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From boom to doom: Dotcoms that went bust
In India, there are several examples of earnings never catching up with the valuations of the eye-popping boom era deals.
There are war clouds everywhere, civilian planes are being shot down and billion-dollar dotcoms are mushrooming.
That was the turn of the century. No, that is now.
“All you need is a model. The money is waiting,” I overheard a budding e-commerce entrepreneur telling someone recently. Suddenly, it is all looking very easy.
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From boom to doom: Dotcoms that went bust
Find a rich fool. Sell him an idea. Don’t tell him what you are selling now.
Talk about what you can in the next three years.
Once he is hooked, it is for the rich fool to find other rich fools, preferably richer. People speak of billions like pocket change.
And, even $100 billion (Rs 6.3 lakh crore) is not too far away.
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From boom to doom: Dotcoms that went bust
Ambition is good. However, there are too many bad memories. Let me scare you with a list forwarded to me by a fund manager friend, googling out some of the most spectacular dotcom busts from what now seems like prehistoric times.
Some burnt out the venture capital money and went bankrupt:
1. Boo.com, a British internet company, was launched in the autumn of 1999 as a global online fashion store. Reports say it spent $188 million in only six months and filed for bankruptcy in May 2000.
2. Freeinternet.com, famous for its Baby Bob mascot, lost $19 million in 1999 on revenues of less than $1 million.
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From boom to doom: Dotcoms that went bust
Some got acquired for astronomical valuations and disappeared:
1. Lycos, a search engine purchased by Spanish telecommunications provider Telefónica for $12.5 bn in 2000 to expand its Terra Networks online platform. It was sold in 2004 to Seoul-based Daum Communications Corporation for $95.4 mn in cash, less than two per cent of Terra's initial multi-billion dollar investment.
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From boom to doom: Dotcoms that went bust
2. GeoCities, purchased by Yahoo for $3.57 bn in January 1999. Yahoo! closed GeoCities on October 26, 2009.
3. The Learning company, bought by Mattel in 1999 for $3.5 bn, sold for $27.3 mn in 2000.
The few which survived have turned posterboys and become justification for new excesses.
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From boom to doom: Dotcoms that went bust
Even in India, there are several examples of earnings never catching up with the valuations of the eye-popping boom era deals.
Though the world is more of a global village now, there is always a huge chasm between what the foreign investor sees and the local investor does.
The former is wowed by the unpenetrated Indian market and see it as a huge opportunity.
The local guy might be in better grasp of the reality that this market might remain underpenetrated for the next 15 years, simply because everyone buying a smartphone need not convert into an online shopper.
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From boom to doom: Dotcoms that went bust
Some analysts point out even the smartphone users use their laptops and desktops when they are ordering stuff online.
The billion-dollar valuations, the $100 bn quotes and the turn of the sentiment are good enough to bring a big smile on our faces.
But not reason enough to part with your hard-earned money. As a small investor, these hot cakes are still far out of the hands of you and me.
But, remember, they are cooking it all up to serve it to the small guy one day. Soon, they will be talking about the exits.
Soon, IPOs will come. Because one way the richer billionaire gets richer is by finding a billion small guys and selling them a dream to make billions.
