It was all a house of cards. It was a wall street scam for the most part, and a lot of smoke and mirrors.
You had too many companies tring to look good on paper with concept that was cool, but where not ready for prime time or had 0 profit margin.
From my take you had too many people making companies that their soul reason to be on the market was to "look" so good to the other companies, they would get bought out, and make a fortune on their stock options, without ever having to turn a profit, and then the officers of the one company wash their hands of the issue, and let the new company figure out how to make a profit with their products (most of which where more concept that real).
The 2nd major reason it all came crashing down, was most of the stocks of the dot-com where worth 10 to 100 times what they should have been worth (all on hopes and prayers), and finally someone in wall street took a much closer look at the profit margin on all these companies worth way too much, and BAM... its stock value falls throught the floor. More and more people get on board, and all the inflated stock crashed out back to the levels they should have been at all along. The problem is now all the investors where just burned big time (and some made a forture and where not out of the market to invent in new companies), so now no start ups can come along for a few years cause everyone is too shy.
To put it in other words... the dot-com success was all a wall street trick to make some people small fortunes, and then people figured out the scam and stopped it, crashing out the doc-com era.
It was a grand time to be an IT person I will say :).. I miss them days.
That makes sense--if I'm understanding you correctly, it was basically because there were so many of them, and most of them were advertising things that didn't really exist yet, or didn't have nearly the functionality that they were being advertised as having. That was coupled with the fact that these companies stocks were trading at many times their actual value. So the big crash was basically due to people going, "Hey! This company really isn't worth that much. In fact, most of these companies really aren't worth this much!" and then pulling out all their funding or rolling it over to different companies, with the end result being that the dot-coms lost pretty much all of their financial backing and couldn't sustain themselves without it because they didn't, in fact, have a strong product; their primary income was from people buying their stocks, and not their goods, so once that was gone they fell apart.
I have worked for 3 different startups so far. One was able to fight to the point it was profitable and I made money off the stock options I had. The other two failed, and it was sad.
You also had a lot of people going around forming companies with no other purpose than to "get bought or bust". On other words they never planned on turning a profit, but wanted to put a threat on one industry or the other and force other companies to buy them out. What kills so many good companies is when doing the "wrong thing for the health of the company" makes "them" so much money they can not help but pull in all that cash. In the end they are rich and the company is dead. This is one of the reasons to work for a startup, you need to be either A) in on the stock option game to make a lot of fast cash and be one of the people with the golden escape routes, or B) Have trust in the company/owners not to sell you out for a fast buck.
The other thing to keep in mind is most startups loss money hand over fist for up to the first 3 to 6 years even with a rocking product!. It just takes so much capital to start up a company and grow it. So even the companies that where doing good and on their 2 to 3 year (with the chance to turn a profit in the 4th year) all crashed and burned when the money was pulled out of the market.
The other term a lot of people use for the end of the dot-com days was the "popping of the bubble". It was a lot of hot air all contained in a small little bubble of wishful thinking. One pin prick and it all went away :)
The current theory is that a meteor hit the earth, and the resulting cloud of dust and debris created a substantial climate change which made Silicon Valley too cold for the dot coms to survive.
In the simplist possible terms... they shouldn't have gone public. Businesses which make a stead profit don't do well like that.
Stock need to grow in value... investor would rather make millions by selling a stock for twice what they bought it for... than make money collecting their percentage of profits... if a compay can't grow, it can't get bought or sold for much...
(incidentally... this is why MS needs the x-box to do well... it's the only market their in where they CAN grow... all their software markets from OS to Office can only fall...)
Basically... everyone realized that most of the dot coms weren't in a position to grow and the market fell out... the only ones who did well were the ones who invested in things like Amazon that are very much stil growing.
![[identity profile]](https://www.dreamwidth.org/img/silk/identity/openid.png){kind=small}
![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
timeasmymeasure
no subject
Date: 2005-12-29 12:18 pm (UTC)You had too many companies tring to look good on paper with concept that was cool, but where not ready for prime time or had 0 profit margin.
From my take you had too many people making companies that their soul reason to be on the market was to "look" so good to the other companies, they would get bought out, and make a fortune on their stock options, without ever having to turn a profit, and then the officers of the one company wash their hands of the issue, and let the new company figure out how to make a profit with their products (most of which where more concept that real).
The 2nd major reason it all came crashing down, was most of the stocks of the dot-com where worth 10 to 100 times what they should have been worth (all on hopes and prayers), and finally someone in wall street took a much closer look at the profit margin on all these companies worth way too much, and BAM... its stock value falls throught the floor. More and more people get on board, and all the inflated stock crashed out back to the levels they should have been at all along. The problem is now all the investors where just burned big time (and some made a forture and where not out of the market to invent in new companies), so now no start ups can come along for a few years cause everyone is too shy.
To put it in other words... the dot-com success was all a wall street trick to make some people small fortunes, and then people figured out the scam and stopped it, crashing out the doc-com era.
It was a grand time to be an IT person I will say :).. I miss them days.
no subject
Date: 2005-12-29 12:27 pm (UTC)Is that about right?
no subject
Date: 2005-12-29 12:50 pm (UTC)I have worked for 3 different startups so far. One was able to fight to the point it was profitable and I made money off the stock options I had. The other two failed, and it was sad.
You also had a lot of people going around forming companies with no other purpose than to "get bought or bust". On other words they never planned on turning a profit, but wanted to put a threat on one industry or the other and force other companies to buy them out. What kills so many good companies is when doing the "wrong thing for the health of the company" makes "them" so much money they can not help but pull in all that cash. In the end they are rich and the company is dead. This is one of the reasons to work for a startup, you need to be either A) in on the stock option game to make a lot of fast cash and be one of the people with the golden escape routes, or B) Have trust in the company/owners not to sell you out for a fast buck.
The other thing to keep in mind is most startups loss money hand over fist for up to the first 3 to 6 years even with a rocking product!. It just takes so much capital to start up a company and grow it. So even the companies that where doing good and on their 2 to 3 year (with the chance to turn a profit in the 4th year) all crashed and burned when the money was pulled out of the market.
The other term a lot of people use for the end of the dot-com days was the "popping of the bubble". It was a lot of hot air all contained in a small little bubble of wishful thinking. One pin prick and it all went away :)
no subject
Date: 2005-12-29 06:50 pm (UTC)The current theory is that a meteor hit the earth, and the resulting cloud of dust and debris created a substantial climate change which made Silicon Valley too cold for the dot coms to survive.
(/snark)
no subject
Date: 2005-12-30 02:33 am (UTC)Stock need to grow in value... investor would rather make millions by selling a stock for twice what they bought it for... than make money collecting their percentage of profits... if a compay can't grow, it can't get bought or sold for much...
(incidentally... this is why MS needs the x-box to do well... it's the only market their in where they CAN grow... all their software markets from OS to Office can only fall...)
Basically... everyone realized that most of the dot coms weren't in a position to grow and the market fell out... the only ones who did well were the ones who invested in things like Amazon that are very much stil growing.