SAN MATEO (07/07/2000) - Despite its pessimistic overtones, the dot-com shakedown may have a silver lining for consulting services willing to jump into the fray and lend a helping hand to dying Internet companies.
Recognizing the need for a kind of halfway house for troubled dot-coms who may be teetering on the brink of bankruptcy or closure, Global Strategy Corp.
(GSC), based in McLean, Virginia, has launched a site called Dot-Trauma.com and expects to help out forlorn businesses with services including finding investors, tweaking business development plans, and performing research and technology validation.
"We're targeting companies anywhere from three to 18 months [old] or longer, after an incubator has brought them through the initial stages," said Wendy Haig, founder of GSC, adding that such companies are often too old to return to incubators for help.
GSC steps in and evaluates what a company has in place -- looking at their management team, financing, revenue projections, and visibility -- and then offers their suggestions for putting the business back on its feet. With analysts predicting a dot-com failure rate of 90 percent or more over the next few years, dot-com realignment services may figure prominently in holding that down to a less staggering figure.
"The business plan has to be driven by something much more definite and sound than what the market's doing in any given week," Haig said. "Longevity is the key to all this -- it isn't about making $100 million overnight. Even if you make that, nobody wants to turn around six months later, close their doors, and say, 'It didn't work out.' "The goal is to combine "old-school and New-Economy types" to offer Internet companies the benefit of the years of experience that give brick-and-mortar companies a strong foundation, Haig said.
Although money woes are most often the cause of dot-com failure, a shaky set of goals and lack of thorough research are just as deadly. Haig said that when many management teams are asked how they define and measure success, "they don't have an answer for it. That's a problem from the get-go, because you can't measure [success] if you don't have a goal, and a goal has to be more defined than 'IPO.' "GSC will also work with venture capitalist and investment firms to form funding strategies that keep dot-coms with good ideas viable for longer periods of time, such as viewing start-ups "very much like a teenager, and doling out an allowance" in chunks rather than flooding a company with cash all at once, Haig said.
Emily Meehan, a senior analyst at The Yankee Group Inc., in Boston, believes that there is a need and sizable opportunity for consultancies and research firms to offer services such as GSC's as dot-coms exhaust their original funding and begin to mature.
"A hard part is admitting that you're going down the drain, and I think what might happen to a lot of these [companies] is they might wait until it's too late to go for help," Meehan said. "It might take some cultural getting used to to provide some kind of stash fund for dot-trauma insurance."
Despite the usefulness of GSC-type services to sinking companies, Meehan notes that those who do ask for help "are going to be very, very quiet. ... No public company is going to disclose that information" and risk being branded as a dying company.