The allure of the Internet start-up.

A dot-com finance career can offer many rewards for the right kind of CPA, but are the risks worth taking?

Like the founders of gold rush towns that rose from dusty plateaus in the Old West, Internet start-up companies are creating new cyberspace communities from the ground up. Some of today's smartest CPAs are building the financial foundations for these virtual enterprises and, in the process, are devising new ways to manage corporate finance. In the pioneer tradition, they make deals and decisions without hesitation. They change business practices and directions as often as they change socks and, instead of sweating over profitability, they concentrate on market share and acquisitions.

On the rare occasions when these adrenaline-charged CPAs pause to chat, they speak the language of the Internet, comparing notes on "unique visitors" (those coming to a particular site for the first time) and "stickiness" (a measure of how long visitors linger before moving on to another site).

Having come to dot-com companies with ideas and aspirations that outstrip possibilities at the traditional jobs they've cast off, these CPAs are in it for the adventure of working in a fast-paced and ever-changing environment. They want to be part of something big, to construct something never built before. And they want stock options.

But those who have successfully pursued such prizes say they come at a price. Aspiring dot-com CPAs therefore must have realistic expectations and not only know, but be willing and able to do, whatever is necessary to achieve their goals. And while the experienced recommend doing considerable research to identify potentially suitable industries and employers, they also say a good share of self-knowledge is essential.

THE DOT-COM ACUMEN: INNOVATE AND CREATE

"Internet start-ups offer a dynamic environment," says CPA Carolyn Aver, former executive vice-president and CFO of USWeb/CKS, an Internet professional services company that recently merged with Whittman-Hart, a provider of e-business consulting services, to become marchFirst, which devises marketing strategies for e-commerce Web sites. On sabbatical with more than a decade of Internet finance experience under her belt, Aver is a typical dot-com success story. After spending two years with USWeb/CKS and successfully negotiating the terms of its merger, Aver left the company in April 2000 and, with a bundle of stock options under her arm, hit the road for a well-earned break from the frenetic pace of her high-tech/finance career.

"People joke about `Internet time,'" Aver says, alluding to the sense of urgency pervading the culture of Web start-ups. "But I'm here to tell you it's real. Instead of attending 10 committee meetings to make a decision, you can go to lunch with a peer and implement a plan that afternoon."

Paul Kothari agrees. "The dot-com world is exciting," says the cofounder and CFO of Redwood Communications, an April 2000 start-up that invests in fledgling technology companies and offers guidance on the fine points of business, marketing and finance. "The competitive landscape changes radically on a day-to-day basis," he says. "We're making deals at: a furious pace."

Kothari, who previously was CFO at TheStreet.com, is no stranger to fast-paced negotiations in the dot-com world. He had spearheaded an alliance in which TheStreet.com, shortly before its IPO, sold a $15 million equity stake to the New York Times Co. and the two organizations rushed to create a joint newsroom serving their online and print publications. At Redwood, Kothari is constantly looking for a stake in new technology companies and admits the deal-making pace hasn't slowed one bit. "We have to make fast decisions all the time," he says, "because the competition wants to buy into the same early-stage companies we do."

Recognition of the need to act quickly is part of an emerging new finance mind-set, borne of the fast-paced start-up world, in which a finance team's business acumen is measured by its ability to innovate and create. Instead of upholding established processes, Internet finance professionals develop new skills to overcome obstacles they've never faced before.

The hardest part? There's no list of best practices and little or no corporate or industry history from which lessons can be learned. So, after a few days on the job, when problems that weren't evident at first become all too apparent, dot-com CPAs survive by feeling their way to ward solutions, learning by trial and error and replacing old beliefs and practices with new ones developed in the crucible of day-to-day e-business.

For example, instead of relying solely on risk management, due diligence and other traditional tools of financial management, they learn how to get things done, even if they're un-familiar tasks normally handled by specialists in other fields. They become experts about their new industries and establish broader networks of contacts to attract private financing or pave the way to IPOs by promoting their companies to Wall Street. And they learn how, when the right opportunities present themselves, to snatch up market share through rapid acquisitions.

While the new mind-set can be frightening, it can be exhilarating as well. "The Internet is not a superhighway," says Derek Doke, president and Cofounder of Pro2Net Accounting, which provides online information and services for CPAs. "It's more like a dirt trail." But sometimes a dirt trail has advantages over a freeway. "With all Internet company, you have the ability to build things your way," says Doke. "And it's not often you get that chance; you certainly don't get it at a company that's been doing the same thing for the last 100 years. With an Internet company, the world really is your oyster."

STOCK OPTIONS: A MODERN-DAY GOLD RUSH?

