The shakeout in the dot.com world continues apace. IPOs that once commanded astronomical share prices, despite their companies not having made a penny of profit, have been crashing to earth since early summer. Venture capitalists are now giving wide berths to internet startups, concentrating instead on second-round financing of those few companies they feel still have a chance to deliver the multiples they desire either by going public or being bought out.
For months, Irish-focused startups largely escaped the shakeout. Now, however, that is apparently changing. VirtualIreland.com, the Irish community website of Virtual Communities, teeters precariously on the brink of extinction and may depart the scene if a buyer does not step forward soon. In the summer, Virtual Communities laid off 50 employees, a third of its staff, from four ethnic websites. Virtual Ireland escaped that cut, but last week its employees were not paid. In the meantime, the parent company’s stock hit a miniscule 1/32 per share, off a 52-week high of $8 13/16. The future looks bleak indeed.
Few people today are surprised when companies with an intriguing idea but little in the way of management experience or business savvy go belly-up. Indeed, the initial venture capital commitment to these firms is already being seen as an aberration in a conservative industry that has long prided itself on the quality of its due diligence. The internet, the VCs knew, offered the promise of staggering profits, even if they — and the companies themselves — hadn’t really worked through the complexities of how to make those profits a reality. It may well be that the future belongs to traditional industries that apply information technology to become more efficient.
Still, it will be sad if Virtual Ireland disappears. It is a good idea, connecting the Irish diaspora through the internet. And its employees, some of them journalists, are first rate. It is, of course, a bit harder to judge the competence of the parent company’s management, which now plans to move from managing on-line communities to developing content-management for the web. It probably was better with ideas than execution. Let’s hope it has learned some lessons along the way.