Don't cry for me new economy
We are urged to shed no tears for the 'Boocrew' -- recently "available" former employees of Boo.com, the failed designer clothes etailer. The word is that they have either found new jobs -- or don't want them because they are working on their own Net plans.
No sympathy for Malmsten and Leander though -- the Boo bosses; dubbed the Net entrepreneurs from central casting. No job offers for them either. Ernst and Kasjia must be wishing they had set up in Silicon Valley, where business failure is regarded as no more than a virile notch on the entrepreneurial bedpost.
But the UK is not Silicon Valley, and those that have argued that it is possible to clone the valley spirit in cool Britannia should be instructed by the peculiarly British orgy of gloating at the demise of Boo. Oh how we love a failure -- especially the failure of those better looking, or more successful than ourselves. Boo made mistakes, don't we all, but it was an ambitious and stylish site that aimed to make shopping fun -- and goodness knows e-shopping needs a little razzmatazz to draw the punters as recent research suggests that right now, the British public prefers Bluewater to Mouse Mall.
The UK is risk-averse, and the demise of Boo and the financial community's reaction to it illustrates the point. The possibility that Malmsten and Leander may have been correct in trying to press on -- that perhaps the mistake they made was in underestimating the amount of investment required, i.e. not spending enough cash, rather than spending too much gets scant consideration. No -- one high profile Internet business failure and the city is rushing to old economy stocks.
Boo is old news now, the new game in the city is to try and guess who goes to the wall next. Again, the national obsession with trying to pick the loser rather the winner ensures a good deal of energy is going into this one.
A recent report from PricewaterhouseCoopers suggested that cash burn was the key metric to watch, to predict which Net company would go under next. Its a popular view -- but not a particularly helpful sentiment for those trying to build a new economy business. Many new firms -- both old economy as well as new -- fail because they are underfunded, or rush to profitability too quickly. There may be good reason why it is necessary to invest now, and not turn a profit in the short or medium term, but the current obsession with burn rate is going to make negotiations investors a good deal harder. Maybe that is good, and maybe business plans will be tighter than before as a result.
Not so good is the rather absurd and simplistic categorisation of Internet companies by the financial community. The current pecking order goes like this; Business to Consumer = Bad, Business to Business = Good, Infrastructure and tools = Better. If only life were that simple. In economics and in the real world important developments have an annoying habit of being inter-related. The old economy is connected to the new, business to business firms need thriving consumer businesses to buy their services, and all firms can only purchase infrastructure products and services if they themselves are earning profits. The biggest complication of all is that in all kinds of business -- B2B, B2C, old and new economy, infrastructure, or whatever, there are plenty of examples of good, bad and indifferent firms.
A fund manager who only invests in B2B is missing the big picture. Infuriatingly, the financial community has been telling net entrepreneurs to bring them sound business plans for two years -- to now add a rider that those business plans must also be B2B or they won't get read is absurd. Ultimately, this slows innovation in online retail and e-commerce and will effect the fortunes of B2B companies too in the long term.
Nobody knows what is going to happen in the next two to three years. Investors must take professional advice and decide where they want to invest their money, but I do know that start-ups are going to need funding from somewhere. If the only firms that can build a sustainable business turn out to be a handful of B2B exchanges, then my life or the life of my children is not going to be particularly enriched by that. If, however, you believe the Internet is changing the way people work, shop, do business, receive an education and enjoy their leisure time then you must also believe that there is the potential for sustainable businesses in these areas too. Boo.com will be a footnote in the history of the new economy, that much is clear. I just hope that footnote isn't found in a chapter about how UK plc failed to invest in the new economy, in a book called 'I Didn't Go to Harrow, Oxford, and get a Great Job in the City by Taking Risks' written by the Director General of the CBI.
A few weeks ago there was a flurry of commentary about the significance of the stock market crash(es) on the viability of emerging dot com business. It has now had a knock on effect on the real world. Read the news comment from Tony Westbrook at AnchorDesk UK.
What do you think? Tell the Mailroom. And read what others have said.
Go to ZDNet's Dot com trouble roundup