Making profit out of the .com crisis

The “Get Big Fast” model has had its day; micro niches are what make entrepreneurs survive in times of crisis.

These are a couple of conclusions that one can draw from the data collected in the Dot Com Archive. This database, containing over a thousand business plans from the small world of Internet, has been created in 2002 by the American David Kirsch, who through analysis has tried to avoid the next generation of entrepreneurs making the same mistakes as the companies that went down when the dot com bubble burst. In particular, he searched the business activities that work (as well as those that don’t) on the Internet. In the meantime, the database has grown to an archive of 6.4 million documents, ranging from e-mails to memos, via marketing material and databases related to thousands of companies.

Through analysis, Kirsch drew several conclusions. He noticed that it is still important to know the right people and to have the right social network at your disposal. Out of the 1,018 companies that he examined, none of the entrepreneurs got an investment by just submitting a business plan; on the other hand, those who knew the investor or were personally introduced improved their chances: in 5% of these cases, they managed to get the required investment.

Another notable fact is that, in contrast with the popular belief, a huge percentage of companies have survived the Internet’s soap bubble effect. 48% of the dot com companies that were founded after 1996 were still active at the end of 2004, more than four years after the Nasdaq culminated in March 2000. Their secret? They didn’t follow the “Get Big Fast” model, that wanted Internet companies to discover a market very fast and then grow as quickly as possible, in order to eliminate any potential competitor. This principle is now outdated. Companies that survived the dot com soap bubble effect turned to “micro niches”: markets that do not guarantee fast gains of hundreds of millions, but that focus on a sustainable Internet-based business.

Starting companies will in any case draw a lot of inspiration out of the 10 advices that can be found in the archive: “Ten lessons from the Internet Shakeout”.