Now, Rick is nobody's fool.  He's worked in the corporate world for years and knew how to test-drive the opportunity before he accepted.  Or so he thought.

He'd interviewed multiple times with the entire management team. He met the staff.  He negotiated a terrific compensation package complete with hefty salary, options and a nice signing bonus. He gave notice to his old boss, graciously declined their counteroffer and left.

Comes the first day at the new job and things were not what they seemed.  When pressed, the COO admitted that third-round funding was not exactly a "lock" but they had a very good feeling" about the venture capitalist.  Nor was the backlog of work actually all signed and waiting.  In fact, most of it was only pending.  The kicker was that the CFO was purchasing laptops on his personal credit card because they wanted to preserve cash flow.

Rick swallowed hard and called his old firm.  They welcomed him back with open arms at his last salary.  And since it was only a couple of days that he'd been gone, everybody chalked it up to a short vacation.  No harm, no foul.  Lesson learned, albeit the hard way.

What more could he have done in the way of due diligence to avoid this painful experience?  Let's review the due ... diligence, that is.

Check It Out:

Due Diligence: the process of investigation into the details of a potential investment, including such elements as an examination of operations and management and the verification of material facts.  Personally, I follow a rule that I heard once on some cop show, "If your grandmother says she loves you, check it out."

Let's start with the easy stuff.  Public or long-established companies are known quantities and information is simple to come by.  First, try the company's public web page itself.  Though most corporate sites are self-serving, many have pages devoted to investor relations.  These sites are a trove of useful information, ranging from online versions of annual reports to promotion of emerging products and services.  All designed to entice the investor.

And that's what you - the potential employee - are.  You'll be investing a chunk of your career and many of your waking hours in the service of any company you work for.  That makes you a significant investor.  And any advisor will tell you that failure to research any potential investment candidate is just stupid, stupid, stupid.

You can also research public companies through SEC reports and investment guidance databases like Zacks or Motley Fool.  A couple of simple passes with your favorite search engines will also produce plenty of results.  And, if it's an analysis of the environment and culture you want, Vault reports are a good source for the inside story.  Don't forget the chat boards, but keep in mind that all the posters have their own agendas.  (And, you never really know who's writing this stuff.)

Don't forget to search through online versions of newspapers and periodicals, especially those devoted to the dot.com economy, like The Industry Standard or Business 2.0.  These sources can also supply intelligence about private tech firms, which may not be covered to the same extent in mainstream media. 

But this is simple.  What about non-public companies?  Especially the emerging firms and start-ups that sound so good and can go so bad?  This is where some planning and a research strategy can be particularly useful.

Learning from Others

First off, check out the experiences of your friends and acquaintances and their friends and acquaintances too.  Not only horror stories, but the day-to-day real deal.  What was different from what they were led to believe?  What was worse ... and what was better?  Ask what they wished they'd known before they accepted the positions.  Then ask if they found out the hard way.

Don't know any ex-dot.commers yourself?  Not to worry. I got the lowdown from a few folks who've been there and already done that.

Raj Vaswani recently left his executive position at Expedior to become a Principal in IBM's e-Business Strategy and Change Center of Excellence.  He suggests that you be sure to talk to several management types. 

"Ask to speak to at least half of the team," says Raj.  "Talk to each one separately and make certain that they all tell the company's story the same way.  Differences mean disagreement, and that usually means a problem. If they're not all pulling in the same direction, they aren't going to make it."

Great advice, but what if you aren't interviewing with execs?  There's still a lot you can learn.  Time to get busy with the business questions. 

Bob Brogan, who recently left his CEO position with a Chicago-based B2B marketplace technology company, says, "Get a good explanation of the prospective company's business model.  Ask how the company will get to profitability and when.  What's the growth strategy?  Who are the company's prospective customers and why would they buy from you?  What's the sell cycle? What value does the company provide in the market space and what differentiates it from its competitors?" 

I asked Bob what he thinks are the benefits and drawbacks of working in a start-up.  "Make sure you know what you want out of the experience," he says.  "It can be both very satisfying and very disappointing. A start-up environment allows you to be creative, be exposed to many parts of the business, and get a variety of transferrable skills."

"There's a major downside though - politics. All that teaming stuff they told you about might only be lip service.  Everybody in a dot.com believes that they're the boss, so get used to arrogance and conflicting direction. Oh, and you get to work incredibly hard at a reduced hourly salary, because you will be there all the time."

Don't just rely on the responses of the folks who interview you.  Insist on talking with some of the team who will be your peers.  Out of earshot of the management.  They'll usually tell you what you need to know. It's great if you can spend half a day or so with them, observing what they do and how they do it.

Research Time

Don't just think of this as some job search extra-credit project.  If you skimp on due diligence, you will pay later.  And would you want to have to start looking all over again in a few short weeks? I didn't think so.  Here's more for you to consider:

1. Check out the reputations of the company executive team and their past history if possible.  Have they had a track record with other start-ups?  Are there any pending legal actions against them?  Their former companies?  This company?
2. Which venture capital firms have made investments in the company?  How much?  What stage funding was provided?  How many rounds of funding have been received already?
3. Who's on the advisory board?  What's their equity stake in the company? 
4. What's the company's product or service?  Does it make sense?  Who are the major competitors?  How are they doing?  How large is the potential market?
5. Get a copy of the complete business plan and read it cover to cover.  Watch out for buzzwords and vague objectives.  Don't really understand it?  Find someone you respect who does and listen carefully to his/her reactions.

More

Start-ups aren't for the faint-hearted.  It's your tolerance for risk that will ultimately determine whether or not they're for you.  Let me know if you found out the hard way - write to me at jamie@jobcircle.com.  Next month, Am I Next? - how to know if your job's at risk. Come on, Spring.

Enjoy this article?  Read more of JobCircle.com's Career Coach articles.

Jamie Fabian spent more than 15 years as a human resources executive before changing careers to become a senior project manager for a growing IT consulting company.  Now in management consulting for a large Pharma company, Jamie would like to be seen as a hybrid of Tom Peters, Tom Jackson, and Tom Wolfe, but spends too much time working, driving carpool and watching mindless TV to write more than this column.  You can contact Jamie with questions and comments at jamie@jobcircle.com.