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The Internet arrived in India in mid 90s. Many dotcoms were launched in 1997 and 1998 with proliferation of dotcoms reaching a crescendo in the late 1999 and 2000. As the Internet is still evolving to reach the immense potential it offers, and the exciting potential the promise of broadband offers, many other promising ideas will be launched in coming years.
However, industry experts say that many of these start-ups will die in the coming couple of years. Some predict that only one of 10 dotcoms will survive, particularly those in the low margin product areas. Others will need to drastically revamp their business strategies and alignment in order to survive. With the existing brick-and-mortar companies looking towards increasing their reach leveraging their rich experience, it becomes more imperative that battle is getting tougher for them. Amazon is a good example of getting strong competition from Barnes and Noble.
Dotcoms fail because of many reasons, some of which are:
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Limited funds: Dotcoms are backed up by angel investors, venture capitalists or promoters' equity. Money pumped in is limited, and can last only for a year or so. So even if u receive a good first round of funding, getting the vital successive round of funding gets tough with targeted benchmarks to achieve and increased competition knocking on the heels.
Cost control: Poor control on the costs result in a faster cash burn out. This has been the scourge of dotcoms like Boo.com, Value America and many others. A faster burn out of the funds means little cash for expansion, and hence, the need to go for next stages of funding. In fact, prior to April Nasdaq crash most of the dotcoms reveled in glory of burning out cash through extravagant advertising, marketing, operations, faster than others to generate "eyeballs", which was a major criteria to satisfy the investors (both initial investors and potential investors) for funding.
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Reluctant investors: With the Nasdaq crash, investors have become skeptical about the dotcoms, and B2C in particular. They have become more careful and less focused on generating mere "eyeballs". They are now also looking more carefully towards revenue projections. This retarded money flow has resulted in the very limited working capital with many dotcoms who were preparing to go for an IPO in April to generate funds for subsequent expansions. Hardest affected are those who were seeking various stages of funding. B2C dotcoms have had to bear the major brunt of guarded investors.
Infrastructure: Internet has immense potential but is often limited by poor infrastructure of the dotcoms, which results in low Internet penetration. And this generally results in targets not being met, as infrastructure become s a limiting factor. With funds burning out faster to generate more users and infrastructure not growing as rapidly, it becomes a tricky situation as the returns or revenues are not occurring as planned.
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