough in your analysis of your "investment decision."

5. 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.

Although 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.

Also, 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.

The 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.

How to find a job at the next Google: [Part 2]

1. 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.

2. Evaluate the management team, products, and vision.

3. If possible, talk to people who have had direct contact with the company (good examples are employees, clients, investors, analysts).

4. Check the company's job postings for positions that may be suitable to you.

5. Check your gut.

Make 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.

The 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 investment.

Finally, 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 you know?

How to find a job at the next Google: [Part 3]

1. Know how stock options work. In particular, make sure you know how your stock options work.

2. Know whether they are ISO's or Non Qualified stock options and know how the tax implications for each in good and bad scenarios.

3. Know what you can do with them if you leave the company before it goes public.

4. Know what you can do with them if the company does not go public.

5. Know whether and when you will get more.

6. Know when the best time to exercise your options is (hint: it might be before the IPO).

You 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.

Finally, 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!"

See how long it will take you to become a millionaire with Salary.com's Millionaire Maker.

- -By Bill Coleman, Senior Vice President of Compensation, Salary.com

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