The bitter pill Net venturists must swallow

E-venturists should stay sober in these heady, gold-digging times. They will need all their wits about them to find the seam of profit out there, says Mike Butcher

It’s gold rush time again. After four years of crying in the wilderness about the future of marketing, the future of business, the future of…well, everything, the Internet industry has gone berserk. And like every gold rush, the people are leaving their old towns in droves, in search of the verdant pastures of e-commerce and one-to-one marketing.

And the money? In the new economy, knowledge is not just power, it is bargaining chips. One young online media planner/buyer was recently hired on a salary of &£60,000. Even a track record measured in months, not years, is worth something right now.

The phenomenon is turning traditional companies psychotic. Internet managers inside larger corporations are often jumping into the arms of the nearest venture capitalist. They are not just eyeing the initial public offering (IPO) millions, but expressing exasperation with management sclerosis above and lower-level staff below. Either that or demanding fat pay-offs to stay on.

The recruitment market for Net-savvy staff is fast resembling a farce.

Start-ups and agencies are going into pitches with half an idea of recruiting their potential client. People with no relevant experience are hatching plans, like the black cab driver who last week told me of his Website “venture”. But like the original gold rush, it is the people making the shovels – today’s recruitment agencies – who are guaranteed money.

Okay, so you may not get a huge salary with an Internet start-up, but they are all looking at the exit strategy: betting on a “flotation inside 12 months” or a sale to a larger company.

The truth is much harsher. For every start-up with a successful trade sale or IPO there will be 20 that either limp on with an ever-increasing burn-rate or just burn-up.

Equity in a start-up can be a stick as well as a carrot. While you wait for your shares to be released – “vest” – over six months to a year, your stake could lock you in to the next Yahoo. On the other hand, you might own ten per cent of an e-venture worth nothing.

There will, of course, be successes. With the right idea, the right people, lots of focus and speed to market, a lot can be achieved.

But for many would-be entrepreneurs the hangover is just around the corner. The only question is, how many drinks will it take?

Mike Butcher is editor of New Media Age


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