The price is right and so is the time - 12/2001

The city should forget talk of the old and new economies, and return to basics.

The collapse of the dotcom sector has created buying opportunities, if companies remember that even the biggest brand needs the support of a healthy balance sheet.

I am convinced that in the medium-term, the city will treat cyberspace ventures in the same way as any other potential investment.

There arenít yet sufficient fund managers and financiers willing to recognise the potential value to be had within the online sector, but there are definite signs that growing numbers are willing to hold their nerve, not take the short-term view, and capitalise on some great opportunities.

Unlike most dotcom entrepreneurs, I am solidly rooted in traditional business values, having spent more than ten years as a corporate finance expert with Ernst & Young.

I believe that grounding has proved increasingly invaluable over the last 18 months, as the dotcom universe disintegrated.

The initial reaction of the business community to Internet and IT companies was largely, to ignore them. Then when the cyberspace sector took off around the world, fund managers didnít want to miss out on what was suddenly the most fashionable area for investments and simply piled money into anything they could find.

Unfortunately, most of them were so keen to follow the herd that they forgot the established principles of business finance. There was a perception that adding dotcom to a name somehow added value by itself, and that view snowballed until many believed that there genuinely were two economies, the Old and the New, and that only the latter was worth investing in.

Such a view is fallacious. The distinction to be drawn should merely be between good and bad businesses. The rules today for investors are the same as they were a hundred years ago. What matters is the quality and strength of a companyís business model, its management and workers, its resources, and its products or services.

Within the remnants of the dotcom sector, the most important element is the potential for a business to create a positive cash-flow. Purely because a company is not making money today, is not sufficient reason to refuse to contemplate either taking a stake in the business, or acquiring it outright.

The test should be if the business is likely to have the ability to generate a return in the foreseeable future. Dotcom or not, all that should matter is, if you put money into one end of the company, will more money come out of the other end.

There are some dotcoms out there, which have quality business models and very good management teams, but whose parent company or financial backer has simply refused to put more money in, or decided for strategic reasons to pull out.

www.Jobsin.co.uk