Dot-com failures abound

At least 130 US-based Internet companies have shut down this year, with the pace quickening in recent months.

          At least 130 Internet companies have shut down this year, with the pace quickening in recent months.

          A new study by San Francisco-based Webmergers.com found that 21 companies had already shut down in the month of November compared with 22 that shut down in the entire month of October.

          "With a grueling holiday buying season approaching, we believe some of these firms are choosing to fold rather than face the music without adequate resources," the report said.

          Nearly 100 of the shutdowns involved companies that catered to the consumer market. Business-to-business companies did not escape, however, with 26 of them closing down this year.

          Content sites accounted for about a quarter of those companies that called it quits. Infrastructure and online services shut downs made up 19%of the total.

          Webmergers.com estimates that about 8,000 employees lost their jobs as a result of the 130 business failures. Thirty-five per cent of the failures were of businesses in California and 11% were in New York.

          Although some of these companies looked for merger or acquisition opportunities prior to their shutdown, many were unsuccessful.

          The Webmergers.com report offered a few theories as to why these companies weren't bought up even at fire sale prices.

          -- Some Internet companies did not have a sustainable business model or had not built up assets of value.

          -- Many of the failed companies were expecting additional rounds of funding that did not materialise.

          -- Some companies waited too long before putting themselves on the market, losing all leverage with buyers and any ability they had to hire a good intermediary.

          -- Venture capitalists have less time to play matchmaker to failing companies.

          -- Potential acquirers are finding it less necessary to "buy talent."

          -- Bricks-and-mortar companies haven't jumped in to buy Web companies.

          Webmergers.com provides research and services to buyers and sellers of Internet properties. The company will soon launch an online marketplace for developed Web sites.

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