Fatal Error

by Michael Ridpath

  We arrived in cold, grey Edinburgh tired but euphoric. We were beginning to believe not only our own story, but Bloomfield Weiss’s as well.

  Things started to go wrong in Scotland. We had breakfast at the Caledonian Hotel with some big investors who asked difficult and rather cynical questions about when we would ever make a profit. As the day progressed, the questions became harder. I found them particularly tricky, because I usually agreed with the questioner. How could a company that had been going for less than twelve months and was making no money be worth two hundred million pounds? How indeed.

  Our smooth Bloomfield Weiss banker was looking worried. This involved not just a frown, but a stoop of the shoulders and a tendency to scurry off to make a call on his mobile at every pause. I was amazed how he was able to shed this demeanour for the few minutes he was introducing us, when he became transported by excitement over Ninetyminutes and its future.

  Even Guy noticed things were going badly after the last afternoon session. He pulled the banker to one side. ‘What’s going on?’

  ‘Edinburgh fund managers are always awkward. They’re notorious for it. They’re just trying to live up to their reputation as canny Scots.’

  ‘Oh, come on. There’s more to it than that. There must be.’

  The banker sighed. ‘Possibly. The market’s a bit shaky. Lastminute was off another twenty p yesterday and the NASDAQ was down again. Have you seen today’s Financial Times?’

  ‘No.’

  The banker handed it over. Articles about investors being let down by lastminute’s share price collapse. About fund managers angry with the greed of their investment-banking sponsors. About how companies due to come to market in April were considering waiting to see what happened. And worst of all, an article about us. According to Lex, the Financial Times’s, back-page comment piece, we were a promising company but at two hundred million pounds we were wildly overvalued.

  The Scots had read the papers. They didn’t like us any more.

  ‘Why didn’t you show us this earlier?’ I demanded, angry that I hadn’t picked up the FT myself that morning.

  ‘I wanted to wait until you’d done your presentations,’ the banker said. ‘Didn’t want to dent your confidence. These roadshows are all about confidence.’

  ‘So what do we do now?’

  The banker frowned more deeply. ‘We carry on. We’ll win them round, you’ll see.’

  When we got back to the hotel Guy and I stopped off at the bar for a quick drink. The banker ran off to make calls. The euphoria of the previous few days had worn off: we were tired and we were worried.

  The banker returned. ‘Bad news, I’m afraid.’

  ‘What?’ said Guy, scowling.

  ‘I was just talking to the syndicate desk in London. They don’t think they can place the deal.’

  ‘What does that mean?’

  ‘It means we’ll have to pull it.’

  ‘You’re not serious? We can’t do that!’

  ‘If we can’t sell the shares, we can’t do the deal.’

  ‘But we need the cash! You promised us the cash. You said we could definitely raise forty million pounds.’

  ‘And that was a perfectly fair assessment at the time that we said it. But market conditions have changed. If we go ahead with this deal it’ll be a very public flop. That will be bad for all of us.’

  ‘But the Germans loved us!’

  ‘I spoke to Frankfurt. They’re getting second thoughts. And the problem with the Germans is they all get second thoughts together.’

  ‘So what do we do?’ I asked.

  ‘We wait. This is just a temporary thing. All bull markets pause for breath. In retrospect this will be seen as a great buying opportunity. Things will turn around in April, you’ll see.’

  ‘I don’t like this,’ Guy said. ‘I don’t like this at all.’

  ‘Believe me, neither do I,’ said the banker.

  ‘Do we have any choice?’ I asked.

  ‘I’m afraid not.’

  Guy looked at me. Then he turned to the barman. ‘Two beers,’ he said.

  The banker left us to it.

  We had to put everything on hold until we knew we could get the IPO away. The uncertainty was immensely disruptive for the business, and for Guy’s frame of mind. We all watched the stock market closely. Things didn’t turn round in April. NASDAQ’s slide became a tumble. On the fourteenth of April it fell ten per cent on the day, reaching a level thirty-four per cent below what was now being seen as the all-time high of March. Lastminute’s shares were now down below two pounds. More significantly, the founders had been transformed from heroes to hate figures in less than a month. All those speculators who had fallen over themselves to fill their boots with lastminute shares could not be relied upon to do the same with ours.