Glory and adventure aren't the only reasons these professionals are switching to dot-com careers. There's also a rush for equity--the chance to hit the jackpot with stock options and perhaps retire early. But like America's original gold rush, the pursuit of stock options has its risks. "If you come to a dot-com company as a CFO from a larger, traditional company, your cash compensation will be lower," says Kothari. "In return for the pay cut, you get equity."

Kothari's latest venture with Redwood Communications, currently a private company, "has the potential to be incredibly big," he says. "Not just in market capitalization but also in revenue." The company aims to go public further down the road, says Kothari. And that's when he hopes the equity will pay off.

Of course, while virtually all start-ups begin with high hopes, there are just as many IPO losers as winners. (See "Winners and Losers".) Stock options lost some of their luster in the spring of 2000, when some companies put off their IPOs, hoping to wait out the market slump. Many new issues posted only moderate gains or closed below their offering prices, sounding a wake-up call for option-seeking dot-com workers, who were forced to shed their rose-colored glasses and face the harsh, but undeniable, truth: No dot-com, no matter how promising, is certain to succeed.

And yet there are incredible success stories that can maintain start-up workers' enthusiasm, even during the hardest times. During Aver's three-year tenure at US Web/CKS, company revenues grew tremendously, to $510.9 million in 1999 from $114.3 million in 1997. And as the company thrived, the value of Aver's options package swelled correspondingly. Such inducements, she says, are an essential part of an Internet company's allure, but there should be more to its attractiveness than that. "Although people come and go for the chance to get options, you can't take a job for that alone; you've also got to feel good about what you're doing."

Doke uses Aver's maxim not just for evaluating his own job but also, for gauging the potential success of emerging companies. "The truth is, there's a lot of garbage out there," he says, adding that CPAs should look for a combination of enthusiasm and sound business practices when evaluating an Internet start-up. (See "How to Pick a Winner".) "I have a passion for Pro2Net Accounting," he says. "I sleep well at night knowing I'm helping the profession. If a company's just on an IPO track, I'd question how long that company's going to be around."

For Kothari, the risks and rewards of joining a dot-com company go hand in hand. "Of course, not all Internet start-ups are going to succeed," he says. "But you have to be part of one to have a chance at success."

And what if a dot-com business goes under--will its employees be devastated? Not as Aver sees it. "In Silicon Valley, that risk is mitigated by the demand for experienced finance people. If your company fails, you might be out of a job, but there will be 10 other jobs waiting for you." And 10 more chances for stock options with companies that successfully complete their IPOs--10 more chances to help fledgling companies leave their nests and fly.

But even a successful start-up presents risks for the would-be dot-com CPA--and they're not all financial ones, such as the possibility that one's hard-earned options will turn out to be worthless. Other common hazards ,of the "total commitment" dot-com life-style include long hours and a work ethic that, by blurring the distinction between working hours and time off, can increase stress, impair productivity and even threaten health. And in the e-business world, where youth often has a higher value than experience, the pressure to innovate and keep up with the latest trends can be intense, even when there is little to gain but novelty.

A NEW FINANCIAL MIND-SET

In order to jump from traditional finance to an Internet career, CPAs need to be comfortable with the idea of shedding their process-oriented habits. "With an Internet company, you can't study a problem for months," says Aver. Instead of making measured, cautious decisions, she believes in "making 10 fast decisions, even if it turns out that only 8 of them are right."

Others feel the same. "You've got to go into a start-up environment with a lot of enthusiasm," Doke says, "because it's not just a job; it's chaos." From a finance perspective, chaos takes different forms. Vision statements change on a daily basis. Assets are valued by opportunity and vision instead of by fair market value, and partnerships come and go in a matter of weeks. "The financial metric is still evolving," says Kothari. "And profitability is not yet a big part of it." Instead, CFOs focus on market share, rapid acquisitions and growth, and investor relations.

Finance professionals working for small start-ups also must be much more energetic than required by their job descriptions--if they even get one. "To run finance at an Internet start-up, you have to be a jack of all trades," says Aver. "You have to be able to handle payroll one moment and unplug toilets the next--and you probably should be a type A personality." It all comes down to the ability to adapt to a nontraditional work environment, to a company that's still in the process of staffing key positions or to a place where plans are based on obtaining the next round of venture capitalist funding.

For Kothari, a typical day includes more than handling the financials; it also entails heavy recruiting--" and not just for the finance department," he says. "It involves selling the company and its benefits to all types of talented people." Besides helping bring in the best talent, a CFO may be asked to assume other administrative responsibilities, such as managing leases or employee benefits. "Employee morale is critically important," says Kothari. "If we want to keep talented people, we must have decent working conditions and good benefits." Dot-com CFOs should be prepared to play an active role in pursuit of such essential goals.

To make the best personal decision about the kind of Internet company to join--or whether to,join one at all--CPAs should think about whether they would be comfortable working in the chaotic atmosphere that prevails at most dot-com start-ups. Also, they have to decide whether they believe in the value of the company's products and services. (See "Are You the Dot-Com Type?") And they must use their well-honed analytical skills to take a good, hard look at a dot-com's management team, financial backers, long-term strategy and current financials. (See "How to Pick a Winner.") Perhaps most important, they have to get the job done--even under pressure. "There's a lot of competition in the Internet world," says Kothari, "so you have to be able to execute really well. I know the company's success depends on my performing my role capably."

A NEW REVOLUTION

"The Internet will cause a transition in every industry," says Aver. "Companies that use it will be able to offer more efficient service to their customers."

Today's Internet companies are snapping up those customers--in every imaginable industry--as quickly as they log onto the Internet. "There's an Internet revolution happening," says Kothari. "This is just the beginning."

But the pioneers of this new financial world don't always want to talk about money. Often, they just want to revel in the excitement of it all. "Maybe it is a gold rush," says Kothari. "Financial rewards are always a consideration. But the fact is, I'm having fun."

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Dot-Com Career Resources

Check out these Web sites for company research, job boards and industry information on the dot-com world.

* www.wired.com. Offers daily Internet news and information, including an IPO Outlook section.

* www.fjn.com (Financial Job Network). Offers global job opportunities for financial professionals, including dot-com and other start-up opportunities.

* www.hoovers.com. Offers statistics and news on recent IPOs and the dot-com world under IPO Central in the Money section.

* www.thestandard.com. Offers daily news and information, as well as research and event listings, on the Internet economy.

Are you the Dot-Com Type?

Your answers to the following questions may reveal your dot-com potential:

* Do you use the Internet as part of your daily activities?

* Would you thrive in a fast-moving, nontraditional environment?

* Can you work without specific ground rules and directions?

* Can you be outspoken when necessary?

* Are you enthusiastic about your potential employer's line of business?

EXECUTIVE SUMMARY

* WEB COMPANIES NEED CPAs just as much as traditional companies do. If you are interested in working for a Web start-up, don't assume that a lack of dot-com experience puts you at a disadvantage. Even your conventional financial skills are in demand at Internet companies; you just may wind up applying them in new ways.

* BE PREPARED TO WEAR MORE THAN ONE HAT because Web start-ups often cannot afford to staff all functions. Until profitability arrives, you may have to be a jack-of-all-trades with permanently rolled-up sleeves. If that scenario is troubling, you and the dot-com world may not be a good fit.

* A DOT-COM FINANCE CAREER HAS RISKS AND REWARDS that you should research carefully and objectively. But there's a place for subjectivity, too. Conduct an honest self-assessment of your attitude about the unorthodox methods and hectic pace you may encounter.

* WITH TECHNOLOGICAL INNOVATIONS occurring on an almost daily basis, small, relatively unknown companies are increasingly capable of explosive growth. To keep pace with strategic opportunities, Web start-ups need finance professionals who can forge mergers and acquisitions faster, better and more often than ever before.

How to Pick a Winner

A CPA, trained to analyze and assess risk, must draw on those skills when evaluating a dot-com company's growth potential. By following these eight tips, any risk-tolerant CPA can make a successful move to a dot-com.

* Evaluate the company's management team. "Lots of people have great ideas," says Aver, "but if you don't have a topnotch management team to execute the ideas, you may never get to the goal line."

* Look for a company run by a CPA. "Passion is essential, but hype and enthusiasm aren't enough--you also need a strong finance team," says Doke.

* Know the company's backers. "A reputable venture company with a great track record can help a lot," says Kothari.

* Ask about the company's long-term strategy. "If management wants to own the world, be skeptical," says Doke. "And if the company's strategic plan sounds too good to be true, it probably is."

* Ask to see the company's financial statements. "You need to see evidence of the company's competence," says Doke. "If management won't give you the financial statements, run."

* Look at the long-term opportunity. "If you're going for options," says Aver, "remember that they aren't worth anything until the company goes public and you're vested in them."

* Understand the company's business. "If you're entering a field in which you've never worked, you need to learn as much as possible about it before leaving your current job," says Kothari. You also need to learn the company's business model.

* Ask yourself whether you believe in the company's goals and its methods of achieving them.

Share Your Experience

If you are, or have taken steps toward becoming, a dot-com CPA, please give other readers the benefit of your experience. Send an e-mail message to the JofA at [e-mail] describing your motives, the challenges you faced, how you dealt with them and any other information you would like to share.

KIMBERLY GROB, based in Salt Lake City, Utah, is a senior writer with EURO RSCG DSW Partners, a high-tech advertising agency. Previously, she was publications manager for the California Society of CPAs. Her e-mail address is [e-mail].