It is no secret that the e-commerce arena has a virtual cloud over its head.
Since January, 130 Internet companies have shut their doors.
The situation has darkened in recent weeks. Since October, the industry
has seen the demise of 45 online operations, including such operations as
pets.com, mothernature.com. mortgage.com, cyberhomes.com, furniture.com and
garden.com.
With the holiday buying season fast approaching, Webmergers.com Thursday
released a study questioning why some of these firms are choosing to fold
rather than proceed without adequate resources.
As part of its research, Webmergers.com asked merger and acquisition
specialists to explain why so many Internet companies have shut down without
finding merger partners, even at fire-sale prices.
Here are some of the explanations:
have a
sustainable business model, others simply have not yet built up assets of
value such as a strong team, proprietary technology, customer lists,
intellectual property, brand or domain names or other assets
failed
companies were expecting second- or third-round funding that appeared to be
just around the corner. By the time they realized their investors had fled,
they were already facing shutdown
themselves after
cash began to run out. In that desperate condition, they lost all leverage
with buyers and any ability to hire a good intermediary
incubators
are currently overwhelmed with simply tending to the basic needs of their
portfolios. They don?t currently have resources for the time-consuming
business of shopping a company. In some cases it?s just easier for them
just to shut it down
has caused
the rapid education of thousands of technical and marketing professionals.
With a much larger employee base to choose from, acquirers find it less
necessary to buy companies just to obtain scarce Internet expertise
According to a
previous Webmergers report, non-Internet companies accounted for
only 9 percent of total dollars spent to acquire Internet destinations in
Q2. As one analyst said, “It might be just more fun for bricks and mortar
companies to watch these dot-coms die”
strategy be implemented early on while cash is plentiful ? if not with the
very first draft of the business plan. For example, Chase H&Q last week
recently put Evite, the online invitations company, on the auction block
while Evite still had $17 million in cash
In compiling data, Webmergers.com also came up with the following
statistics:
- High-technology corridors naturally bore the brunt of the
shakeout: Nearly
35 percent of shutdowns were in the state of California. New York accounted
for 11 percent
of the implosions and European companies made up 8 percent of the total - E-commerce sectors saw the highest shutdown: Closings are broken
down to show 74 companies were e-commerce, 31 were content, 13 were service
and 12 were infrastructure - Consumer sites are shutting down more quickly: Ninety-eight of
the sites that were closed were geared toward consumers, 26 toward
business/professional and six to a general audience
Webmergers compiled its shutdown data from more than 50 public and
private
news and information sources. The study includes any Internet unit that has
ceased operations and is either liquidating the company, seeking a buyer or
attempting to reorganize through bankruptcy or some other means.
The San Francisco-based company provides research and services for buyers
and sellers o
f
Internet properties. To assist with the ongoing Web fallout, Webmergers.com
noted that it will soon offer an online “marketplace” for developed Web
sites.
