A Few Attributes of Local Optical Startups

The startup phenomenon was old hat in the Silicon Valley and some other places by the time optical switching startups started to sprout in the Dallas area. Like their California predecessors, the local variety are known for the following:

  • Long Hours, Hard Work, And Often, High Stress
    If this trio seems the norm for many industries, the optical pre-IPOs seem to have them in particular abundance. Devices and pressure to keep people at their desk working long hours are the norm. Many firms routinely order in pizza to set out in front of those who might be tempted to step out to eat. Some have game rooms in which to unwind without leaving. I once asked a prospective peer at a local startup where I was interviewing to describe his typical work week. His answer was an average of 12 hours Mon-Fri and 8 hours on Sat. He seemed proud that he was able to avoid working on most Sundays. This situation is a tough one for engineers with young children and those with working spouses. It is sometimes argued that not all startups are equally demanding. This is true, but I have yet to find any slow paced ones and have noticed that local startup parking lots seem far less empty after working hours than those of the majors. If your spouse is working outside the home and you have children to raise, the decision to leave a good job to join a startup is best made after thorough evaluation of the tradeoffs. I know a middle aged man who has growing children at home and who left a high visibility, high pressure management job at at major supplier to take a similar one at a startup. After a short time at the startup he decided that the stress and long hours were just like they were at the major - not worth it for him. He left and took a challenging but lower stress position away from optics and telecom where he could make a difference and quickly see the results of his efforts. That was about six months ago, and both he and his wife are pleased with his decision. He still works long hours sometimes, but he now really likes going to work and enjoys the extra time for himself and his family. And funny thing - the financial future of his new job, which he originally evaluated as far less promising than over at Stressville, is looking better all the time.

  • Higher risk of failure than established firms
    What percentage of existing startups can Cisco, Ciena or Alcatel possibly buy even if the market booms again? Lucrative trading debuts by relatively untested and unproved optical IPOs will have to wait for better times. Obviously, some technologies are more over-represented than others. Handling voice over IP or metro edge connections will not make you a unique provider in today's market..

  • High Personal Visibility
    Due to very small, tightly knit teams of workers, everyone knows who the heavy producers and clever designers are - and who are not.

  • Chance To Make A Windfall From Stock Options
    There is a chance for a mid-level employee to make hundreds of thousands in just a few years from options. Key engineers and VPs have a shot at more than a million. The golden dream used to be to make a splash loud enough to attract a buyer like Cisco, Nortel, or Alcatel. Then as a key member of an acquired state to the art tech firm, you might receive a healthy chunk of their stock for your intense but brief efforts. A local early version of the cliché dream come true was Monterey Networks, where some who migrated from the local telecom majors and other firms received nice stock options and worked for less than a year when Cisco bought the company. As with some other legends of found treasure, amounts of their purported individual wealth grew with the local telling of the tale. But it appears that despite the facts that Cisco later closed it down, and that worth of the Cisco stock they were issued when bought out recently dived, some of the pre-Cisco/Monterey folks have a good deal more paper wealth than their former colleagues who did not join them. At least two I used to work with became millionaires, at least on paper. Cashing in on the options takes a while. Typically, no more than 25% of one's options are vested in the first year, and four- or five-year work commitments are necessary to maximize one's gains. There are usually some strings attached and personal tax surprises for those who don't handle optioned stock sales carefully. Less seldom discussed are the capable people that leave startups to return to the majors, those who turn down the promise of lucrative options for family reasons, and the many startups whose teams seem to be failing in their efforts to be acquired or attain a high IPO value. Also not as exciting as talk of instant riches is the distinct chance that the most recent startups may face fierce competition from many of like kind and be less likely to succeed than earlier companies with fewer peers.

  • Lack of Certain Employee Benefits
    Goodies such as generous yearly vacation time, high percentage matching 401K programs, and work breaks for week long training courses are not common among startups. There are fewer perks and privileges based on rank or title. There is usually some health insurance package offered, but seldom one that can compete with those of the majors .

  • Secrecy
    Optical switching development is very fast paced and competitive, so an adherence to secrecy is the norm for those involved. I have found that when interviewing with Dallas startups the first thing you might be offered after a handshake is a pen with which to sign the ubiquitous nondisclosure agreement.

  • Seasoned, Experienced Employees
    Startups have too little time to train college grads in myriad topics from POTS to SONET to MEMS. They pay for experience and often employ a heavy representation of middle aged types in the startup rosters. Engineers with two to three years of pertinent development are prized, but the designers with five or more years of telecom background that spans several key technologies are ideal.
Competition From The Majors

The business and competence of the majors is strong. If they have lost key design engineers in droves to startups, they have also mastered many of the high hurdles that startups will have to face if they are ever to become majors themselves. Mastering volume component purchasing, reliable and timely manufacturing, and establishing procedures to provide products that consistently meet the myriad standards and performance requirements of the telecom world are no small tasks. Equally daunting can be the purchase of key components from suppliers. Competing for a limited supply of components against majors who in many cases are long term loyal customers of these suppliers can be a serious hurdle for the youngest firms.

What The Majors Do To Slow The Loss Of Talent To Startups

The majors are not defenseless when it comes to loss of design talent. Several methods of slowing departures to startups include:

  • Paying More Money -- Counter Offers, Yearly "Stay Put" Bonus, and Stock Options

  • Forming Their Own Small Creative Design Teams And Spinning Them Off Into New IPOs

  • Transfer of Key Design Talent To The Newest (Leading Edge) Product Teams Within The Company

  • Increased Rate of Promotion

  • Publicizing Disadvantages of Working For Startups In Employee Publications and Web Sites

  • Threat Of Legal Action

It should be noted that in the current labor market, the majors lose engineering talent to each other in volume just as they do to start ups.

 

Copyright Chuck Bealke, 2001