Tim Hames, head of public affairs, communications and campaigns at the BVCA, told the Astia Investor Forum in London this week that there is no ‘evidence’ the tech boom and bust that occurred at the start of the last decade is being repeated.
His comments follow the announcement that software giant Microsoft has agreed to acquire web-based telephone service Skype for $8.5 billion (£5.1 > billion) – its largest ever purchase.
Hames comments, ‘In recent months, and heightened in the light of the Microsoft-Skype deal, a claim has emerged that the dot com boom of a decade or so past and the consequential bust are in the process of being repeated.This seems to me to fly in the face of the evidence.
‘The dot com boom was characterized by a glut, indeed a veritable splurge, of IPOs of internet companies. Many of these businesses were little more than a domain name, a website and a concept. The false premise was that there would be a huge premium for whatever companies could pitch their tent in a particular section of the market ahead of any other possible rivals. Furthermore, this was a craze in which hundreds and hundreds of companies attracted cash from thousands and thousands of investors.’
Hames continues by highlighting the difference in the number of technology initial public offers (IPOs) between then and now. He says there were 308 IPOs in the sector in the United States in 1999 compared with 20 in 2010. He adds that the companies currently attracting attention are ‘well-established ones’, which have proved their technology, have a large customer base and can accumulate substantial revenues. But he says he does not deny ‘something intriguing is occurring’.
‘As someone with an interest in history and politics, I see the likes of Google, Microsoft, Facebook , Apple and to a lesser degree Amazon engaging in a modern version of the 19th century colonial “struggle for Africa”,’ he says.
‘All these mega-players – in what might be described as the “Internet Plus” economy – are scouring an area which is big but finite and where the equivalents of mineral resources and strategic advantages are known to be present in order to position themselves for a much wider competition and conflict. They are alighting on prominent businesses which have shown the capacity to create a market for themselves, not hyper early stage companies that barely qualify as a business in the orthodox sense of that term.’
