- The Guardian,
- Tuesday January 23 2001
The first Tuesday of the month is the time for all dot.com entrepreneurs to drop everything and head to the monthly meeting of the nearest First Tuesday, the networking concept that started in London in 1999 and spread around the globe like a benevolent virus.
Or rather, it used to be: because First Tuesday, like the dot.com wannabes that defined its existence, has seen the balloon burst with a vengeance. Whether the next meeting becomes Last Tuesday and turns into the UK's first mass web wake remains to be seen, but everyone knows it will never be the same again.
At the height of web start-up mania last year, First Tuesday, which provides a forum for would-be entrepreneurs to meet venture capitalists, had to hire Lord's cricket ground for its London meeting. It had to accommodate the exploding numbers of graduates with business plans in their Palm Pilots in addition to established employees jettisoning comfortable jobs in the City to make internet fortunes.
Last July, the medium suddenly became the message when Yazam, an Israeli company, stumped up £33m to buy a networking organisation that was never intended to be a company and had never worked out a viable plan to attract enough revenue to make a profit. Underneath it was like all the other hopeful dot.coms that have bitten the dust because they had no route to profitability. If First Tuesday went to one of its own meetings now it would find it impossible to raise money. The show has moved on.
What went wrong? Just over 18 months ago, I wrote an article on the start of the UK's internet boom after my first visit to First Tuesday. Strange things have happened to nearly all of the companies mentioned. Freeserve, the "free" internet service provider was the main inspirational source to so many of the others because it had just become Britain's first billion pound web stock.
Since then its shares have collapsed on the stock market and it has just been bought out by France's Wanadoo. Lastminute.com's shares have also collapsed but it has enough money in the bank from its share flotation to see it through for a year or two. QXL, the European rival to the US eBay's auction site, dropped in price by 99% but has this week secured extra funding.
Boo, an online clothing seller, was the biggest of last year's crashes. Sharkhunt.com, which offered to pay punters to surf, is keeping a very low profile. However, Funmail, which offers up to 20 lighthearted email addresses, has changed its name to Another and claims to have 750,000 users.
Andrew Doe, founder of Confetti.com, (whom I had met at the bottom of the stairs at First Tuesday) says he hopes to be in profit later this year. But he is ahead of the game. He has done what every surviving dot.com company dreams of doing - he has bought up his two main online rivals (plus an old-economy catalogue company) and is using his stronger market position to raise prices.
Doe, who says that his original funding came through contacts with Nick Denton, one of the founders of First Tuesday, is "incredibly impressed" with the scale of expansion of First Tuesday. But he has concerns about how they could turn it into a viable business plan. At the very least, he says, the organisation has encouraged lots of people to become entrepreneurial.
Most of the big shots of venture capital have moved away from First Tuesday's scatter-gun approach to funding more specialist places. One of these is The Chemistry founded by Mark Simon, which hardly got any publicity compared with First Tuesday but is now steaming ahead and expanding successfully into tough markets such as Germany.
Unlike FT, it vets applicants first - thereby separating the wheat from the chaff - and in this way attracts a much higher class of venture capitalist to meetings. It also gets sponsorship from large companies, giving it a revenue stream that First Tuesday doesn't have. Simon says that there is no shortage of ideas in Britain but there is a shortage of entrepreneurs who could turn them into businesses.
The demise of First Tuesday and the dot.coms that once underpinned it is no more than the usual attrition rate for small companies, some 50% of which fail or are taken over after four years. The only difference this time is that the small companies happen to have acquired the (temporary) sex appeal of being attached to the internet. Normally, small companies don't make the headlines in the years after their birth.
It was never going to be easy to make money from the deflationary forces of the internet, where the ability to move at the click of a mouse to another, cheaper, place has made it a paradise for consumers. Not for much longer. Companies are learning fast that merely selling other people's old economy goods on the internet is a recipe for disaster because of the marketing costs of publicising the product and the high cost of a reliable delivery system.
So, old economy companies are starting instead to snap up failed dot.coms at bargain basement prices to give themselves an additional outlet. At the same time, internet companies are starting to gobble each other up in order to acquire a quasi-monopoly position so they can raise prices.
The party isn't over, it has just moved into a different room. Lack of investment means, ironically, that there is still plenty of money around with nowhere to go. "Wireless" is the new buzzword and one of the few areas of activity still attracting substantial new money (although no one has yet worked out how to make a profit out of it).
The internet revolution isn't over. It has hardly begun. There will be whole new debates this year about how wireless technologies - such as the short-range Bluetooth now starting to be unveiled - will change the world.
Even though the debates may not take place in the same way at First Tuesday, historians will look at kindly on it as the place that acted as a catalyst to unleash a surge of entrepreneurial activity that a lot of people didn't realise existed.
