Archive for May, 2011

Cash footprint is good

Posted: May 20, 2011 in Ecosystem
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For a few years, I’ve been occasionally thinking about how to measure the economic effect of a startup. This was sparked off by a realization that even though the first company I founded hadn’t been profitable in several years, it was still contributing millions of euros to the national economy, mostly in terms of salaries and different taxes. In addition, almost all revenues and investments came from abroad, which created a strong net positive cash flow to Finland.

Footprints

I believe that this (discounted) net cash flow over the lifetime of a company could be used to measure and compare very different startups, independent of their specific industry, business model, etc. For the national economy, what matters the most is how much money the company leaves in its home country over its lifetime.

I’ve used the term cash footprint (“rahajalanjälki” in Finnish) for this concept. Its analogy to carbon footprint is obvious, except that a large cash footprint should be a positive thing or even the key goal of, for example, governmental decision makers.

I’ve talked about this idea with various folks, but the first time I mentioned it in public was at an Aalto Entrepreneurship Society panel discussion at Finlandia Hall. (The panel was held in Finnish and the longish recording is here.) After the event, there has been a lot of interest towards the concept and I finally decided to blog about it.

As the next step, I’d like to “formalize” the concept. For this, I’d need help from somebody who understands both growth company dynamics and economics; for example, I think this would be a good topic for a master’s thesis. A few government organizations have indicated that they could be willing to support such a  project with both funding and data. Please get in touch with me if you’re interested (firstname AT lifelineventures.com).

Finally, an executive summary for busy business people: carbon footprint is bad, cash footprint is good.

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