Most dot-com businesses have just enough money to finance approximately two months of operations. That chilling statistic comes from a recent compilation by Prince & Cooke (Argentina) of forecasts made by several international consultants about the "mortality rate" of dot-coms.
According to the report, around 50 percent of the sites have money reserves for about two months, while 25 percent have cash to last them up to the Christmas season. The money limit applies particularly to B2C (business-to-consumer) dot-coms and to companies that are still in the middle of their capitalisation process.
According to Enrique Carrier, director of Prince & Cooke (Argentina), this state of affairs is "something that had been foreseen. After the Nasdaq debacle, investors are much more cautious now," he said in a phone interview.
Specifically, the financial limitations affect B2B companies and those that are purely content providers, relying solely on revenues from advertising for their survival, Carrier said.
Carrier cited a study carried out by PricewaterhouseCoopers LLP on British dot-coms. The study suggested that most of the companies will suffer from a lack of cash within 15 months. This is due to the high costs of launching Internet startups. As they face increasing competition from established brick-and-mortar firms that venture on to the Internet, the dot-coms see their break-even point receding into the future and trouble immediately ahead, he said.
Investors' expectations about dot-coms have significantly changed. The market value of many companies was estimated too optimistically, according to Carrier. "There is a more honest attitude now," he said. "There will be a Darwinian selection process, and the end of opportunism."
Only well-funded companies with a brick-and-mortar backing or companies that have successfully completed their second capitalization round will have a chance in today's Internet market, Carrier added.