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| Dot-Com Business Plans Recalled To Life |
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| January 02, 2006 | Venturewire |
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By Jeanette Borzo
We know it was the worst of times. But for many, wasn't the Dot-Com Boom
also the best of times?
To be sure, the age that Dickens might have labeled "the age of
e-foolishness" certainly provided plenty of mixed emotions as a rash of
start-ups -- brave, stupid, and sometimes wacky - paraded through our lives.
As 2005 - and all of its signs of an overheating market - comes to a close,
many holiday reflections are conjuring the ghosts of Dot-Coms past. And it's
not just nostalgia for auld lang syne. Many of today's start-ups look
remarkably like dot-com bombs from 2000.
"There are so many retreads of ideas that failed before," said Scott Irwin,
a general partner at El Dorado Ventures in Menlo Park, Calif.
Still, examples show that many key differences in approach and market
conditions are yielding stunningly different results today.
Consider the contrast between Webvan Group Inc. and Safeway.com, which is
majority-owned by Safeway Inc. By 1999, Webvan had raised more than $150
million in venture backing - before it generated any revenue or even
launched its site. While Webvan rushed to build a warehouse infrastructure
for local grocery deliveries, Safeway.com -- an online grocery - and
pharmacy-delivery service launched in 2001 in Pleasanton, Calif. -- today
successfully fills customers' orders from its existing network of local
stores in select markets.
"Webvan was the ultimate belly flop," said Sheeraz Haji, chief executive at
GetActive.com, a profitable software firm in Berkeley, Calif., that makes
relationship-management software for membership organizations. "But I use
Safeway.com."
In part, today's infrastructure lets businesses effectively market their
services with inexpensive techniques such as viral marketing. To generate a
buzz, Internet firms no longer feel compelled to spend millions on 30
seconds of Super-Bowl-commercial airtime.
And certainly, there is far more realism and caution in the market today.
Five years ago, eyeballs and first-mover status were king. "In the early
days it was more about being first on the scene," remembered Cory Pulice,
e-commerce vice-president at Gold River, Calif.-based Skinstore, an online
store for skin, hair, and nail products founded in 1997. But today's
investors and entrepreneurs are generally far more focused on something
different -- generating revenue. FaceBook Inc.'s site, FaceBook.com, already
had millions of users - and revenue - before Accel Partners led a $12.7
million round for the social network targeted at high-school and college
students.
To be sure, the bulk of today's Internet start-ups are a far cry from the
Pets.com Inc. and eToys Inc. start-ups from the Boom. And yet at this time
of annual reflection, so many of the bygone start-ups seem so, well,
unforgettable.
"There were a ton of companies that were going to give loose networks of
independent resellers the same power as the big guys in purchasing and
marketing their products," remembered serial entrepreneur Jeremy Jaech, who
is currently president and chief executive of Seattle start-up Trumba Corp.
"I personally invested in a couple that went bust...I only remember
eFueler.com [an online marketplace for gas stations and convenience stores]
because I have three golf shirts that cost me about $35K each."
Looking back, many of those costly polo shirts clothed business ideas that
arrived too early. Founded in London at the end of 1999, article27 was an
online start-up with $9 million in venture capital that rushed to obtain
rights to films that it syndicated to Internet portals and video-on-demand
providers. While waiting for the broadband market to develop, article27 sold
movie DVDs and videocassettes. But operations ceased before the end of
2002 -- just about six months after Netflix Inc. went public.
But other business ideas were simply untenable -- even if highly appealing,
from a consumer's point of view. Urbanfetch (with more than $250 million in
funding) and Kozmo purported to deliver a double nonfat cappuccino (or
pepperoni pizza or dry cleaning or whatever your heart desired) to your
office -- all within an hour and for a reasonable delivery charge. "As a
consumer, I'd love to see that work," reminisced Sheeraz Haji,
GetActive.com's CEO.
But Urbanfetch was gone before the end of 2000 and Kozmo followed suit in
April the next year. In Seattle, MyLackey.com raised $7.7 million in venture
funding in early 2000, but was gone before year end. "I loved those guys,"
Jaech said.
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