thecoolhunter - 50 Great e-Businesses and the Minds Behind Them

50 Great e-Businesses and the Minds Behind Them

Tuesday, 27 November 2007

Welcome to the Wild Wild Web, a modern-day gold rush that has created a new economy where, in theory, anybody with a computer and an internet connection can make their fortune.

And just like the Californian and Australian gold rushes, it’s a time for heroes, villains, geeks, geniuses, charlatans, visionaries . . . and suckers. In the Wild Wild Web, some fortunes are made, some are lost and the pace of change is lightning-fast. There is always a new kid in town and there is always a new plague to watch out for, though this time it’s not cholera or typhoid, but spam and spyware. There is always some new tool to help make that fortune faster and a landscape paved with golden opportunities: email, broadband, blogs, the people power of Web 2.0, maps, video-sharing, Skype and virtual worlds, to name just a few.

Fortunes have been made at a rate never seen before. Google made its first $1 billion in less than six years. It took McDonald’s 24 years to do that. eBay partner Jeff Skoll’s fortune arrived so quickly he was still living in a share house when the company listed in 1998 and suddenly made him worth $4.8 billion. No wonder every man and his dog wants to start a successful internet company (or even just a blog).

As of June 2007, there were an estimated 1.1 billion internet users around the world and some 110 million active websites*, including 70 million blogs. Out of all of this chaos, 50 Great e-Businesses and the Minds Behind Them is a collection of case
studies of some of the most inspiring people behind many of the Web’s success stories.The oldest company we feature in the book, Amazon, started in mid-1995. Astrology.com, created by Australians David and Kelli Fox, started soon afterwards, in December 1995. The newest companies we feature, NYCgarages and Twitter, were started in 2006.

As well as the big guns such as YouTube, Google, eBay and Amazon, we have looked at a variety of other sites, some chosen for their rapid success, some for their popularity, and others for their ingenuity: their ability to cleverly harness aspects of the Web and create new ways of making money. Many started from scratch: from lounge room to global brand (aussieBum), basement to multi-million-dollar buyout (CollegeHumor), sideline experiment to $38.9-million sale (RSVP).Gary Vaynerchuk launched a video site called WineLibrary.com with a camera and a desk in the back of his father’s liquor store in New Jersey. Finishing college is not a prerequisite for internet success: several of the founders profiled here dropped out of Harvard, including Facebook’s Mark Zuckerberg.

In 1995 there were an estimated 18 million users of the internet. Growth in internet usage was increasing at 2300 per cent per year (despite the frustration of dial-up services). The well-documented dotcom bubble began. A big idea and a cute
domain name could inspire investors to pour millions into a project. The ill-fated Boo.com fashion venture burnt through $160 million in cash before the company was liquidated in May 2000.Walt Disney’s Go.com ended up writing off $790 million
in losses. Pets.com raised $82.5 million in an IPO in February 2000. It closed months later. Ouch. It was a time when businesses with the turnover of a few country shops were being valued at more than $1 billion.

In 2000, the leading technology index, NASDAQ, lost 87 per cent of its value. Many of the companies featured in 50 Great e-Businesses and the Minds Behind Them were created as the technology bubble burst in that year, proof that the NASDAQ
collapse could not harm a solid business with genuine products and services that consumers were prepared to pay for, or that advertisers were prepared to fund. Net-a-Porter and PayPal went live in the volatile time of the dotcom bust in March 2000 and have gone on to flourish.

Many e-businesses passed through this time relatively easily. Some may have had to hold off on going public, and others did not enjoy big venture-capital cash injections – but for many start-ups this turned out to be a blessing in disguise, as they
minimised costs and grew without the pressure of outside investors looking for quick profits. A co-founder of travel search engine Kayak, Paul English, cautions start-ups not to go out and raise too much money. ‘It is easy when you have a lot of money to think you are doing well – you become delusioned and the product might not be working,’ he says. For Carsales.com.au co-founder Greg Roebuck, the boom and bust did not change the value of the internet. ‘The value that the internet’s always provided is still there and still growing,’ he says.

Venture capital was never going to factor in the business plans of many of the entrepreneurs we have profiled.The only capital they could find was through their credit cards. There is an exception to that.The founders of Australian site Arts Hub used to borrow money from a man they called ‘Mr X’ when their cashflow was really bad.The cash would be transferred to a bank account and they would pay it back with 10 per cent interest within six months.

The 2000 crash has long gone and investment is flowing into the new economy again. In 2006, venture capitalists in the US invested $25.5 billion in 3416 companies, and investors spent $26 billion in 5000 companies. Yet, as Microsoft’s director of business development Don Dodge points out in his blog (dondodge.typepad.com), for every brilliant investment in a company such as Google, there are 100 flops, so investors need to kiss a lot of frogs.

In the Wild Wild Web there is space for the common man, like eBay PowerSeller Phil Leahy, who started his eBay business Entertainment House by selling some old records from his collection. He has come back from bankruptcy to be one of
Australia’s most successful online sellers. However, the Wild Wild Web is not a place for everyone. Just as there is a tendency to romanticise the Wild West, the history of the World Wide Web has been glossed over so that creating a successful webbusiness seems – well, easy. For anyone who starts to think creating a viable, profitable start-up is simple, think again. People talk about the ‘magic of the internet’, says the open software pioneer and creator of hot start-up Lulu, Bob Young. ‘But it is not easy stuff,’ he says. That is why these 50 e-businesses, we hope, make for inspiring reading. By Emily Ross & angus Holland. Exlusive online extract from the new book, 50 Great e-Businesses and the Minds Behind Them.

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