eCommerce CFO? Ready...Set...Go!!!!!!

To thrive in a fast growth startup or early stage Internet company, today's Chief Financial Officer needs a new set of skills and relationships. Oh, and roller blades. The need for speed and agility overlays all activities in "Internet Time".

How does the traditional CFO job description differ from that of an e-commerce CFO? In almost every way. As the traditional business model has been tossed out in order to meet the demands of the e-commerce revolution, the role of the new CFO has exploded. Significant differences between the traditional CFO and the Dot Com CFO are:

• The Dot Com CFO has no boundaries. The position requires coming out of the traditional finance box and having a broader vision, along with the ability to make quick decisions in a fast growth environment.
• A Dot Com CFO is multitasking in non-financial functions including Business Development, Human Resources, Information Technology, Process Reengineering, Operations, Marketing and Sales.

These differences can be illustrated by the vocabulary, core competencies, experience, and financial measures and tools required for the job.

VOCABULARY

The buzzwords are different. It's like communicating in a foreign language. To start with, what is a "Dot Com"? Derived from the domain name, or Website address (URL), such as YourCompany.com, it's just a trendy way of referring to an Internet company.

Several online dictionaries shed light on the sometimes mysterious jargon of e-Commerce. Try these:

• "Welcome to NetLingo.com, your online dictionary with thousands of words and acronyms about the technology and community of the Internet and the World Wide Web!"
• Webopedia, "The only online dictionary and search engine you need for computer and Internet "technology."
• WhatIs?com, "E-commerce (electronic commerce or EC) is the buying and selling of goods and services on the Internet…"
• Computer Support Group Online, "Computer Glossary and Dictionary."

CORE COMPETENCIES AND EXPERIENCE

The Dot Com CFO has an extensive network of contacts and market knowledge, has developed relationships with venture capital and angel investor communities, and has created strong strategic alliances with at least one well-known law firm, public relations firm and Big 5 CPA firm.

The e-Commerce CFO needs to know how to:

• Raise capital with Venture Capital firms and Angel investors.
• Provide the required documentation including the executive summary, detailed business plan, and 5 year financial projections in summary and detail.
• Prepare and present the business plan in PowerPoint.
• Prepare for sudden mergers or acquisitions.
• Incorporate and structure a new subsidiary.
• Develop an exit strategy by the IPO, merger, or acquisition process.
• Draft an initial public offering S-1 document to prepare the company for the IPO exit strategy.
• Account for intellectual property including patents, trademarks and copyrights.

FINANCIAL MEASURES AND TOOLS

The financial measures and tools are different for the Dot Com CFO than for the traditional CFO.

In the early stages of growth, a Dot Com CFO’s focus is on investing in technology and people, increasing company valuation and increasing company growth, whereas the traditional CFO's focus is on increasing profits, controlling costs, improving operational efficiencies and risk management.

"Growth first, profits later!" is the Dot Com CFO's mantra. Amazon.com is a good example of this philosophy. Even thought it may be a long, long time before they become profitable, they are considered successful because they have captured the lion's share of their market, and are expanding product lines as fast as they can.

In fact, positive cash flow for many Dot Coms has been the next round of financing! As the e-commerce model matures, and as more "Clicks and Mortar" companies develop strategic alliances with "bricks and mortar" companies, more traditional measures of value will be applied.

Other important considerations which factor into the overall financial structure involve:

• Website traffic, customer conversion rate and customer retention in order to calculate the overall cost of obtaining a customer. Besides website traffic value, site "stickiness" and the marketing value of site promotion and advertising.
• Coordination with IT department to determine hardware and software requirements for increases in traffic and transactions. Accounting system interface with Website e-commerce systems.

The Dot Com CFO manages millions of dollars of cash throughout the various rounds of funding, and must balance the interests of the company and all the various financing rounds. Including accounting for options and warrant valuations.

THE GOOD NEWS

Laying out a road map with all of the necessary components to meet the challenges and milestones is critical to managing an Internet company from startup to early stage through IPO Success, and beyond..

If you do not know how to do most of the listed items, start catching up NOW, or you will not survive long in this environment. The good news is, you can outsource many of the tasks to experienced firms specializing in these areas, but do your homework. Look for specialists with a demonstrated track record of success in the e-commerce arena.

Web www.ventureplan.com www.venturemap.com www.360webmarketing.com

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Last Modified October 11, 2005