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Wall Street crisis leads to caution locally Boston Business Journal
Architect keeps operation lean and expands reach Frederick Kramer, president of the architecture firm ADD Inc., says he’s fighting his way through the current economy but only worried for the short-term. “We’re trying to keep things as efficient as we possibly can,” says Kramer, whose business is down 10 percent this year. In February, Kramer laid off staff at the 135- person firm though he won’t specify how many. The reductions were a result of attrition but also a strategic move after Kramer noticed an “emerging softness” in the market last fall. ADD Inc. has a decent backlog of projects and is continuing to stay busy by doing planning work, corporate interiors and college and university jobs. To fill in the gaps resulting from a lack of big jobs, Kramer is looking beyond the region. Venture capital sees companies investing in cost-cutting The financial crisis hitting the country will likely make it difficult for mid- and late-stage companies to access new capital, says Michael Greeley, general partner at Boston-based Flybridge Capital Partners and chairman of the New England Venture Capital Association. He predicts aggressive cost-cutting by venture-backed companies. “I already had a board meeting — we all have — where we say, ‘how do you change the business plan,’ ” Greeley said. It’s not that VCs will stop investing, he said. But they’ll favor early-stage companies where the rounds are lower and the exit times further out. So Greeley said he wouldn’t be surprised in the fourth quarter to see deal volume hold steady but overall investments fall sharply. Hospitals already hurting from credit crunch Massachusetts hospitals are already starting to feel the pinch from the nation’s ever-worsening credit crunch and stock market volatility. They expect to lose money from investment income and see a drop-off in volume as economically-struggling patients defer care. And chief financial officers are reporting new struggles to get financing for even smaller construction efforts, says Lynn Nicholas, president and CEO of the Massachusetts Hospital Association. “It’s a trickle-down impact that will probably worsen,” she says. Nicholas says some members are worried about the status of their bonds, particularly if they had planned to refinance in the near future. “They will have to rethink their strategies in the short run,” she says. Hospital margins in Massachusetts are already “razor thin and dropping,” she adds, and among hospital executives, “tolerance for the ambiguity and uncertainty created by this is less than it is for some other parts of the economy.” Pharma investor isn’t worrying, but he’s planning Fred Morris describes the atmosphere in the life sciences industry as girding, with many startups and their respective investors unsure what the financial turmoil will mean for the demand for health care services. Morris, a partner with Wakefield venture capital firm Brook Venture Partners, said his portfolio companies are expecting longer sales cycles for their life sciences equipment products, but the firm itself is sitting tight to see how things play out. “It’s going to take more money for slower growth, but it hasn’t been a major problem yet. You do your planning with a little extra capital in mind,” he says. The firm provides growth equity to companies that are either profitable or close to being in the black, so Morris is not concerned with its firms burning through piles of cash quickly as was the case in the tech bust of 2001. But the firm is still trying to determine if and how a consumer-led recession will seep into the drug development space. One bright spot for exits has been the private equity space, where “there is still a lot of money there,” Morris says. “I don’t think we’re in crisis mode yet but you’d be foolish not to be planning for tough times.” Ex ad-exec looks for opportunity amid chaos Matt Lindley is in a position few people would envy: He’s currently looking for a new job immediately after one of the worst financial hits Wall Street has ever experienced. Lindley, who this month left his post as executive creative director at Boston-based ad agency Arnold Worldwide, has spent close to two decades working in the ad business. He plans to take a job working in an entirely different industry, possibly a startup company. Despite the slow economy, he’s positive about his prospects. “I think in chaos there’s opportunity,” says Lindley. “You have to think non-traditionally in this environment. Ideally, (I’m) looking for an opportunity that didn’t exist six months ago — something that’s nimble and that takes advantage of the new economy.” Early warning signs are troubling at benefits firm James Blue’s Bostonian Group, a benefits consulting firm with 53 employees, is kind of like a canary in the coal mine with the expanding economic crisis. Blue says clients in all sectors, in light of the broadening downturn, are starting to look at how to cut benefits or pass on more of the cost to employees. Companies are worried about stretching their cash and keeping in business as economic problems spread. “One of the things we are clearly seeing is employers are facing an incredibly difficult and challenging economic environment,” Blue says. “This is affecting their ability to be able to grow.” If there is a bright spot, Blue says, his biotechnology clients aren’t as affected as other business sectors. “Most of our clients largely have their funding in place or they are public,” he says. “And so it is very competitive for them (to maintain benefits) to attract the right talent.” Being an easy item to cut, marketers know there’s pain out there George Irish, owner and president of marketing communications company Strategis in Stoughton, has noticed that clients have been nervous for the past year. Marketing firms are often the first to experience a slowdown in the economy as businesses cut back on expenses that don’t contribute directly to the bottom line, he says. At Strategis, Irish says, his eight-person company is sized right to handle the downturn. “We are a barometer of the economy — we’re the first ones to feel it,” he says. “But I feel more for the average citizen on the street living paycheck to paycheck. The silver lining is that maybe we’ve bottomed out and we can start to turn this thing back around.” Vendor sees security in being the cheaper alternative David Friend is happy he closed his Series C venture round a few weeks ago instead of last week. “If it was last week, who knows if (the venture capital firms) would be answering my calls,” the CEO of Boston online backup firm Carbonite Inc. says. But Friend is not panicked about how the current financial turmoil will affect his company, although he says, “it’s much harder on me personally than it is professionally.” Carbonite is focusing on international sales to buffer the downturn in the U.S. consumer market. At about $50 a year, subscribing to an online backup service is generally less expensive than buying an external hard drive to back up files, Friend says, and he hopes businesses look at the cost savings as well. “When times get tough, anything that can be considered a deferred expense gets set aside,” he says. “IT managers are telling me it’s cheaper to buy Carbonite than buy new servers and storage.” Boston well-positioned, says money manager John F. Osbon, founder and chief investment officer of Boston’s Osbon Capital Management and a former executive at Credit Suisse First Boston and Morgan Stanley, says Boston is in a stronger position than New York and London because it is a major center for money management. New York and London are at the epicenter of the convulsions in the capital markets. “Boston is a huge beneficiary of this turmoil,” he says. Osbon, whose money management firm relies solely on index investing, says he is not changing his philosophy. “I do what I always do: emphasize quality and diversification. You never get hurt by any one area no matter how bad it is. Business is up 50 percent this year with new clients and new assets.” Restaurateur is worried, but so far so good Evan Deluty, chef-owner of the restaurant Stella in the South End, is concerned that his restaurant will take a hit because more patrons will forgo dining out to save money. “I’m a firm believer that the economy directly affects people’s ability to go out and enjoy themselves,” says Deluty, who launched Stella in 2005. “That’s always been a consummate stress of my wife and myself: How bad is the economy and how much will it directly affect our business? It’s one of those things you have no control over — it’s like freaking out about world peace.” Still, Deluty says that so far business has been brisk, but he is bracing for a slowdown. “I do think that we will feel it,” said Deluty. “I think it will get worse before it gets better.” To view article on the Boston Business Journal website click here. | ||
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