Internet Boom or Bust: Part II?
Those who went through the late nineties and early 2000’s
remember how quickly internet companies attracted investment and then promptly
went belly-up. The valuations seemed to stretch common sense and yet investors
(individual and institutional) would throw money after these firms looking
to hit on the promise that they would remake the world as we knew it. The retailing
segment had plenty, with online grocery firm Webvan perhaps the most prominent
of those that didn’t
Today, it seems, we may be back in a similar place even if not quite
so frenzied as it was 10 – 15 years ago. Companies such as Gilt, Groupon and
LivingSocial are attracting large investments, leading some to question the
businesses’ actual worth.
A report by Reuters last month projected that
Groupon could raise up to $1 billion in its initial public offering. The company
could attain a valuation of up to $20 billion.
Recent reports that Gilt had
received $138 million in investment capital, bringing its valuation to $1 billion,
led The Wall Street Journal to question whether the flash sales retailer was
"I’m a bit of a doubter," Andrew Jassin, co-founder of Jassin Consulting
Group, with clients that supply Gilt Group, told the Journal.
doubts stem from questions of supply for Gilt. As a flash sales site, how does
it guarantee that it has consistent inventory to keep up with demand?
- Groupon IPO may value company at $15-$20 billion: source – Reuters
- Gilt’s Hefty Valuation Puts New Web Boom to the Test – The Wall Street Journal
Discussion Question: Are you concerned that we’re heading for another internet bust similar to a decade ago? Of the current crop of hot companies, which do you see as being most worthy of large investments?