General net article.....should make us all feel a bit more secure
Internet Biz Set To Dazzle Amid Spectacular Collapses
By Samuel Perry
PALO ALTO, California (Reuters) - The hottest Internet properties are expected to sizzle in 1998, but the year will also see some dramatic implosions as Web entrepreneurs face the challenge to "show me the money" to be made on the Web.
That exhortation -- uttered by actor Cuba Gooding, Jr. as a character of the movie "Jerry McGuire" -- has become the oft- repeated mantra of the pioneers of the Internet's Wild West frontier, and of their investors.
Some of the sharpest speculators on the World Wide Web to date have followed those who made their fortunes in the California gold rush by selling equipment -- the pick axes and shovels -- to prospectors rather than panning for their own gold.
"The most successful way to make money on the Net is to start a company, and then sell it," said James Kinsella, general manager of MSNBC on the Internet, a joint venture of Microsoft and General Electric's NBC.
Consolidation is indeed in vogue in the Internet industry as corporate giants such as Microsoft and network equipment company Cisco Systems gobble up startups and other corporations acquire a stake in the Internet age.
Next year electronic commerce should begin to take off in the consumer markets, with early Internet homesteaders" like Netscape Communications Corp. and Yahoo! Inc. building out e- commerce sites and capabilities.
The Internet remains perhaps the strongest driver of growth in the technology industry as a whole as entrepreneurs enjoy record levels of venture money flooding into young companies -- more than $9 billion in the first nine months of 1997, nearly equaling the record level for all of 1996.
"As in the PC era, we believe the commercialization of the Internet across industries will represent net (no pun intended) wealth creation of hundreds of billions of dollars globally, across several industries, over the next five to 10 years," Goldman Sach analysts predicted in a recent report.
But at December's Technologic Partners conference, populated largely by Internet startup companies looking to be matched with investors and partners, both executives and venture capitalists -- the rare breed of professionals who fund startups -- predicted the Web's first apocalypse.
They fear that in many areas, such as in Silicon Valley where the meeting was held, too much new money was funding business plans that put startups on a collision course.
Like an agricultural crop, some of the seedlings must be pruned back to enable others to thrive, they said.
"People need to recognize the next two years are going to be very painful and very ugly," Kinsella said in a panel discussion. "Friends of mine are going to see their companies crash and burn on a regular basis."
"I hope so," he said, referring to the glut of companies targeting overlapping markets. "We need that, or none of us are going to make a profit."
Some venture investors and company-builders argue that what many consider the last prime "beach-front property" in the largest World Wide Web markets was snapped up early on.
"One of the things we've seen now is that there is very significant first-mover advantage," said Eff Martin, managing director of Goldman Sachs.
Some Internet analysts and investors said the land grab in providing content over the Internet, hyped by the interest and paranoia of traditional media, could be over already.
"I'm pretty skittish about investing in any content areas," said Michael Moritz, a partner at Sequoia Capital of Menlo Park, California, the fund that backed Yahoo! and helped build that company from "search engine" for finding information on the far- flung Web into a media concern.
"It's too much like being in the magazine startup business and there are a lot of small companies that are not going to be much bigger than tiny companies," he said.
The rates of investment have been so high, adds Moritz, "that when these babies go down, they're going to take a lot of money with them." |
