The first time fortunes were made – and lost
Saturday 21 May 2011
In the autumn of 1999, a new internet start-up called Boo.com was launched with the intention of creating a global fashion retailer, selling brand name clothes. The British-based company – founded by Swedes Ernst Malmsten, Kajsa Leander and Patrik Hedelin – spent £83.5m of venture capital in 18 months. Less than a year later, on 18 May, 2000, it was placed into receivership and liquidated.
While Boo.com represented one of the more spectacular busts in the dotcom crash of 2000, it was not alone. The first dotcom bubble lasted almost six years, from 1995-2000.
It is now viewed as a period of mass hysteria. Investors had little idea how the companies they were investing in would make money, resulting in the inevitable bursting of the bubble.
In the mid to late Nineties shares in internet start-ups soared when they listed on the Nasdaq stock market, despite the fact few of them made a profit. The unwavering belief shown by investors that companies would eventually turn a profit if their market share kept growing fuelled soaring share prices and drastically overvalued companies. A powerful myth was circulating – the dotcom age was rewriting economic laws
This confidence was exemplified by the amount of money being spent on advertising for the early start-ups. During its first fiscal year in 1999, Pets.com had revenues of £381,000, but spent £7.3m to market itself, including an advertisement during the 2000 Super Bowl TV broadcast. The company folded in November 2000.
This story was repeated throughout the tech industry. In 18 months, American online grocery delivery firm Webvan raised £108m to expand into eight cities. At its peak, the company was valued at £740m, but with small profit margins, it was never going to last. The company closed in 2001, with 2,000 jobs lost.
In Britain, a similarly extravagant amount of money was being invested in companies yet to show a profit. A small online travel agency started by Brent Hoberman and Martha Lane Fox was valued at £735m at its flotation on 15 March, 2000. A year later, the company, lastminute.com, was worth £70m. Lastminute.com, however, eventually turned a profit in 2002.
The dotcom boom peaked when the internet service provider America Online bought the media company Time Warner for nearly $200bn (£122.9bn) in January 2000. But in March the same year, the bubble burst, and the Nasdaq index fell by 78 per cent by October 2002. Speaking in 2010, Jeff Bewkes, chairman and CEO of Time Warner, acknowledged the merger was "the biggest mistake in corporate history".
Life & Style blogs
iPhone 7 (or iPhone 6S) leaked pictures show similarities to older model — but Apple is fixing the biggest issue of all
People all over the world are getting semicolon tattoos to draw attention to mental health
'Help me I'm trapped in a factory' messages keep being found on bottles of vitamin water
Google has set its terrifying, dreaming image robots on the public
The biggest first date turnoff has been revealed
Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
Greece crisis: IMF was pushed around by Angela Merkel and Nicholas Sarkozy – and now it is being humiliated
'I wish the BBC would stop calling it Islamic State' – David Cameron unleashes frustration at broadcaster
Forget little green men – aliens will look like humans, says Cambridge University evolution expert
Greece crisis: The wider lesson is that it’s time to abandon this failed experiment in currencies
Girl, 7, stares down hate preacher at Ohio festival with pro-LGBT rainbow flag gesture
- 1 Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
- 2 People all over the world are getting semicolon tattoos to draw attention to mental health
- 3 Van driver who comforted Clark Carlisle and called 999 after suicide attempt dies age 24
- 4 James Blunt was special guest on the highest-rating Top Gear episode ever
- 5 Baby rescued 1km out to sea after parents forgot about her
iJobs Gadgets & Tech
£20000 per annum: Recruitment Genius: The leading provider of Employee Managem...
£15000 - £25000 per annum: Recruitment Genius: This Kent based design consulta...
£25000 - £34000 per annum: Recruitment Genius: Are you looking to work for an ...
Negotiable: Recruitment Genius: This role's responsibility also include operat...