RE: UKNM: Dot Com Fever

[Tim.Hayward]

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The ease with which they got the agreement is not really that surprising.

Here

are a few observations that I'm starting to think are early indicators...


1. For a long time now UK VCs have been investing in 'tranches' of .coms.

For

investors, a 'portfolio' is always protection against poor performance of

one

stock against another - It's just horrific if you're on the other side of

it.


The VC agrees to back 10 companies for £4m each. The companies are set tight

targets with the real money arriving as each target is reached. The initial

payment can be as little as £10K. If a couple of companies start to look a

little flaky before second payment, the VC pulls the rug at that point.

Ideally

the portfolio ends up with a couple of companies that will IPO with high

multiples in a carcasse strewn arena.


What is scary here is that the VC doesn't need to be too clever in picking

the

companies, he just has to find enough with half baked idea then let market

forces take their course. The frightening truth is that the most successful

VC

is the one who's most ruthless about yanking the rug.


So what happens to the three kids going for their cub-scout 'entrepreneur'

badge

with a business plan that couldn't build a lego fire-station let alone a

business?


Frankly, I found the charming, naiive trust with which they bent over and

held

their cheeks open faintly arousing.


2. Does anyone ever think what happens *after* the IPO? You've spent 12

months

as a sexy, popular, fashionable NM 'entrepreneur' writing a business plan

full

of huge overclaims for an 'e-Commerce' portal. You float.


What are you now? An e-Commerce God? A trailblazer of the new economy?


....Or the MD of a small direct selling business largely owned and

controlled by

other people. If you're lucky, you're looking at two years of trying to hit

unacheivable targets in order to cash in a rapidly shrinking set of share

options?


That's the kind of poor, tragic, wage-slave hump we're all laughing at.


One of the reasons that it's so tough to find good people is that, once you

blow

away the hype and your mortgage is on the line it's pretty tough to explain

to

the marketing director of a pet food company exactly how they'd be better

off in

a spot.com.


3. Remember Banquo's Ghost. Well there's a whole tribe of similar spectres

drifting around NM this week. About 8 months ago, a lot of career marketeers

who

were between jobs got snapped up by 'Private Investors' who saw the .com

bandwagon as a dead cert.


I've taken calls from four in the last week who have suddenly changed from

'Courageous 'entrepreneurial' MD with secure financing' to 'Lost, bitter,

unemployed hackwith thousand yard stare' in the 12.5 seconds it took for the

backer to tug the rug.


I'm hearing a lot of gung-ho from people * in * .coms and a whole bunch of


silence from anybody with the real option of pulling out.



For what my opinion is worth - This is going to be a protracted, ugly, messy

firefight with some pretty unacceptable levels of collateral damage.


T




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