  Suddenly B2C websites were out of fashion; everyone wanted to be in B2B. B2C was business-to-consumer. B2B was business-to-business. Ninetyminutes was B2C.

  The following Monday Bloomfield Weiss advised us to delay the IPO for a couple more months until the markets recovered. It was the kind of advice we had no choice but to accept.

  That left us with a problem. We had big plans, but not much cash left to finance them. Guy and Owen could help a little. The winding up of their father’s estate had given them a million pounds each they could get their hands on. But that wouldn’t keep us going for long: we had been relying on forty. So Guy and I went to see Henry.

  He gave us a friendly enough welcome when we met him in his Mayfair office. But despite the smile there was a frown on his high forehead, and he was fidgeting. Not a good sign.

  Henry had been involved in the discussions with Bloomfield Weiss to delay the IPO further, and he knew we would need more money from somewhere. Nevertheless I took him in detail through our cash situation and the advice we had received from Bloomfield Weiss. I showed him forecasts for the next six months, which reflected the reduced expenditure levels I had been able to press Guy to accept. We needed ten million to see us through to October, by which time the IPO should have happened.

  Henry was listening closely. When we had finished he ran his fingers through his thinning hair. ‘I have bad news, I’m afraid,’ he said. ‘The answer’s no.’

  ‘What?’ exclaimed Guy.

  ‘I should explain.’

  ‘You certainly should.’

  ‘We had a big meeting here yesterday to discuss the latest market developments. We think there has been a fundamental change. It’s at times like this that venture-capital firms are tempted to throw good money after bad. We want to avoid that. So the message to all our investee companies is, conserve cash. You won’t get any more from us.’

  ‘But that’s absurd! If you don’t give us more funds, we’ll go under. If you do, you’ll make at least a hundred million.’

  ‘And if the stock market doesn’t pick up over the summer? What then? We put in yet another ten million?’

  Guy calmed himself. ‘The business is going just as we said it would. Better. Our sites in Germany and France have started brilliantly; I wouldn’t be surprised if Germany outstrips the UK next year. Visitor numbers are still climbing, we went over four million last month. The retailing is losing money, but our own-brand stuff is doing well. You walk down any street in the country and you’ll see people wearing ninetyminutes.com T-shirts and sweatshirts. We’re building a brand here, Henry. And good brands, the kind of brands that are worth hundreds of millions, cost money to build.’

  ‘I know. But I can’t give it to you. It’s the firm’s policy.’ Henry glanced at me. ‘I’m sorry, David. I do understand all this. I’ve argued your case, believe me. But we’re a partnership and I need to abide by the partnership’s decision. No more cash.’

  ‘Let me talk to your partners,’ said Guy. ‘I’ll convince them.’

  ‘No point,’ said Henry, his voice cooling.

  ‘Let me call them direct.’

  I raised my hand to steady Guy. Henry was
our ally at Orchestra. Going over his head had no chance of getting us what we wanted. ‘So what do you suggest we do now?’ I asked him.

  Henry raised his hands. ‘What can I say? The world’s changed. There is no more easy money. Batten down the hatches. Conserve cash. Make profits.’

  ‘But that’ll mean we’ll screech to a halt just when we’re pulling into the lead,’ said Guy. ‘This is a race. We put on the brakes, we lose.’

  We had a real problem, and Guy and I sat down to figure out what to do about it. There really was no choice but to cut back. Stop the advertising campaign in its tracks. Freeze hiring. Hold back on the development of the WAP company in Helsinki. Delay plans for offices in Barcelona, Milan and Stockholm. And try to slow down the retailing express train that was speeding away, pulling truckfuls of cash with it.

  We told the team. They had been through so many tribulations that they took another one in their stride. They all left at seven to have an ‘austerity party’ at Smiths.

