Ernst & YoungBorn:
B.A. in business administration from California State University, FullertonCareer Turning Point:
When he became a partner with the company in 1983.Most Admired Person:
Ewing Marion Kauffman, founder of Kauffman Center for Entrepreneurial LeadershipHobbies:
Golf, family activitiesPersonal:
Married, three childrenErnst & Young's Jim Peters helped Etoys and other local companies raise money during Internet boom times but he's also witnessed first-hand the failure of some of these firms
Jim Peters may have been destined to audit technology companies from the day he stepped into Ernst & Young's Santa Ana office (then Ernst & Whinney) in the early 1980s, when he graduated from college. Now a partner at the firm's Woodland Hills office, Peters has worked on initial public offerings for numerous local companies, including Ticketmaster and Etoys. He's helped a number of startup tech firms raise venture capital. And he's seen a lot of companies fail.
Peters was the director of Ernst & Young's Entrepreneur of the Year program from 1996 to 2000. He is on the advisory committee of the Lloyd Grief Center for Entrepreneurial Studies at USC's Marshall School of Business. And he speaks regularly at a three-day program for corporate board members at UCLA.Question:
How did you become interested in auditing?
Answer: I had a tax practice with a couple of guys; we mostly did (auditing) to make our resumes look good. We didn't make money at all. I thought I was going to be a tax professional. At that time, the firm always started people on audits and over time transferred them to tax work. I think that's what they had in mind for me.
I got on a couple of good accounts and the timing was such that I couldn't work the entire tax season.
Q: Why have you stayed with Ernst & Young for so long?
A: I've got some interesting offers over the years. In fact, just a few weeks ago something was presented to me that was very interesting. I had a couple of offers to be the CFO of several things. But the truth is, I really like the clients I get a chance to work with, the companies I get a chance to talk with and I like the people I work with.
Q: What's the hardest thing about auditing technology firms?
A: Keeping up with it. I spend hours every week reading about different technology things. I read a lot of magazines. I get up every morning and watch CNBC while I'm on my exercise bike at a quarter to 5. Many of these startup companies are very similar. The issues are the same how to attract the right people, how to keep the right people, how to value your stock options.
Q: How has your job changed in the past year?
A: We did a lot of initial public offerings. And I worked on a lot of those. I just stopped last year in the spring of 2000. We still have plenty of exciting startup companies; they're just managed at a different pace now. Getting funding is more of a challenge than it was. I think I have more venture capital backed clients than I've been able to have for a couple of years. I was so busy in 1998 and 1999 with IPOs and other transactions that I didn't take on as many of the startups and companies I really love to work with.
Q: Is there something you don't particularly like about your job?
A: I don't like the business part of my job. I don't like having to worry about how much it will cost to do something for a client.
Sometimes we have companies that just don't make it, and that's disappointing. If we want to see them when they're successful, we also have to face the pain when they have challenges. Etoys, for example, was a client I helped take public. And I believe in my lifetime we'll see that type of business model work. The timing and the pace of growth and the funding didn't come together in a way that allowed them to make that model successful. But I believe some day we'll see a company like Etoys selling toys on the Internet.
Q: Yet many people said that the Etoys business model didn't work at all.
A: I believe there is a place for retail business that's focused on a particular segment of the marketplace. And it's just a question of time for people to get comfortable buying enough products over the Internet. Eventually, maybe as a spin-off from a toy company with bricks and mortar, we'll see an Internet site that's selling toys that is in fact profitable. I think by then most of these business segments will be covered by bricks-and-mortar companies developing online retail capabilities and the fulfillment capabilities to support that.
Q: There have been a number of lawsuits filed against technology firms and their auditors for approving failed business plans and initial public offerings that caused shareholders to lose money. How much do you think auditors are to blame?
A: I think the auditors were asked to give opinions on financial statements that represented businesses where the business model itself didn't seem to work. There's a standard for auditing financial statements that auditors need to adhere to, and just because the auditor approves it doesn't mean the business idea will be workable. With the economy changing the way it is right now, there are some opportunities and risks that go along with trying to guess what models will work best. For many of the dot-coms that went out of business, it seems like quite a stretch for shareholders to say the financial statements that were audited misled them.
Q: Is it hard on a personal level to see those clients not do well?
A: Most of these people getting funding from venture capital firms are really talented, and they're going to be successful. I've seen a couple of examples of people who probably on a personal level were more successful once their products went in the wrong direction.
Q: Did you ever want to be an entrepreneur yourself?
A: I've actually thought of that a number of times. And maybe I will someday. But I just get a lot of satisfaction working with entrepreneurs now and feel like I'm making good contributions.
Q: How do you have the energy to do your job?
A: I don't have any idea. I do know that I've never felt like I needed as much sleep as other people. If someone says they need me in San Diego for an 8 o'clock meeting, I often will just get up early and drive down there and usually I'm there early enough to have breakfast and get my thoughts together before the meeting. I do remember a partner when I was relatively young who said if you ever feel like you have trouble getting up in the morning, that's not right. That's an insightful thought.
Q: If you weren't an accountant, what would you be?
A: I would love to be an analyst, an investment banker, analyzing on the buy side. I'd enjoy being a venture capitalist. Although my job is almost parallel. I have to make the same decisions that some of the VCs do. I decide which companies we're going to work with because we can't work with all of them.
Q: Who do you admire most?
A: Ewing Marion Kauffman (founder of Marion Laboratories pharmaceutical firm). I really do have this thing about entrepreneurs. He was a very successful entrepreneur, and he started this foundation to learn more about them.
For reprint and licensing requests for this article, CLICK HERE.