At Entrepreneurs Roundtable 43 we asked Bernie Leone, partner at the regional accounting firm WithumSmith+Brown, about how accounting affects startups. He has several clients that are considered disruptive tech businesses, including Tumbler, GetGlue, and Codecademy, and says that several of the things that entrepreneurs like them have to face include business model reviews, tax issues, finding financing, and help to prepare for investor and equity structure.
“Our work for ERA is pro-bono; generally we will review business plans for startups,” he explained. “Last session we had a startup that came to us with a tax issue, which is unusual for a startup.”
He said that the startups that come to him are principally tech companies. “Just follow the PWC money tree (Price Waterhouse Coopers) to see where the money is being provided and that’s where the companies are going – and right now you see a lot of software, mobile apps, some medical device and biotech, and an occasional consumer product company, although finding funding for this these are getting tougher.
He has startup clients that have changed the way people do things, but he wanted to make it clear that being “disruptive” means something different than most people think. “The word ‘disruptive” is a much-overused term – everything that is going to cause something to be a little different is called disruptive technology. And that’s not disruptive technology — I mean, working in the cloud versus having software resident on your own server – that’s disruptive technology – that’s the way you do business and that changes the whole paradigm in which you do business.
“If you have something great, people will buy it and use it because they need it,” he continued, “and that is disruptive. But if you can’t get that to happen, what follows is economics; you might have developed something that is “disruptive,” but it’s not disruptive enough in a way that somebody cares about. So for instance, somebody finds a different way to bring wire into your home, but you don’t care about it. All you care about is that you plug in your phone and it works, you plug in your cable and it works.”
Christopher Ortolano works with Leone and also commented on disruptive technology. “It’s doing something that people want to repeat. If you look at Social Network, the movie, it was cool. They didn’t know what they had but it was cool and people were using it. So it became disruptive — they were doing something differently even though they still didn’t know they had business. So what gets going is when it’s repetitive, when you can measure that by economics or when people writing about it. So if you see things popping up that say ‘wow this is a cool thing,’ you might not have an economic model to it yet, but if people are on it like they were with Facebook, then I would guess that would be recognized as disruptive, or changing the way someone meets or talks or gets together instead of sitting around a coffee table.”