Companies Confused Over Having to Take Something Other Than Stock
Santa Clara, Cal. (SatireWire.com) – The Internet stock drop has done more than just lop off paper profits. Start-ups, which once regularly paid for goods and services in stock, have been forced to switch to an arcane form of payment called ‘money,’ a dramatic shift that has confounded both start-ups and those who once took equity for their work.
As one Bay Area software executive grumbled: “This ‘money’ stuff is quite difficult to find. Unlike our stock, it doesn’t seem to grow on trees, and what’s worse, we’ve learned we’re not allowed to issue our own.”
The drain on much-needed cash reserves, however, is not the only reason start-ups have had difficulty with the transition.
“We have consultants, bankers, gardeners – you name it – who just stare at us blankly now when we give them a check for their services,” said Angela Macronus, CFO of OneStopB2B.com. “We have to explain it to them succinctly. We say, ‘This is $4,000. It’s worth 699 shares of our stock.’ That seems to work.”
In fact, industry observers say service company employees – not start-ups – have been hardest-hit by the change.
At Valley Vendo, which since 1997 has taken equity in exchange for vending machine services, delivery drivers have practically revolted, said dispatcher Pamela Shreveson.
“They’ve worked with the same clients for years, and they’re used to exchanging, say, three cases of Coca-Cola and 16 cases of assorted snack crackers for 70 shares of stock. Now we’re telling them, ‘No, just take money.’ Well naturally, they’re confused. They say, ‘Why are we suddenly giving our stuff away?’”
Silicon Valley law firm Mancini & Mancini has had similar problems, said managing partner Clayton Longley, who constantly reassures younger attorneys that money is a valid substitute for equity.
“Very often we’ll refer them to history books, where they learn that money was, not so long ago, actually the preferred method of payment,” said Longley. “That blows them away.”
The trend is not limited to Silicon Valley, however, as London-based Web design firm ColourGraphics discovered last week.
“One French company we’ve been working with tried to pay us in something called ‘euros,’” said ColourGraphics site producer Ian McNair. “We were like, ‘Yeah, right, what the hell is that?’”
Ironically, McNair later learned that ‘Yeah, right, what the hell is that?’ is also the official British government position on the euro, “so I felt kind of vindicated.”
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