Ethnography the 1990 Term Paper

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[. . .] Of the companies initially financed in 2000, eighteen percent were defunct two years later (Chait pp). The amounts invested in startups founded since 1999 that are were no longer operational in 2002 totaled $15.3 billion (Chait pp).

Paul Ritter, an analyst at the Yankee Group, says that "During the 1992 to 1998 time period it was a much more rational approach to evaluating...By 1999 it was a frenzy of funding activities...without much scrutiny and without much expectations for when payback periods would arrive" (Chait pp). The sheer volume of funding during the dot.com boom could be the major factor in the failure rate (Chait pp). Although the number of initial financing grew steadily throughout the early 1990's, it almost doubled between 19998 and 1999 and then grew an additional forty-four percent in 2000 (Chait pp). "Analysts agree that the market simply couldn't support this overabundance of companies" (Chait pp).

According to Ritter, few companies had the potential to grow in size to be Amazon-like revenue, yet many companies had business models "predicated on achieving that type of revenue and new customers" (Chait pp). Basically there were tons of companies who needed tons of customers, but "there's a limit to who is on the Web" (Chait pp). Ritter says that products and services fared the worst, with over twenty-seven percent of the companies that were funded in 1999 and 2000 failing (Chait pp). Though unpopular at the time, healthcare startups have fared much better with only nine percent folding, and twenty percent of Information Technology ventures from the period closing their doors (Chait pp).

According to Robert C. Pozen, Fidelity's vice chairman, the four most dangerous words in investing are "This time it's different" (Oberberck pp).

Many billed the Internet's rise as a retailing revolution that would change and "reshape the way consumers bought their goods and services, and that led to an Internet stock-buying frenzy as investors sought one hot deal after another" (Oberberck pp). By the end of the craze, realization sunk in that many Internet business models that intended to remake and revolutionize the world were flawed, "things were not so different after all" (Oberberck pp).

Since the bubble burst in the later part of 2000, many Internet stocks went down as much as eighty to ninety percent and "some fell all the way out of business" (Oberberck pp). The financial world learned many things, one of them being that the Internet is not very good at selling things such as "pet food" (Oberberck pp). "Many of the Internet business models based on business-to-consumer sales, especially those that counted on advertising "click throughs" or cross sales when core products failed to sell, were inherently weak" (Oberberck pp).

Today, Prozen says, the traditional retailers are incorporating the Internet in the business models, and are gradually putting the specialty retailers out of business (Oberberck pp). Other Internet business models, consumer to business, consumer to consumer and business to business, were much more successful (Oberberck pp).

Priceline.com is an example of the consumer-to-business Internet model, and was initially "successful when it concentrated on bringing consumers and businesses together for the sale of "perishable items" such as airplane tickets, hotel rooms and rental cars" (Oberberck pp). Although Priceline had a good business model, they did not understand what was good about it and "the company ran into trouble when it started offering insurance and gasoline instead of concentrating on selling the "use it or lose" perishable items for businesses" (Oberberck pp). Ebay is one of the most successful Internet companies with its consumer to consumer business model (Oberberck Pp). The Internet provides a good outlet for auctions and in that arena "the first mover" the company that has the volume is in a strong position (Oberberck pp). Prozen says, "the question for Ebay is whether it can compete with specialized auctions (Oberberck pp). The business to business model offers the potential for huge savings and profits in that area depend on establishing a middleman role business suppliers and business consumers (Oberberck pp).

No matter the financing strategy, if a venture wants to survive, it has to focus on fundamentals, growing revenues, bringing in cash, and turning a profit (Kahn pp).

Works Cited

Chait, Michael. Dot-com Era Start-Ups Still Feeling Woes. September 20, http://ecommerce.internet.com/news/news/article/0%2C%2C10375_1467101%2C00.html

Oberberck, Steven. Fidelity Executive Looks Back on Dot-Com Crash at Salt

Lake City Lecture. Knight Ridder/Tribune Business News; 10/27/2001; Pp.

Kahn, Jeremy. What You Can Learn From the Dot-Com Crash.

FSB; 10/1/2000;… [END OF PREVIEW]

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