Exactly 20 years ago, the dot com boom was at its height. The high tech NASDAQ index hit a historic high point on March 10 2000. Then the crash began, ending the dreams of countless young entrepreneurs. But Charles Miller argues that the boom left a positive legacy while the crash was just a blip.
Toby Rowland and his friend Rob Norton had never run a business. But as aspiring dot com entrepreneurs they found it easy to raise £3 million from venture capitalists in the heady days of London’s dot com boom. Looking back, twenty years later, Rowland remembers with embarrassment that they met their future investors at a networking party where, not having business cards, he presented their contact details on a paper napkin.
Their idea was Clickmango, an online retailer of health products. Today, Rowland cheerfully admits that Clickmango was probably doomed from the start. They hired Joanna Lumley to try to attract older customers but these were early days for online shopping and “if you were an older vitamin-buyer, you absolutely were not going to put in your credit card online.” Despite all the hype, featuring Lumley, as well as Rowland and Norton in the company’s groovy office with its “inflatable boardroom”, sales were minimal.
In 2000, when connecting to the Internet usually meant waiting for a strange electronic tune and a few seconds of white noise, the UK was enjoying its own brief dot com boom. About five years behind the USA, websites were everywhere and newspapers were full of beaming young people touted as Internet millionaires, notably the glamorous business couple, Martha Lane Fox and Brent Hoberman of Lastminute.com.
It all went well for the new dot coms until March 10 2000, the day New York’s NASDAQ high tech stock index peaked. From then on, the index plummeted and would not recover its high point for another fifteen years. That ended the financial hopes of thousands who worked for startups. New dot com buzzwords like ‘monetizing eyeballs’, ‘etailing’ and ‘first mover advantage’ didn’t seem so clever after all.
The dot com crash came as a relief to those who felt they had missed out. But in retrospect, dot com exuberance doesn’t look quite so ridiculous. Although potential fortunes evaporated, the dot com entrepreneurs turned out to be on the right side of history and their can-do attitude made the idea of starting a business seem much more possible. We’d never have had The Apprentice or Dragon’s Den without it.
Today Toby Rowland is proud to have been a player in those heady days, even though the boom ended in disappointment for him personally. After receiving their three million pound investment, he and his partner found that almost a million went on building the website. While that was happening, their investors needed constant reassurance that they had backed a winner. So Rowland and Norton kept the publicity machine whirring, long before they were ready to sell their first vitamin pill. The media were happy to oblige: “people wanted crazy dot com startups to write about.”
For the BBC’s Rory Cellan-Jones, then a business reporter, the dot coms were a welcome relief from covering “the tired old titans of British industry.” Suddenly there was a more attractive cast of characters to write about and “journalists who started off with a very cynical attitude then wanted to cover these companies and wanted to believe their stories.”
Cellan-Jones attended the First Tuesday networking events at which the Clickmango founders and many others made contact with investors. When First Tuesday tried to turn itself into a dot com, the high water mark of the boom had been reached. As Cellan-Jones puts it, First Tuesday was “a wine and cheese party that thought it was worth £60m.” Even that does not seem quite so implausible twenty years later: Facebook has shown that social networks can be worth almost any number you can imagine.
For much of Britain’s dot com experience, the US was the model. For some UK startups, it also provided fierce competition. In 1994, a year ahead of Amazon, Darryl Mattocks, a young British IT consultant, opened his Internet Bookshop from his spare bedroom. When a customer bought a book, Mattocks would go to his local bookshop, order it, pick it up from the shop a couple of weeks later and post it to his customer. In the early days, the site couldn’t even take credit cards, Mattocks remembers with a laugh, so the first customers found that the books were free.
Within a few months, the Internet Bookshop started to take money. Then Amazon appeared online. Mattocks and his staff were not impressed: “their ordering system was a bit clunky and we genuinely thought ‘they’re not going anywhere’.”
Both businesses expanded fast and it wasn’t long before Amazon’s founder, Jeff Bezos, visited the UK in search of an online bookstore to buy. Mattocks met him (“I got on well with Jeff. He was a nice guy”) but in the end, Amazon chose a British rival, Bookpages, for which he paid a reported £20 million. Eventually the Internet Bookshop was sold to W.H.Smith for £10 million. Mattocks did well, walking away with about £3 million, which he now describes as “that awkward amount, which is enough to change your life but it did mean that at some stage I’d have to go back and do something again.” Today, he’s still an entrepreneur in Oxford.
Getting out of a dot com with money was all about timing. Too early and you missed out on the profits of ‘dot com fever’; too late and the air had gone out of the bubble. The poster children of UK dot coms, Brent and Martha of Lastminute, timed it perfectly. Their company floated on the stock market on March 14 2000, exactly four days after the NASDAQ had peaked (as we can now see, in retrospect). Their flotation raised more than £110 million and made Martha and Brent’s shares worth, respectively, £60 million and £90 million. Sadly, that was the high point for their stakes, as well as for Lastminute and the British dot com boom. A month later, Lastminute shares were selling for just 30 per cent of their opening price.
While Martha and Brent were a media success story, Toby Rowland of Clickmango had to put up with a new role, as a famous dot com failure. Clickmango had soon spent all its investors’ money and they were in no mood to extend their credit since the business was eating £100,000 a week. Their only option was to close the business.
“Clickmango was one of a few really spectacular busts,” Rowland recalls. But “we couldn’t just stop talking to the media because we’d been courting media attention so much on the way up. We were advised by our public relations agency, ‘you’re got to give them time on the way down because otherwise you’ll just look like real jerks’.” Gamely, the two founders went along with their PR advisors’ plan: “we would be filmed emptying documents into the back of dumpsters and all this stuff. We were famous dotbombers.”
There’s no bitterness in Rowland’s dot com memories. He has done well as an entrepreneur since and looks back on Clickmango with “a genuine happiness to have been part of something that I see as being of historical importance. To have played it not terribly, and to have been part of something so fascinating, and something so momentous.” Even to have closed down the business methodically, trying to treat the staff as well as they could was “quite cathartic”.
For Rory Cellan-Jones, although the British dot com era is probably more remembered today for the crash than the boom, it laid the foundation of Britain’s not inconsiderable tech industry today. And, perhaps more important, it changed attitudes to entrepreneurship: “it had never been cool to go into business before. This country was very sniffy about it. And I think that changed radically because of how attractive some of these people were.”
As an entrepreneur, Darryl Mattocks thinks he still benefits from the insights that the dot com era provided to the public: “I think people are now educated. It raised the profile of what entrepreneurs do. I now can talk to other people who say ‘what do you do?’ and I can say ‘I’m an entrepreneur’ and they don’t look at you in this crazy fashion.”
Toby Rowland agrees: “the nature of entrepreneurship changed through that time. The way we thought about an entrepreneur before 1999 was …Richard Branson. We didn’t think about this kind of ‘masspreneurship’ that we now have. It was a few individuals …And now it’s everybody.”
Charles Miller made an observational documentary series for BBC Two, Inside Dot Coms, in 2000. He is completing a Masters in History at the University of Roehampton, specialising in the dot com boom and making the Tech Business History podcast whilst also working for CoinGeek, reporting on the coming tech revolution, in Bitcoin.