  Guy was less resilient. In March, he had been on a high. He had seen what lastminute had done and had genuinely believed he could do better. As far as he was concerned, Ninetyminutes was already the best soccer site on the Internet. Recognition of that fact was going to come in a matter of weeks and bring with it piles of cash. For Guy, that had been a given. He was already thinking how to spend it. Now he had not just to lower his sights, but to change his whole mindset one hundred and eighty degrees from expansion to efficiency, from investing in growth to cutting costs, from shooting for the moon to survival. It was a shock.

  Long after the others had all gone to Smiths, he and I went for a pint to the Jerusalem over the road.

  ‘We’ll pull through,’ I said. ‘We always do.’

  ‘I guess so. If we cut back as much as you say we should, we’ll struggle on,’ Guy said. ‘But that’s almost the worst thing of all.’

  ‘What do you mean?’

  Guy shrugged. ‘I always wanted to have either a huge success or a spectacular failure. Struggling along to break even until we eventually fade away is my worst outcome. It will be like death from a thousand cuts.’

  ‘We need to stay in the game.’

  ‘Oh, come on, Davo. You know as well as I do that once we stop growing it’s all over. The competition will pull away from us. Champion Starsat will start up its own site and they’ll overtake us. We’ll just be also-rans.’

  Guy’s optimism was difficult enough to handle. His pessimism was impossible.

  ‘You never know,’ I said. ‘Maybe the others will have to cut back too. Maybe the stock market will bounce tomorrow and Bloomfield Weiss will be knocking on our door again. You have to keep going, Guy.’

  ‘Actually, I’m not sure I do have to. You and Ingrid can run things. Maybe I should slip away.’

  ‘That’s absurd.’

  ‘This is going the same way as everything else I try. Everything’s hunky-dory to start with, but then it just slides through my fingers. At drama school they thought I was a pretty damn talented actor. I looked good. After a couple of years I should have landed some decent roles. It didn’t happen. Instead I almost destroyed myself.’

  ‘This is different.’

  ‘Is it?’ Guy looked at me witheringly. ‘Ninetyminutes was a great idea. I thought I’d done well to get it this far. I thought I was good at this stuff. But then what happens? It runs into a brick wall like everything else.’

  ‘All successful businesses go through rough patches early on,’ I said.

  ‘Not this rough.’

  ‘Yes, this rough. Do you think your father never had times as tough as this? Do you think he gave up?’

  ‘Don’t compare me to my father.’

  ‘Why not? You do.’

  Guy didn’t answer.

  ‘He wasn’t a superman, you know,’ I went on. ‘He was just another reasonably successful property speculator. There are many more like him around. Sure, he had flair. But he also had determination. He didn’t give up every time property prices crashed, did he? He can’t have done, or he’d never have survived.’

  ‘Perhaps he was lucky.’

  ‘Lucky?’ I snorted. ‘You make your own luck.’

  ‘Well, it looks like I don’t make mine.’ Guy stared into his beer. I stared at Guy.

  Eventually he looked up and met my gaze. His eyes, usually so bright and forceful, were unsteady, hesitant. ‘I don’t know what I’ll do if Ninetyminutes doesn’t make it.’

  I saw it then; saw the fragile core that was at the heart of Guy. I had caught glimpses of it during the many years we had known each other. Despite the success, the friends, the popularity, the women, the athletic ability and the money, Guy didn’t believe in himself. Ninetyminutes was his final attempt to build a solid shield around that core. The attempt had worked for a year or so but now it was all unravelling, leaving Guy soft, vulnerable and unprotected underneath.

  Ninetyminutes had to succeed for Guy to survive.

  Guy was watching me. He knew I knew.

  I opened another beer as soon as I got home, and sank into an armchair. It was very hard not to let Guy’s despair rub off on me.

  My eyes rested on the telephone. I still had an unpleasant task facing me that evening. It was one of those tasks that doesn’t get any easier the longer you leave it, so I decided to face up to it straight away. I called my parents.

  Fortunately, my father answered. He was full of expectation.

