(May 25) – “Get ready for a pileup of corpses in the land of dot-coms,” write David P. Hamilton and Mylene Mangalindan in today’s Wall Street Journal.
“Just months ago, when the Internet seemed to promise untold stock-market wealth, Web companies could count on their backers to keep pouring in more money whenever the coffers ran dry. Now that party is suddenly over, and Web investors are in brutal triage mode, on the lookout for losers and cutting off their cash.”
“Violet.com, an online retailer in San Francisco, learned the new rules the hard way. The company got $3 million in an initial round of fund-raising last October to help build a Web boutique stuffed with fancy beaded purses, orchid-oil lamps and other retail rarities. Founded two years ago by former Apple Computer Inc. engineer Amy Barnett and marketing specialist Bonnie Cohen, the site also featured a search engine that claimed it would let shoppers pick gifts based on their mood.”
“That initial funding didn’t last long, and by March, as the Internet-stock sell-off was under way, Violet was asking venture capitalists for more. No way, said its backers, who tried to arrange a sale of the company to another retailer. When a promising deal fell through, the company’s lead investor stepped back and let Violet fold.”
“It closed its doors last month. Today, all that’s left on its Web site is a short note thanking visitors and urging them to ‘continue to seek out unique and interesting items that bring inspiration to the things you do every day.’ “
“In just the past week, nearly a half-dozen dot-com ventures have imploded, many of them quite suddenly. High-end fashion retailer Boo.com collapsed last week after spending much of its $135 million in seed capital on lavish marketing and advertising campaigns promoting its plan to dominate global online sales of Donna Karan, Helly Hansen and the like. Its investors, which included French entrepreneur Bernard Arnault and Italy’s Benetton family, failed to find a buyer for the company, and instead put it up for liquidation.”
“Earlier this week, Walt Disney Co. shut down Toysmart Inc., an online toy start-up in which it owned a majority stake. CraftShop.com (www.craftshop.com), a Connecticut-based retailer of craft supplies, sought bankruptcy-court protection on Monday after its backers, led by Brand Equity Ventures of Greenwich, Conn., decided to withhold a promised second round of funding.”
“And one of the most closely watched experiments in online entertainment, Digital Entertainment Network, shut its doors last week after a long stream of bad publicity — including the resignation of a co-founder amid allegations of a sex scandal — soured investors on its prospects. That co-founder, Marc Collins-Rector, has denied the allegations.”
“Could some big-name Internet highfliers be next in line? Auditors at both CDnow.com Inc. and drkoop.com Inc. have expressed doubts about the companies’ viability. CDnow says it expects to sign a merger or investment transaction by the end of the second quarter. Drkoop.com says it has slashed expenses and retained Bear Stearns Cos. to help it explore strategic financing options that could include the sale of the company.”