From FT Entrepreneur section of Financial Times (Saturday 31 May 2008), by Jonathan Moules

Lenders pass on the pain of credit costs to firms

extract:

For Colin Smith, who founded his web software company BIW Technologies just as the dotcom bubble burst, the current credit squeeze has an air of déjà vu about it.

His company, which specialises in systems for the construction sector, found itself with about 30 competitors when it started trading in March 2000. Almost all these rivals had raised large sums of financing of up to £100m, but were left crippled with the financing costs when the market turned and all but a few have now disappeared.

BIW raised a more modest £3m in seven funding rounds, and cut its operating costs when times got tough, moves that Smith now claims were key to its survival.

Efficiency savings included moving the headquarters from central London to Woking and setting up a development base in Nottingham because local IT graduates demanded less money than programmers in southern England.

“It was all about giving us the space to grow our business but without the cost,” Smith says.

Some of the savings might seem extreme. For instance, BIW set up an offshore development base in Gujarat because it was an even less expensive location than other Indian states.

However, Smith maintains that it is better to save money in that way than cut down on popular little perks. “We still provide people with free, decent coffee because I think those are the things that employees value,” he says. “And we still buy everyone pizza on Friday.”

(Full original article here)