(June 8 – 10:55 ET) – KPMG says cash-strapped start-ups and dot.coms are increasingly paying suppliers in stock options.

KPMG experts will tell its story at the Technology Summit 2000 seminar today in Toronto. Renzo Francescutti, partner in KPMG’s Information, Communications and Entertainment practice says there is a growing trend among start-ups to pay suppliers in stock options. The practice has created a whole new form of currency, he notes.

However entrepreneurs often don’t consider the implications of the practice. “It can certainly make sense for a new technology company to pay suppliers in stock options,” said Francescutti, “But founders of start-ups often end up owning less than 50% of their company. They should understand all the business and accounting implications before giving up equity.”

Francescutti also says that paying in options can hurt the bottom line and probably valuation. For example, U.S. accounting rules require a company gravitating to the U.S. market to book stock options as an expense at fair market value. So if the share price is up the expenses could hit the bottom line hard.

The Technology Summit 2000 is on today from 13:00 ET to 16:00 ET at the TSE Conference Centre in the Exchange Tower. It is sponsored by Silicon Valley North, KPMG, Fasken Martineau DuMoulin and Yorkton Securities.
-IE Staff