How stable is that dotcom?

There had to be a downside to all those stock options, pool tables and company masseurs. After some high-profile failures, one of the biggest disadvantages of working for a dotcom has just become clear: your employer could simply disappear.

Recent calculations by Fletcher Advisory for PricewaterhouseCoopers found that seven out of 28 internet companies floated on London's stock exchanges would run out of money within six months, unless they received more backing from investors. The researcher divided the amount of cash on the company's most recently published balance sheet by its losses - operating costs minus gross profits. The time until burn-out averaged 15 months.

And that's just the floated companies - those which have gone through the relatively rigorous process of selling their shares to financial institutions and the general public through a stock market listing, an event which involves a range of legal requirements. So if these companies are heading towards potential disaster, what dotcom is safe?

Anthony Miller, an analyst with Richard Holway, said the idea that dotcom firms are risky should not be news. "We've been saying this for the last couple of years," he said. "We did not see how you can spend more than you're earning but stay in business. It's almost like pyramid selling - a circle of talking the company up, the share price going up, and people taking profits. And then share traders take fright, as has happened recently."

Bricks, not clicks
So, is it possible to move to the dotcom arena without risking redundancy? Yes. You can work for a dotcom venture within an existing company, with many blue chip firms creating divisions very similar to the startups.

You are unlikely to get soaring share options, as the company shares are probably already at a mature stage unless the venture is spun off. However, you can probably paint on a much wider canvas, with more money to spend in areas such as advertising. Furthermore, there is an existing company structure with which to work: a multinational parent will be a great help if an idea could work in several countries.

And, of course, conventional firms are less likely to go bust - they are businesses which exist to make profits, not just bubbly share prices. "The companies with the best chance of survival are the bricks and mortar companies moving into the dotcom world," said Miller.

But if you are determined to go for a true dotcom, where the potential stock-option gain and chance to reinvent things is greater, what should you look for? One simple check for potential job movers is to see whether the recruiter has an interest in checking out its clients. Adam Gunnell, managing director at recruitment firm Boldly-go.com, said he puts potential clients through a screening process. This is particularly important, as the company sometimes takes shares for its recruitment services - worthless currency if it chooses duff firms.

Gunnell said the sort of things he wants to know include the strength of the management team. "Where were they before? What is their track record? If they don't have any, what is their experience of this industry?" He said potential employees should satisfy themselves - after all, it's their jobs that are on the line.

Warning signs
You can spot the warning signs of risky ventures. "A company would ring alarm bells if it hasn't looked at its target market. If we can list five competitors off the top of our heads, we ask what can they do that is different," he said.

"Often there's a degree of confidentiality surrounding venture capitalists," he added, but this should only apply to the identity of the funder. Even if they can't say who the venture capitalist is, they should have a date.

His favourite tactic is to tie payment to a set date, to see if the firm raises objections. If it does, then funding is less secure than the company is letting on.

It also makes sense to avoid business-to-consumer startups. Miller said business-to-business sites are more secure, but there are even better options elsewhere. "The companies that we are backing are the ones that provide services for the dotcoms - building the websites and handling the transactions," he said. "These are the ones that probably have more to gain. If all these dotcoms are determined to spend themselves out of existence, perhaps you should be one of the ones accepting the cash, rather than handing it over."