Prospective Buyers Approach Deals with Caution

Published by Turnaround Management

The phenomenon is streaking back toward Earth in a fiery display even more spectacular than its meteoric rise just a couple of years ago. In the rush to capitalize on readily available venture capital and the promise of huge payoffs through initial public offerings, thousands upon thousands of companies were created in just a few short years.

Some recognized the Internet’s potential as perhaps the most pervasive and flexible media to come along so far and developed truly unique business models, created innovative new tools or simply muscled their way to powerful first-mover advantage in their respective markets. But for every company with a product people will actually pay for and a truly promising revenue model, thousands were just along for the ride.

In just over a year, the market for dot-com companies has become a very different place. Burned by promises of profits that have yet to materialize, the investing public lost its appetite for the stocks of high-flying Internet IPOs and began to severely punish those who turned in quarter after quarter of lackluster performance. In the first quarter of 2000, 128 companies went public. In that same period this year, less than 20 braved those now shark-infested waters. Today, venture capitalists are more circumspect about the deals they will fund. Second-round funding is harder to get and is being doled out in smaller pieces. Continue reading “Prospective Buyers Approach Deals with Caution”