171201 Not All Dot-com Companies Failed

webvanIf you’re old enough to remember the dot-com bubble you might remember what was going on at the time that gave rise to the fever.  The Internet was brand new.  Companies were popping up left and right.  All they needed was a value proposition and a domain name and off they went.  There were stories of instant, overnight millionaires who took a simple idea and turned it into a fortune.  Before you knew what was happening, many a famous actress or TV personality would be promoting his or her new dot-com idea and funded an initial public offering (IPO).  Hundreds of IPOs were streaming onto the market every day.  Suddenly, thirty million dollars in an IPO, for a website whose famous celebrity founder/owner was an expert in fashion advice and thought her website which would give advice to others would be an instant success.  It took several months but when these hotshot startups started bleeding money, no amount of funding was going to make them work.

In every industry sector, there were many bright ideas. There were well-funded websites for selling beauty products like iBeauty.com, Beauty.com, Reflect.com, and Eve.com. They all failed. One famous fail was Boo.com, a would-be pioneer in the e-commerce space. It was founded in ’98, started selling branded fashion apparel in ’99, and ended burning through $135 million by the end of the second year. Webvan was founded in ’99 as an online grocery store, delivering groceries (including perishables) to doorsteps across the US much like FreshDirect does today.  Webvan went from being a $1.2bn company to being liquidated in under two years.

The digital forerunner of Bitcoin, in 1999, was sold like a gift card without a store to back its value. The overall consumer reaction was “why?” Have you ever heard of eToys.com and Pets.com. Both failures but not for lack of a good idea.

But what did we know? Gwen Stefani gives fashion advice as a Wall Street investment?  Who knows? No one knows.  Well… the bubble burst.  Those dot-com dreams disappeared and Wall Street got much more realistic about Internet riches.  That doesn’t mean that no one made money.  Many companies got started then with very good ideas and made lots of money the old-fashioned way. Amazon, Yahoo, Google, Facebook, LinkedIn, and eBay are amongst those, for example.  They earned it.

There’s talk right now about a cryptocurrency bubble, fueled by Bitcoin’s valuation.  Everyone mentions the tulip bubble and talks about outlandish prices going up in smoke for a virtual commodity no one can describe or understand.  What is happening at the moment has many similarities to the dot-com bubble.  Every nerdy programmer with a micron of an idea for a new cryptocurrency is creating an ICO (Initial Cryptocurrency Offering).  Most are sketchy ideas that have not been thoroughly fleshed out and lend themselves to scams and fraud.  ICOs have been outlawed in many countries.  Some of the ideas sound plausible.  Some don’t. Of the top ten cryptocurrencies, most of them will thrive.  Of the bottom ten cryptocurrencies, most won’t.