(FORTUNE Small Business) – It's Payback Time

If you're a dot-com trying to hire or hold on to a management team of grade A players, it's going to cost you plenty. To compensate for the implosion in stock option values, executives are demanding higher annual salaries and bonuses. A summer 2001 study released by Unifi Network, a subsidiary of PricewaterhouseCoopers, reveals that the median total cash compensation (salary plus bonus) for CEOs at Internet companies has risen 42%, from $196,000 to $279,000, since last year. During the same period compensation for COOs rose 24%, to $212,000. The price tag for CFOs rose 15%, also reaching $212,000. Compensation for top marketing executives rose 14%, to $156,000.

Net Tax Crusade

The three-year moratorium on federal Internet taxes expires in October, and most members of Congress agree that extending it is a good idea. After all, dot-coms are reeling from the slowdown in the economy and struggling to survive. But what's causing some conflict is that now many states want to tax Internet access and online sales. That could make interstate business a nightmare for e-companies, since even having a computer server that reaches out-of-state customers might subject them to extra taxes. The rules vary from state to state, but some legislators hope to change that.

Representatives Robert Goodlatte (R-Va.), Richard Boucher (D-Va.), and Christopher Cox (R-Calif.) introduced the Internet Tax Fairness Act of 2001 in July. The bill would not only make the moratorium on federal Internet taxes permanent but also prevent states from charging Web companies taxes on everything from shipments of online sales to expenses for out-of-state trade shows.

Island Hatchery

Want to be a global e-company? Dealing with trade regulations and taxes between countries can be mind numbing, but one Bermuda-based e-commerce incubator, eVentureCentre, thinks it can ease your startup's path overseas. Since this island retreat has no corporate taxes and its Bermudian dollar is on par with the U.S. dollar, it is a good launching pad for companies aspiring to become multinationals.

The offshore incubator, a joint venture between the Centre Group (a subsidiary of Zurich Financial Services Group) and Paragon (a local technology consultancy), provides $250,000 to $1 million to startups. The hatchery also gives fledglings management and technical assistance. In exchange it takes, on average, a 25% equity stake in its incubatees. Already it has six companies in its portfolio. Among them: Invesdex, a hub for trading index futures.

The Mighty U.S. Dollar

If you think price wars in the U.S. are bloody, try vying for an export sale. The dollar's rise against major currencies such as the euro and the yen has caused goods with the made in u.s.a. stamp to be more costly abroad. Since January 1999 the dollar has appreciated 19% against the Japanese yen and about 31% against the euro.

So how can a U.S. exporter remain competitive overseas? John Taylor, CEO of FX Concepts, a New York City currency management firm, offers this advice: (1) Do your sales in foreign currency to reduce the risk of price fluctuations for the buyer; (2) buy forward or option contracts that allow you to lock in the current value of the foreign currency in U.S. dollars; and (3) lower your prices. Those strategies are a way to hold on to market share until the dollar weakens, which, it's hoped, will happen soon. At press time in August, Taylor said the dollar was peaking and was poised to begin its descent.

Biotech Boom

Venture capitalists are siphoning a larger portion of their portfolios to biotech, health, and medical companies. During the second quarter of 2001, VCs funneled 14%, or $1.5 billion, into this sector, according to the National Venture Capital Association. In the second quarter of 2000, VCs earmarked 4%, or $1 billion, to the life sciences. The trend reflects a renewed emphasis on long-term investing, since it can take seven years or more for fledglings to become profitable.

Reported by Eric Cohen, Jennifer Keeney, and Maggie Overfelt