Magazine article The Spectator

Dot.coms Go Up in Smoke, Cash Is the Best Fire-Break, Keep Close to It Now

Magazine article The Spectator

Dot.coms Go Up in Smoke, Cash Is the Best Fire-Break, Keep Close to It Now

Article excerpt

We must go on learning in life, and backing dot.com companies has its own lessons. They do not, so we find, have priceearnings ratios (no earnings) or discounted cash flow (it flows out) but they have burn rates. These measure the pace at which they are getting through money: `Our burn rate is 50,000 a week.' Or: `We are in great shape, we're at 90 per cent of bum rate' - meaning that they had budgeted to run out of money in September but now look as if they can last out for the rest of the year. Then they would plan to bring in new investors who, inspired by the company's potential, would add fuel to the fire. This worked well as long as they kept coming but now they, too, have got burned and the conflagration is spreading. Boo.com's burn rate has consumed it, others have postponed their appointments with the new investors - possibly for ever - and even the Prudential's Egg has had to be put on the back-burner. …

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