Have you heard enough about the “dot com meltdown?” The plunging stock prices. The layoffs. The bankruptcies. The “fact” that tech firms won’t be able to raise a dime of financing until 2020.
The reality is that a falling tide has lowered all the boats, but there are people out there who are keeping the dot-com faith.
One is Leonard J. Brody, vice-president and general counsel of Seattle-based Onvia.com. I had the chance to meet him recently when he spoke at a Business Day conference sponsored by the University of Calgary’s management students. He certainly qualifies as one of the walking wounded, since his stock, which went as high as US$78 is sitting now at around a buck and half. Since he hasn’t jumped out any windows, he just might be a good guy to listen to about what’s coming next. Brody impressed the Business Day group with a clear set of principles and I’m inclined to agree with most of them.
He made the point, and somebody needed to say this, that “the Internet is still the killer app.” Sure it has been overhyped and pimply kids have suckered many a venture capitalist, but still, any computer network that connects you to just about every business in the world has got to command attention. Brody was quick to add that the Internet is not the only significant app and that most businesses will continue to use it to supplement their bricks and mortar operations, probably forever. Then he presented five pretty solid “theses for the New Economy.”
Strategic alliances are critical for success. Brody admitted that last year, Onvia (www.onvia.com) was spending a ridiculous amount of money to acquire each new customer.
“This can’t go on,” they thought. So they struck up a strategic alliance with Visa U.S. that leverages the vast merchant database the credit card company has built up over the years. Onvia gives small businesses an easy way to buy and sell each other’s stuff on-line, as well as a convenient place to read business news and download useful forms. Visa brings eyeballs and Onvia brings content. We’re finding the same need for strategic alliances in the university sector. To make our fledging eSecurity Innovation Center a reality, the University of Calgary joined up with companies like JAWZ Technologies and Telus, as well as other educational organizations, to pool our strengths.
Brody quoted a Forrester Research study showing that “84 per cent of companies believe that, in 2001, partnerships will be the highest growing part of their business, far outpacing staff, technology, content and product offerings.”
Sustainable business models are the key. Well, duh, but what does this really mean? Brody said that “the era of free stuff on the Internet is dead.” Tell that to the gazillion kids who are still using Napster for free. Or maybe to the TV stations that brought you the SuperBowl as long as you watched the (pretty good) ads.
What is certainly true is that companies can’t go on hemorrhaging money. Brody said the lesson of high-profile failures like Pets.com is that the distribution of mass-market and non-specialty consumer goods is best left to bricks and mortar companies. But he sees a lot of potential for companies, like his own, to get into the cracks and add value, especially with small- and medium-sized businesses.
Business life cycles are dramatically shorter. Brody gave a somewhat self-serving but nevertheless instructive example of this effect. He pointed out that Onvia.com started out in November 1996 (as MegaDepot.com) in Glenn Ballman’s Vancouver apartment. Within three years, Ballman was, very briefly, a dot-com billionaire. They now claim to be getting down to business with over one million business members, 600 employees and a successful NASDAQ financing with US$240M raised.
In a way, they’ve accomplished in one year what used to take 10. He backed this up with a U.S. Federal Trade Commission report claiming the average product life cycle has shrunk from three to five years just half a decade ago to six months now.
The new economy will be led by the market for the next two years. OK, here’s the bad news: for the foreseeable future the analysts are you new CFOs, determining what you can and cannot do. Seven of the 17 dot-com companies that blew huge wads of money on 2000 SuperBowl ads are now out of business or have been acquired. IPOs are being cancelled all over the place. If there was ever a stage of growing pains for the dot-com sector, this is it.
On the hopeful side, Brody said Angel Investors, (“affluent individuals who provide entrepreneurs and their new companies with much-needed venture capital,” according to Angel Investor magazine), are a great untapped source of funding. Brody said they invest US$30 billion to US$40 billion dollars in 50,000 new ventures each year. It’s worth noting that an Angel is different from your mother in law – most people warn against going to that source of capital unless you are truly desperate. There are clubs and networks of Angel investors, including a Canadian one (Iceangels LLP) and Web sites like www.universityangels.com
The next big thing on the Internet will be community. If people don’t want to buy discount pet food on-line, and if the supply of free music and videos dries up, will folks just put their computers in the back of the closet with that old food processor? No, said Brody. What people are craving is on-line community.
He quotes The Cluetrain Manifesto (www.cluetrain.com) which claims that “markets are conversations” and that “when you think of the Internet, don’t think of Mack trucks full of widgets destined for distributorships whizzing by countless billboards. Think of an intimate table for two.”
There’s good evidence for this philosophical position in the runaway success of sites like Napster (officially “the Napster Music Community”). More to the point, take a look at www.fuckedcompany.com, an intimate little community site that lets you tell the world why your idiotic dot-com employer just sent you and 10 friends out the door.
The bottom line? People need people. They want to connect with them in efficient, meaningful ways. The Internet provides the plumbing. If somebody gets the water flowing and finds a way to make good money off it, they’ll have trouble fighting off the Angels.
Dr. Keenan, ISP, is Dean of the Faculty of Continuing Education at the University of Calgary and teaches a course called Hot Issues in Computer Security.