Leader - Dot.com reality hits home.
The lessons of the dot.com era are proving hard ones to learn. Where optimism once prevailed among the young entrepreneurs rushing headlong to get their dot.com companies up and running, there is instead the will sapping realisation that internet businesses may not be so unique after all.
Where once talk was of massive stock market valuations there is now, as latest casualty TheStreet.co.uk demonstrates, the cold reality that death rates in the new economy may be as high as in the old.
Boo.com proved you need more than a good business plan – you need someone, a strong finance director, keeping a tight hold of the expenditure reins.
Bryan Levine, FD at TheStreet.co.uk, reveals on page 22 this week that even if you have a robust business plan, unless your backers are committed to bearing losses in the short term, your trading life will be as short as a mayfly’s. That said, Levine suggests a way out. If you’re with a dot.com look for funding that will see you all the way through to making a profit.
A tall order but the rate of attrition will certainly be making the venture capitalists sit up a take notice.
Remember this: VCs are inundated with proposals. The rejection rate is massive. Why? Because business plans need to be realistic and based on traditional business principles and performance measures.
A good FD knows this. And if ever there was a time an FD could make his mark it is writing those plans.