TMCnet News
Dot-com: The new wave: Lessons from the '90s bust inform young entrepreneurs(News & Observer, The (Raleigh, NC) (KRT) Via Thomson Dialog NewsEdge) Sep. 28--To most 22-year-olds, the receipt for a breakfast biscuit is just an annoying piece of paper. But Taylor Mingos hopes to turn those little scraps of paper into a business. Mingos has introduced shoeboxed.com, a Web site that helps users archive receipts and filter out spam e-mail messages from companies they once patronized. "I want to eliminate paper receipts entirely," he said. "I saw my mom collect literally shoe boxes full of receipts. They're very archaic in a society where everything has gone digital." Shoeboxed.com, introduced two months ago, may be based on a simple idea, but Mingos knows simple ideas have gone on to dot-com immortality. Inspired by the recent success of sites such as YouTube, Facebook and MySpace, Mingos and other young entrepreneurs are going into cyberspace with new ambition and ideas. They want to follow in the footsteps of the dot-com millionaires of the 1990s, who are watching the new generation with great interest. Realistically, it's a statistical certainty that all can't succeed. So, while they scramble to create the next YouTube, these young entrepreneurs are treading carefully to avoid their predecessors' pitfalls, building their futures but determined not to repeat the mistakes that led to the dot-com bust. Mingos was inspired by his experience two summers ago working to help introduce StudiVZ.net, Germany's equivalent of social networking site Facebook. Mingos now leads his own staff of 25. "We were students, for the most part, working on that site, and we won," he said during an interview in the shoeboxed.com office at Durham's Brightleaf Square. "When I started Shoeboxed, it was surprisingly easy to find people who wanted to do something big." That's the draw for young entrepreneurs and possibly the reason for the latest wave of dot-com startups, said Ted Baker, an assistant professor in the Department of Management, Innovation and Entrepreneurship at N.C. State University. "After the bubble [in the 1990s], people were like, 'The fad about entrepreneurship is over' " he said. "Among college-age students and graduate students, it's stronger than it's ever been, and I think it's driven by this desire to have an impact." Getting the money One thing that has changed is the funding opportunities for dot-com wannabes. During the heydays in the 1990s, investors wanted a piece of the next big thing. Venture capital was seemingly easy and endless. This time, the road is a bit rockier. Investors have long memories of money lost, the economy is shaky, and there's more competition. Venture capital funding in dot-com startups surged a few years ago when people began buzzing about the more interactive Internet, dubbed Web 2.0, said Chris Gill, president of the Silicon Valley Association of Startup Entrepreneurs. After that, funding trailed off, he said. That doesn't mean there's not money out there -- it's just tougher to get. Ninety-eight percent of new ventures fail, Gill said. Most venture capital groups that he works with will see 2,000 to 3,000 proposals a year, meet with about 10 percent of the entrepreneurs and fund half a dozen, Gill said. That doesn't mean the latest dot-com wave is all gloom and doom compared with the first. Shoeboxed.com's offices, for instance, have all the funky flavor of their predecessors. Mingos' taste runs to Ikea furniture, Play-Doh and Tinker Toys. The company hopes to make its site compatible with financial software such as Quicken, which might catch the attention of Intuit, which makes the software. Managing the risks The new entrepreneurs benefit from dot-com pioneers: People now understand that Internet-based businesses are legitimate ventures. "What we tell people is: If you've had the idea, 50 other people in North America have had the idea, and 200 people around the world have had it," Gill said. "The challenge is to market it and develop it better than the rest of them." Arup Banerjee, CEO of campusdestinations.com, said he is aware of the successes and failures of the 1990s. "I've looked at the technology boom," he said. "They'd go to like 300 [dollars a share], and now they're trading at, like, $8." But that's not stopping him from trying his own venture. Campusdestinations.com, introduced in the fall of 2006, maps college campuses and gives students walking directions, driving directions and bus routes and points out local landmarks. Banerjee estimated that he and his business partner have invested $50,000 of their own money in the startup. They also found an angel investor to back them. Before the investor stepped up, the company was looking for venture capital and found the process difficult. "When we started out, we were thinking, 'We can easily make $1 million in the first six months,'" he said. "They really, really grill you until the point where you show them some financials. ... They will tell you: This is something you can do. Or they'll tell you: ... you definitely can't do this." More than two years into the development of the project, Banerjee said the company is approaching the break-even point. And that's with creative approaches to salary that offer employees stock options and ask colleagues to go through an internship program in lieu of cash compensation. Despite the financial pitfalls and personal risk, Banerjee said he thinks the company or its patents will be bought out. "Even if the company goes bust, the patents are intellectual property," he said. "And if Google decides five years from now that they want to buy it, then the company's way profitable." Inspired by successes That's certainly how many first-generation dot-coms made their millions, including many companies in the Triangle. OpenSite Technologies, which supplied auction software for Web sites, was acquired for $444 million in stock in 2000. Scot Wingo has hit gold more than once. He debuted Stingray, which made software for online auction sites, in 1995; he was 24 and sold it for $12 million. In 1999, he started AuctionRover, then sold it eight months later for $166 million. Wingo is now CEO of Channel Advisor, a Morrisville company that makes software to help retailers sell products on the Web. The veteran of three successful dot-com startups said the best time to start a company is when you're young. "Now I have three kids, a mortgage, a car payment and all that stuff," he said. "At that point, I had a mid '80s Honda that was falling apart, but I didn't owe any money on it." Still, Wingo cautions would-be entrepreneurs. "We were able to sell the company literally two months before the bottom fell out," he said. Those kinds of cautionary tales don't seem to slow Shoeboxed CEO Mingos. Though he just graduated from Duke University in the spring -- with a triple degree in biomedical engineering, electrical engineering and German studies -- Mingos is enthusiastic about his project and has mastered the art of CEO-speak. "At a startup, you sleep with one eye open -- if you sleep at all," he said. Gill of the Silicon Valley Association of Startup Entrepreneurs said Mingos shouldn't be discouraged if he has to try again. "People take three to four shots before they've got sufficient experience to make it happen," he said. "The one thing I'd say is to break through or crash early. The ones that are the saddest are the ones that limp along for 10 years, second-mortgaging their homes and losing their families." (News researcher Becky Ogburn contributed to this report.) [email protected] or (919) 829-4649 News researcher Becky Ogburn contributed to this report. To see more of The News & Observer, or to subscribe to the newspaper, go to http://www.newsobserver.com. Copyright (c) 2007, The News & Observer, Raleigh, N.C. Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |