I had the pleasure of attending a panel discussion put on by FD (Financial Dynamics), the strategic communications division of FTI Consulting, Inc. at the Taj Hotel in Boston late last week. The topic was “What Will Drive the Next Wave of Growth?” Panelists included Spencer Ante, BusinessWeek Associate Editor, Bob Davis, Managing General Partner at Highland Capital Partners, Ed Goldfinger, CFO at Zipcar, Richard Benjamin, Managing Director Forensic and Litigation Consulting at FTI Consulting, and Andrew Goldfarb, Co-Founder of Globalspan Capital Partner. Scott Kirsner, columnist of the Innovation Economy at the Boston Globe moderated.
So what will drive future growth? Benjamin was big on medical devices, software and alternative energy, specifically bio fules, wind, solar, and nuclear (outside the US). Goldfarb placed his bets on mobile and virtual goods, the later more for Asian markets. Ante pointed out that risk taking got virtually destroyed over the last 18 months, including both dumb and smart risks, with the economic meltdown. He believed mobile apps were poised for explosive growth going forward. Then the discussion got into the current and near-term future of all things economic and entrepreneurial and where the challenges ahead.
Tech M&A activity has started to pick up and IPOs are starting to come back (Bostons A123 IPO was the big news this week) with 11 IPOs expected over the next two weeks. Digital media is moving from crisis mode to opportunity as new businesses rise out of the ashes of older ones, but business models remain challanged. Despite this, Bob Davis of Highland Capital seemed the most pesimistic, saying that rumors of an economic rebound are greatly exagerated and that stagflation, huge deficits, and unknown regulation will make it increasingly difficult and costly to take a company public in the current business environment. That cost was speculated to be about $3 million. So if you’re a company with a $100 million market cap, you could lose $15-$20 million after everything was said and done. Zipcar is one company that continues to grow and Ed Goldfinger stated that it still had significant expansion plans and needed to finance thousands of cars ahead. But the importance of going public wasn’t there.
Then the discussion got lively around the role of VCs and (depending on who was speaking) how they got too big. Spencer Ante made the case that the math that powers VC funds just doesn’t work anymore and we’re seeing a reinvention of the VC these days, and a shakeout. During the dot.com boom the goal was to go public in nine months. The current recession’s helping move that back to reality (8 to 10 years was typical before the dot.com boom) to a more manageable 5 to 7 years now. There are still deals being made each week with Boston-area VCs, but I’ve noticed a lot more bootstrapping these days,with startups looking to gain a few clients and a revenue stream before seeking funding. Bigger $100-$200 million investments of the past have given away to $200K-$500K pocket deals (the Marc Andreesen model), while the new breed of super angels emerging are very entreprenuerial but interested in big exits and accumulating wealth.
As Edward Reilly, CEO Americas of FD stated in his opening remarks, the top five issues around driving future growth are centered around new market entries, acquisitions, divestitures and business model restructuring, and repositioning and branding. But many companies have cut back too much and now lack the understanding in what they need to do strategically going forward and how to implement it. And I couldn’t agree more! The strategic analysis process has been brushed aside for the blind persuit of tactical objectives, and his point that communication remains critical to the success of the C-suite is spot on as well. Many companies will have problems carrying out their implementation plans going forward, as they don’t have the authors of the strategic vision anymore. Most became casualties of the recession, as companies shifted focus to short term loss reduction and profit retention.