Maybe these concerns of the ‘old economy’ just haven’t been seen as sexy enough for the go-getters of the new.
Certainly, the concepts of budget control and the drive for profit and cash generation that characterise non-technology entrepreneurs run contrary to the anarchic culture of brand building hot-houses that were held out to be success factors in new economy businesses.
You can imagine the thinking: having an FD would hold them back. All those checks and authorisations would reduce creativity and spontaneity – the life blood of a sector creating itself day by day. Budgets would be out of date before they were issued as new targets and new ideas over-ran the original business plan. So why bother?
All of this, sadly, reflects on the profession. Why are we seen as being not only of little value but actually as a hindrance to dramatic growth? I suspect that it is because we act as the conscience of the business. And the best CEOs know it. They actively look for FDs who will be the ‘voice of reason’ in the heat of battle, the person who coughs at the strategically important moment and asks the question that brings the meeting back down to earth.
But venture capitalists lambasting the dot.coms is interesting. Someone invested in these companies and gave them access to significant amounts of capital without an FD in place.
Too often plans that talked of having FDs ‘ahead of float’ were enough for investors scared of missing out on the ever rising wave. Was their good sense over-ridden by the scale of the opportunities or did they really think that the new economy would be different? I guess we will never know.
From here on it should be back to the old adage of: market opportunity, quality of offering, protected intellectual property rights, plus a complete management team.
Henry Fairpo is a corporate finance partner at Pannell Kerr Forster.