Re: Ad market growth forecasts

From: Peter Hupalo <hcmpublishing.com_at_hcmpublishing.com>
Date: Wed 07 Mar 2001 12:55:27 -0600

BRANDI JASMINE <brandi_at_brandijasmine.com> WROTE:

>I saw an article in the paper the other day that said
>20 out of 120 new dot.com startups failed in the first
>two years and they were using terms like "bloodbath"
>and "implosion" and "disaster" to describe it.

>I got to thinking ... gee, isn't it pretty much the
>accepted wisdom that most small businesses - up to 60%
>fail in the first two years? In any other industry they
>would be spinning the same stats as an amazing sector
>for growth and opportunity.

http://www.sba.gov/advo/stats/sbfaq.html has some stats
on small business. They quote one of their studies as
saying "66.0 percent of small businesses remained open
at least 2 years" (it doesn't say if they make money
or not :) )

A key factor is the size of the business. One person
businesses are included in most stats reported, and they
have high failure rates (and a large number of start-ups).
Once, you get to companies starting with half a dozen
or so people, the success rates increase substantially.

When large numbers of companies which were able to go
public and raise millions in capital fail, I feel that
often indicates a lack of long-range planning in favor
of short-term desire to make money quick by taking a
company public, i.e., the people taking the company
public profit via the sale of shares to investors and
not by building and growing a sustainable company.

DANIEL COLLICO SAVIO <COLLICOD_at_advance.com.ar> NOTES:

>They are funded entirely by VCs, and since VCs are
>pulling out of the dotcom market, most of the dotcoms
>will go bankrupt very fast, very soon, very hard.

i.e., many of these new .coms were in a pre-prep-IPO
phase, with funding from VC's, and no substantial
operational sources of income, and when the IPO market
potential for these companies dropped, the VC's had
to ask themselves the question, "Do I feel this company
will be profitable in three or four years?" That's a very
different question from "Do I feel we can take this
company public?"

So, in addition to comparing .com failure rates to
failure rates of startup businesses, we should also
look at the relative failure rates compared to
comparably-sized companies.

In any case, these failing companies won't be spending
money on online advertising, content, etc..

Peter Hupalo
Thinking Like An Entrepreneur
http://www.thinkinglike.com



Received on Wed Mar 07 2001 - 12:55:27 CST