Leader - Internet creates bloodbath.
With last week’s collapse of Boo.com – the first big liquidation of a dot.com company in Europe – the internet gold rush has taken on the appearance of a bloodbath.
The company’s principal failing – and there were many, it was burning cash at a rate of $1m a week – was to forget that in the new economy the old rules still apply.
The promised riches of the e-business revolution are nothing if not seductive but as soon as you forget about basic financial stewardship, you’re dead.
In April, Boo’s finance director left after just two months. A strong financial hand might have saved the company.
But it wasn’t until last week that that strong hand, in the form of liquidators from KPMG, arrived. And though too late to do anything but a salvage operation, they are optimistic that some value can be found in what remains.
The collapse should serve as a reminder to businesses, old and new. And already some firms have sought to drive this message home. PwC, for instance, has warned that Boo is not the only dot.com in danger of running out of money because of unsustainable cash burn rates.
True, but equally Boo’s collapse should not be allowed to mar the reputation of every player in the sector.
Entrepreneurs with millions of pounds of other people’s money burning a hole in their back pockets need strong financial advice.
Boo.com forgot that. It’s up to accountants to ensure no one else makes the same mistake.