CITY AND SUBURBAN
Dot.coms go up in smoke, cash is the best fire-break, keep close to it now
CHRISTOPHER FILDES
e must go on learning in life, and W backing dot.com companies has its own lessons. They do not, so we find, have price- earnings 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 burn 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 corning but now they, too, have got burned and the conflagration is spreading. !Ino.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. You would need to be older than most of the dot.com promoters to have seen markets reverse themselves so dr. amatically. In two or three months, shares hke theirs have lost half their value. Only a month ago, they could still claim (as I said at the time) to be paper-rich but cash-skint, but stakes in highly valued businesses nut still bringing their socks home to Mum to be washed. Some of them will now turn out to be paper-poor, too. It is the oldest story of all. Cash is the lifeblood of any busi- 1.1ess. There are times when credit will do Just as well, for, as the authors of Refer to , awer point out, credit is only the Latin for tie believes it'. Then belief is overstretched and, when it goes, cash goes, too. Cash is the best fire-break. Keep close to it now.
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