It was the sweet smell of stock options that helped lure 23-year-old Jim Stathopoulos to his first job out of college at Chicago-based Internet consulting firm MarchFirst Inc.
Fresh out of Northern Illinois University in DeKalb, Stathopoulos took a job as a systems analyst with the company a year ago. MarchFirst, which had just been created from the merging of Whittman-Hart Inc. and USWeb/CKS, was slated for giant growth spurts, and Stathopoulos got in on the frenzy.
He invested over $3,000 on company stock. He said his family spent thousands more.
But the stock began to tumble just months later, and in November he was laid off, just shy of his one-year anniversary at the company.
“I think being laid off was harder on me because it was my first job out of school,” Stathopoulos said. “And it was a double whammy because of how much I had invested in the company.”
Stathopoulos is one of droves of Chicagoans laid off from local technology companies last year. Morale may have been stung and potential stock-option fortunes left by the wayside, but the legions have moved on–professionally and mentally.
Laid-off Internet workers are finding jobs on average in a week–some even in a day–because the number of cuts still pales in comparison to the number of workers needed, said Diana Eagen, a recruiter at Systems One, a tech placement firm in the city.
Web-based technologies are still the most sought-after in the job market, with the demand remarkably similar to what it was at the height of the dot-com charge earlier last year, Eagen said.
“While consumer-focused e-commerce companies may be laying people off or even shutting down, there are an immense amount of people needed in database-driven development and business-to-business and business-to-consumer Web site development,” she said.
“Some of them may have to take a pay cut initially or have to take a step backward, but the highly-skilled, object-oriented, Web-based designers and information architects who have experience with customers and clients are not going to take a cut,” Eagen said.
When tech stocks soured last spring, venture capitalists grew weary, wide-eyed Internet companies were forced to downsize in relentless pursuit of cost cutting, and the net result was mass layoffs.
Locally, companies that reduced their workforces last year include MarchFirst; Web-consulting firm Xpedior Inc.; Britannica.com; MVP.com Inc., an Internet sporting-goods retailer backed by sports icons, including Michael Jordan; and Divine interVentures Inc.-backed BeautyJungle.com, an on-line cosmetics store that folded last November.
The beleaguered Internet conglomerate Divine, founded by Andrew “Flip” Filipowski, also trimmed its staff last year.
Chicago-area layoffs from Web commerce, content and services companies last year are estimated at around 1,000, said Shaye Mandle, president of the Illinois Coalition, an organization that encourages technology-based economic development in the state.
Mandle said hard data on layoffs is difficult to obtain since the toll is so recent. Many smaller firms also do not disclose their numbers, he said.
Mark Koulogeorge, who specializes in Internet investments for Chicago-based First Analysis Venture Capital, said the number of local technology-related layoffs last year climbed closer to 2,000.
“In a normal year, just in the traditional, creative construction of companies going out of business because they are out-competed by other folks in Chicago, [the layoffs] are probably 1,000 to 2,000,” Koulogeorge said.
“Remember it’s not just the guys at Divine cutting back or the folks at DigitalWork.com and the venture-backed companies,” he said. “It’s also some of the public companies . . . such as FTD.com (a Downers Grove-based online florist) that realized they don’t have good access to capital that are cutting back.”
Doug Elwell, former creative director at Xqsite, a Web-development start-up backed by Divine, was laid off in November with about 10 other employees at the Lisle-based office.
“I packed up my work belongings in 15 minutes and exited the building,” said Elwell, 32.
And he wasted little time in getting his grounding back. After taking a week hiatus to Iowa’s Effigy Mounds National Monument, Elwell began a mission to kick-start his own venture–Doug Elwell Inc.–a Web communications consulting firm.
Within a month, Elwell’s company was officially incorporated.
“I wouldn’t go toward another dot-com again–unless I was the chief information officer or the president of the company,” he said.
The reward working for a Divine company was the stock options, Elwell said, which he said quickly disappeared in June “when the stock fell and morale at the office became abysmal.”
Elwell, who said he was paid $55,000 a year, opted to take a 20 percent pay cut in order to get stock options at Xqsite. “That turned out to be a big mistake,” he said.
For Amy Minick, job transitioning after being laid off last year was seamless.
Minick, 29, worked as the office manager and in human resources at BeautyJungle.com before she was let go along with 20 other employees in November.
While serving her last two weeks at the job, Minick landed a similar position at a Web applications service provider in downtown Chicago. She wished to keep the company’s name confidential.
“This time I asked more questions during the interview: `What is our funding? What is our burn-through rate? What is our business plan?’ I am savvier now and hope for things, but I don’t expect as much,” Minick said.
But finding a new job quickly doesn’t completely alleviate the angst of being laid off, especially with the strong level of comradeship often found at start-ups, Minick said.
She was passionate about her role at BeautyJungle. She had been with the company since its inception in May 1999, where on any given day she was a Jane of all trades.
“I worked in benefits administration, conducted new employee orientations and even played amateur phone technician,” Minick said. “It’s demoralizing to have something you’ve worked on from the very beginning to just vanish into ether,” she said. “I’d rather we got bought out than to have gotten laid off.”
Although he was inundated with interested recruiters just days after posting his resume on Monster.com, Stathopoulos, formerly of MarchFirst, said he limited prospects to “companies only if they’ve been around for at least five years.”
“I just want to work for a big consulting company or a manufacturing company where their sole revenue isn’t from the e-commerce,” he said.
Stathopoulos took his time job hunting, spending more than a month interviewing. Over the holidays he finally met his match: After three meetings at Accenture, formerly Andersen Consulting, Stathopoulos accepted a position as a support and development systems analyst at the Northbrook office.
This time what drew him to the job was the company’s growth and technology training opportunities, he said. Also this time around, Stathopoulos received a signing bonus in cash–not in options.
Layoffs at Internet commerce and content businesses will not be vanishing anytime soon, according to George Nichols, a stock analyst with Chicago-based Morningstar.com, an online equity analysis company.
“The shakeout is not done yet,” Nichols said.
“The number of layoffs might level off later this year, but in the meantime there are plenty of precarious business models out there and incubators and venture capitalists that are still withdrawing their money,” he said. “A lot of these start-up companies that are dependent on them are having their training wheels pulled off and they will have to crash and burn.”
But the crashing and burning won’t nearly be as painful as it was during the latter part of 2000, Mandle of the Illinois Coalition said.
“We have a tremendous amount of intellectual capital and this will put us in a position to go forward and excel. It might not feel so good right now, but it will be,” he said.
“You will see companies such as MarchFirst start adding people,” Mandle said
That would be good news for Stathopoulos, who said he doesn’t feel any resentment toward the company. The 2 1/2-month severance package, he said, gave him adequate time and the financial means to look for a new job. And he is still holding out hopes that MarchFirst will swim.
“I still have my shares, but they will be at a loss and worthless for now. I could buy a pack of cigarettes with that money,” he said.
Meanwhile Elwell is busy digging a business niche for himself, which he realizes may not be fulfilled immediately.
“I may have to wait until I’m 40–and not 35–to hit $1 million, and I may have to take a pay cut initially,” Elwell said.
In the interim, freelance work garnered through contacts from previous jobs in the print and Web industry have been keeping him afloat financially. And he’s also putting to good use all the skills that built up his resume over the years.
“I’m full service; I’m installing computers, consulting on communications infrastructure and implementing advertising strategies for clients,” Elwell said.
“I would have gone off on my own eventually anyway, so in a sense it’s good that this [getting laid off] happened.”
