The Fox outruns the hounds of gloom

Amid the rubble of the dot-com economy, the redoubtable Martha Lane Fox and her company are living proof that the sector does have a future. And they're ready to take some risks

Two years ago, in the wake of the Paddington rail disaster, a BBC Question Time panel was debating the future of Railtrack. The array of MPs delivered the usual diplomatic answers until the camera got round to Martha Lane Fox. It was time to hear the voice of young, entrepreneurial corporate Britain – the co-founder of Lastminute.com.

"Renationalise it," she said to deafening whoops from the audience.

It was 1999 and the technology bubble was inflating fast. The Nasdaq market in the US, which became the benchmark for the madness, had soared almost 70 per cent that year alone. As the new economy grew, the investment-hungry public made rock stars of chief executives who seemed able to turn simple ideas into gold.

"It was a crazy period. I sometimes do wonder what on earth I was doing on Question Time," says Lane Fox. "On one level, I played the publicity for all I could get. On the other it was really depressing. Brent [Hoberman, her co-founder] was just as important as me, but because I was 26 and blonde, I got all the interest."

But for Lastminute, the madness was only beginning. The dot-com bubble reached its peak in March 2000, the month Lane Fox and Hoberman floated the company. Unlike the US, where internet companies were coming to market on a near daily basis, the event stood out enough to grab the whole City's attention.

The fledgling company, as an analyst once said, may have only had the annual turnover of a decent-sized pub, but the issue was 47 times oversubscribed. On its first day of trading, shares surged from 380p to over 550p – a rise that gave Lastminute.com a blink-and-you'll-miss-it valuation of £820m, and Lane Fox and Hoberman a paper worth of over £100m.

But almost from the second day of trading, the shares started to fall. They plunged with the rest of the new economy as the bubble-era faith disintegrated. At their current levels of 32p, the stock has lost 93 per cent since flotation.

"But we're still here," she says, mixing "bloodied by unbowed" with "I will survive". Though she won't turn 29 until February, she can be considered a dot com veteran. "There were a lot of terrible ideas out there, but ours is basically a good one. We do what our name says, and people buy things. I don't regret the float one bit."

She has a point. Strewn all around her are the carcasses of hundreds of UK dot com failures; across the Atlantic there are thousands more. There were the high-profile casualties such as boo.com, Web-van, Clickmango, Boxman and eToys. And below the surface there were countless smaller online ventures that gobbled huge sums of venture capital, splashed it around on advertising and a flawed business model, and finally sank without a trace.

But Lastminute and Lane Fox, despite endless rumours of looming insolvency, are the great survivors.

"We're not getting the battering we used to, and I think that a lot of people have realised they underestimated me and Brent," she says. "I remember everyone saying that because we were building a business with people we knew, we would not be able to get tough with them. Nobody who knows me would have said that."

The most important discipline that being listed has taught them is the very lesson that the likes of boo.com ignored.

"When we started off, we raised £600,000 and made sure it lasted. It was still early days for dot coms and a lot of people we knew thought Brent and I were square freaks. There was much to prove, and wasting that money wasn't going to achieve it. Later we raised a lot of money with the float, but we had no problem resisting the urge to spend it."

Although Lastminute managed to keep its advertising spend relatively low, Lane Fox found that experience shattered one huge myth about setting up a dot-com business. The great majority of those 1999-2000 business plans touted the belief that dot coms could undercut their bricks-and-mortar rivals because their overheads were so much lower.

"It was a huge misconception that you could create anything big with small overheads. In fact, given that the whole idea revolves around technology, you often had to spend more," argues Lane Fox.

Despite their historical care with their cash, the Lastminute founders still see themselves as risk-takers – a strategy that has seen spending climb steadily in recent quarters. But even that may now be paying off. The company's biggest step since its flotation has been to expand into the Continent, where it now has a large presence in France and eight other countries. In the aftermath of 11 September and the killer blow it has dealt trans-Atlantic travel, Lastminute's focus on Europe is starting to look pretty clever.

Behind the scenes at Lastminute's survival is the former Asda chief executive Allan Leighton, now one year into his role as the company's chairman.

"He's given us a lot of focus, but despite what people might have expected he hasn't changed the culture. He's managed to sit me and Brent down and help us plan things on a long-term basis," says Lane Fox.

With more than 18 months of trading history behind the shares, and the break-even point drawing tantalisingly nearer, Lastminute is on the brink of sealing its survivor status.