The late 1990s were happy days. Investors were falling over themselves to pour money into this new-fangled internet thing, and anyone making software or launching an e-commerce website was on a fast track to Ferrariville. In 1998 alone, venture capital firms pumped a staggering $26 billion into internet start-ups.
And it isn’t hard to see why. During the 1980s, the average first-day return on IPOs was 7% – during the bubble years of 1999 and 2000 the figure had rocketed to a wickedly tempting 65%. Investing in tech stocks was a licence to print money.
By early March 2000, the FTSE Techmark index had reached an all-time high of 5,743 points. Then things started to go wrong. Badly wrong. Investors became jittery, then sober financiers realised the bubble had to burst and started to sell. The uncertainty triggered a chain reaction, as companies dot-bombed and investor confidence plummeted – just nine months later, the Techmark bottomed out at 1,064 points, crippling investors both big and small.
Weak business models, lack of experience and a blatant disregard for common sense were the chief reasons for the dot-bomb – that and the human failing of greed. Here we bring you the stories of just ten of the companies that had their moment of fame before crashing back down to Earth.
1 Boo.com
How do you spend nearly £150 million of investors’ money in just over a year? Caviar, champagne and Concorde is a start. Boo.com founders Kajsa Leander and Ernst Malmsten liked to party, soaking in sybaritic splendour while protected by a mini-army of Ghurka bodyguards. They had it all, except a profitable business.
The fashion site was years ahead of its time. The brilliant back-end system was matched by an equally impressive shop front, full of 3D animation. Unfortunately, the JavaScript and Flash powering the snazzy graphics and sassy 3D avatar of the lovely Miss Boo crippled the dial-up connection used by most potential customers; most people couldn’t buy a thing.
Its failure to attract leading sportswear brands and a disastrous ad campaign that ran before the site was even live further contributed to its downfall, as it slid into receivership in 2000. Fashionmall reportedly paid just £250,000 for the Boo name; a relaunch is promised later this year.
2 Boxman.com
The Swedish CD retailer self-effacingly called itself the biggest entertainment superstore in the universe, but its demise smacked of earthly oversights. If usability scholar Kristoffer Bohman is correct, it’s a miracle that a single would-be buyer ever managed to snap-up a Kylie CD from the site. An over-complicated homepage made a Jackson Pollock painting look well ordered, and the search button was a veritable example of Random Access Memory.
The killer blow had nothing to do with dodgy design, however. Customers reported that, because web credit card payments were impossible in parts of Europe, they were asked to send cash after goods had been delivered. As those other famous Swedes might have said: “Thank you for the music.”
3 Clickmango.com
Backed by Toby Rowland (son of business magnate Tiny), health and beauty store Clickmango was an instant smash with investors. As company directors told The Daily Telegraph at the time, they raised £3 million in a week, before they’d even set up a website.
Once up and running the website looked smart enough, but never came close to selling enough mud packs and face masks. Reports highlighted a monthly turnover of £2,000, with outgoings of £100,000, results that even the most nautical of spin doctors would fail to float.
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