  ‘Did you tell Mum?’ I asked him.

  ‘Yes, I did,’ he replied. ‘To tell you the truth she was a bit miffed. Can’t think why. Seemed to think I had taken a big risk. She said even if it all came out well in the end it might not have done. Still, we’ll show her, eh?’

  ‘Perhaps not, Dad.’

  ‘What do you mean?’

  ‘You must have read about our IPO being delayed.’

  ‘Yes. But that was just for a few weeks, wasn’t it? The papers say this is just a correction. The market will be roaring ahead again any moment soon.’

  ‘Well it had better hurry up,’ I said. ‘Because until it does there will be no IPO.’

  ‘Oh,’ said my father, thinking through the consequences. ‘So where does that leave Ninetyminutes?’

  ‘Very short of cash,’ I said. ‘I don’t think we’re actually going to go bust, at least not for a few months yet, but it means we don’t have any funds to invest in the business. It will be all we can do to keep it ticking over.’

  ‘Your mother won’t like this.’

  ‘No, she won’t. But you’d better tell her, Dad.’

  ‘Perhaps I’ll wait a couple of weeks. You never know what might turn up.’

  ‘Tell her, Dad.’

  My father sounded deflated. ‘OK,’ he said. ‘And good luck.’

  32

  I was working late and Guy was out of the office. I didn’t know whether he was at a meeting or had sneaked home. I was engrossed in a spreadsheet for calculating Amy’s funding requirements for the retailing business over the summer, when I felt as much as saw someone watching me. I looked up. It was Ingrid, sitting in Guy’s chair, fiddling with a strand of her chestnut hair.

  ‘Am I disturbing you?’ she asked.

  ‘No.’ I looked at the papers in front of me representing hours of unfinished work, work that couldn’t be done during the hurly-burly of the normal office day. ‘That is, you are, but I’m grateful.’

  ‘Stressed?’

  I smiled. ‘Yeah. I am stressed. And tired. Funny, really, I could handle all the hard work when I thought we were just about to do the IPO, but it’s more difficult when we’re struggling to survive.’

  ‘What do you think about the IPO?’

  ‘We’ll get it away in the summer,’ I said. ‘It’s just a question of getting through the next couple of months. Bloomfield Weiss are confident we’ve got a good story, and the site’s going well.’

  Ingrid’s pale-blue eyes were watching me steadily. ‘Is that what you really t
hink?’

  I sighed. ‘I don’t know what I really think. All that might happen. Or Bloomfield Weiss could be totally wrong and we’ll never do an IPO. We might never get another penny of cash from anywhere. Champion Starsat might come back and buy us tomorrow. The site might crash. On-line retailing sales might go through the roof. People might stop using the Internet. The world might stop turning. Doing this job, I’ve given up trying to forecast even a day ahead. We just have to keep plugging away and hope.’

  ‘I know what you mean,’ said Ingrid. ‘But Guy seems worried.’

  ‘He is,’ I said.

  ‘I think he’s losing his nerve.’

  ‘Do you?’

  ‘Don’t you?’ She looked at me pointedly.

  ‘Yes,’ I admitted.

  ‘Unless he pulls himself together, everything will fall apart before we get a chance to do the IPO.’

  ‘Can you talk him out of it?’ I asked.

  ‘I don’t think so. We don’t have that kind of relationship.’

  I couldn’t help myself raising an eyebrow. Ingrid pretended not to notice.

  ‘What about you?’ I asked her. ‘Are you worried? You always look so cool about everything.’

  ‘Do I? I don’t always feel cool about everything. Yes, I am worried. Of course, everything has always been so uncertain at Ninetyminutes. And I kind of expected that when I joined. It made a change after working for a large corporation with its plans and budgets. But over the last nine months I’ve really found myself being drawn in. If we’d done the IPO my stake would have been worth three million pounds. That’s serious money. It’s really why I joined Ninetyminutes. It’s so frustrating to have that amount of money so close and then see it whipped away from you. I might never get another chance.’