Dot.com flops cause record number of bankruptcies

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The Independent Online

The number of individuals going bankrupt has hit a five-year high, according to official figures yesterday that raise fears dot.com entrepreneurs have been hit by the collapse in confidence of major investors.

The number of individuals going bankrupt has hit a five-year high, according to official figures yesterday that raise fears dot.com entrepreneurs have been hit by the collapse in confidence of major investors.

The Department of Trade and Industry said there were 7,655 insolvencies between April and July, a 6.1 per cent rise on a year ago and the highest since the third quarter of 1994.

Russel Shear, a partner at the City law firm Edwin Coe, which has advised on a number of new media flotations, said there were signs that entrepreneurs were finding it increasingly difficult to raise venture capital.

He said some founders of "dot.coms" had failed to get further finance to sustain the businesses in the early loss-making stages. "I have seen individual founders who have raised initial funds by securing their assets through a mortgage or overdraft, who have either had to sell their house or go bankrupt when the guarantee is called in," he said.

Stephen Taylor, European insolvency leader at the accountants PricewaterhouseCoopers, said the rise was "not necessarily ominous".

"Insolvencies act as a critical valve in our economy, recycling resources necessary to sustain record levels of economic growth."

A DTI spokesman said it was vital that entrepreneurs did proper research. "There's a trend for people to just plunge in and start up without researching whether it is a viable idea."

The number of corporate bankruptcies fell 6 per cent on a year ago, the DTI said.

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