Dot-com Bubble - 2?
Paul Bondsfield
Marketer | Strategist | Traveller | Author | Musician | Dad | Foodie
I lost around NZ$20,000 in the dot-com bubble of the late 90's. Far less than some, but to me, at the time, it was a lot of cash.
It was an expensive, but salutary lesson about the risks of hype, certainly around dot com businesses, but also around the need for research and understanding in business generally.
There are currently signs of a similar growth in high-risk businesses, funded by breathless angels and the super rich looking for The Next Big Thing. I don't think I can ever remember a time when there were so many start-ups around (the term itself has entered modern parlance as meaning something cool and destined for greatness one feels), each crying out for executives with "extensive start-up experience", more and more funds, high-growth audiences, but less, it seems, in the way of meaningful understanding of their markets. Globally, there are around 100 million start-ups launched each year - of varying sizes it has to be said. In the UK, between 2000 and 2015, 1.9 million new businesses were born. Of all these, only one in twenty is likely to be suitable for funding, more than half will fail quickly and around 93% will fail further down the track. That puts the chance of success at around 0.5% - one in 200. Sobering.
Market Research
A huge proportion of these failures occur due to business leaders simply not doing their homework - or working on the arrogant assumption that the market doesn't know what it wants until it sees it. Now, this approach has worked exceptionally well for a few - Steve Jobs, Henry Ford et al - but sometimes it seems that only a deep understanding and some common sense will deliver results.
Business Failures
Even big corporations get it wrong. Think Google Glass (who would ever believe people would go out of their way to look daft for a bit of new tech?). Apple Watch has not been the success Apple would have liked, probably because of the need to have a iPhone with you to get the most of the device. What's the point? SnapChat has announced huge losses just this week - and you wonder if its bubble is ready to burst (or significantly deflate): limited functionality, really only attractive to a younger audience which is notoriously fickle and always on the lookout for something new, are just a couple of warning signs. Even the mighty Twitter is losing share and possibly its way in the world as it fails to innovate and understand enough to keep ahead of the curve. Facebook - a brand about which, in a marketing strategy meeting not that long ago, I was asked if it was worth bothering with at all - seems to have done its homework on both free-using and paid-for audiences and is becoming a worthy rival to Google - so it can be done.
I'm genuinely excited about some of the new disruptive and disinter-mediating businesses out there, but am tempering that excitement with a large dollop of expensively-gained experience and common sense. If you look at a website and can't quite work out why it's there and who it's for or what it does, or if you see an amazing new product that is possibly going to make you look a bit less than cool in public...then step away and have nothing more to do with it.
Economies need Entrepreneurs
Don't get me wrong - we need start-ups and we need the visionary entrepreneurs that drive them, and we absolutely should ensure the resources, funding and support those people need to succeed are available. No modern economy can prosper without them. In the UK, some say VC funding is far harder to come by than in the USA for example - a symbol of a slightly more risk-averse culture perhaps - but the launch of a number of small business and start-up labs indicates a willingness to back new ideas.
It's the sheer number of these around at the moment that has given me pause to consider if, perhaps globally if not locally, things are becoming overheated. Personally, I feel a correction coming, but this time, my money is staying firmly in my pocket.