A year ago, when I told people that I ran a Web development company, I'd often get that look: Could you be one of those dot-com millionaires? Those days are over. Now I get piteous inquiries into the health of my company and have to endure "Do you still have a job?" questions.
Yes, luckily I do -- and I'll tell you why in a moment -- but many of my comrades have not been so lucky. According to industry trackers at WebMergers, over 490 dot-coms have gone bust in the past year. The Industry Standard (itself undergoing substantial layoffs) estimates that over 75,000 people have been canned since 2000. Everywhere you look, one-time high-flying, scooter-riding dot-commies are now scooting around town from job interview to job interview.
In this perilous time, many out of work dot-commers are wondering whether they should move as far away from the "new economy" as possible, and investors are anxious to know where to move their money. There are some basic things that can help you hitch your wagon to a rising star and not a falling one.
One of the first things to get chucked out of a Wall Street window on August 9, 1995, (the birth date of the "new economy" when Netscape hit the market and ended the day with billions) was common sense. A company that gave away its product for free was suddenly worth two billion dollars! The old rules didn't seem to apply anymore. Money poured in as venture capitalists and investors everywhere sunk billions into any business plan that repeated the words "Internet" and ".com" like a mantra. Questions about "returns on investment" and "paths to profitability" where met with "Oh that is SUCH old-age thinking!" looks.
But we all know how this story ended. Eventually, it all came back to bite us in the backend database. So how can you keep from being the victim of further tech wrecks as you look for job security or companies in which to invest? As "old economy" as it sounds, it all comes back to the fundamentals of sound business. Look for companies that produce products or services that customers want, market them to the right people, provide them with an easy and satisfying buying experience, and deliver those products or services in a timely and satisfying manner. It has nothing to do with "revenue model" buzzwords or revolutionary economic theories. Let common sense prevail!
Before you plunk down your cold, hard cash on a new investment, or take that new job, look at the basics, look beneath the hype. Are people buying what the company is selling? Do they keep buying it? If the company's a startup, does it have enough money to continue for a long while before the sales roll in?
If you're checking out a public company, head on over to Hoovers and look at the detailed financials and news there. You may also want to examine WebMergers for info on upcoming mergers and acquisitions.
It's also good to go right to the source if you're looking for information on public firms: the Securities and Exchange Commission. Most publicly-traded companies have to file quarterly reports with the government about themselves -- the infamous 10-Q. You can look them up on the SEC site but they can be pretty difficult for the uninitiated to interpret. Luckily, Netslaves runs a regular feature called "How to Read a 10-Q" that provides annotated 10-Q's for many of the top Net firms.
If you're trying to see far into the future, the best thing to do is catch the beginning of the trends now. Probably THE best spot on the Web for trendwatching is NUA Internet Surveys a compendium of the most recent Internet research. As you're reading the site, don't pay too much attention to any individual report -- most of them are pretty bogus taken individually. Instead, mentally "blur" your vision and take them all in at once without too much analysis. You'll be surprised at the way patterns tend to emerge once you take the long view.
Finally, trust your gut. If it sounds too good to be true, it probably is. If the dot-com implosion has taught us anything, it's that there's no such thing as a free lunch...in cyberspace or anywhere else.
P.S.: So how did my company survive the Web crisis? Well, it wasn't some grand strategy, but we happened to play right into the point of this piece. Many of our clients were (and still are) "old economy" companies: utilities, transportation concerns, learning institutions, industrials, companies that others yawned at and thought not sexy enough, too unwired to bother with. These same people now look at us longingly from the unemployment line.
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