The dot-com shakeout of 2000 saw at least 210 Internet companies shut down their operations, according to a study released yesterday by Webmergers.com.
The fourth quarter of the year hit the Internet sector particularly hard, as 121 companies — or 60 percent — were forced to close, the study revealed.
The mass shutdown took with it approximately $1.5 billion in investor funds and claimed anywhere from 12,000 to 15,000 jobs, according to the study. Dot-com layoffs from companies that struggled but did not shut down were not included in that figure.
“This kind of shakeout has happened in the past in most major technology cycles,” said Tim Miller, president of Webmergers, San Francisco. “It's just exaggerated in this cycle because the pendulum has swung so far to the side of exuberance on one hand, and on the other hand to the side of despair.”
More companies failed toward the end of the year because they did not have the resources to meet the holiday season demand, Miller said.
A steady lack of funding from venture capitalists earlier in the year, in part, led to the dot-com closures, Miller said. Internet companies, operating with little money, were “running on fumes” as the year progressed, and “just ran out of gas” during the fourth quarter, he said.
Miller expects fewer Internet companies to shut down during 2001. The dot-com sector should begin to show signs of stabilizing itself during the first quarter of the year, he said.
“We're hoping we've seen the worst,” Miller said. “I believe we'll see a rebound, because that's what has typically occurred in the past [in other sectors]: The shakeout has been followed by a period of re-growth.”