It was just 18 years ago that the world was being bombarded with internet-based companies, and just about everyone was talking about the dotcom bubble. It was a different time back then. The world was worried about Y2K, pre-9/11, Justin and Britney were pop royalty and the Nokia 3310 was the number one selling cell phone on the market.
Yes, it was a simpler time back then, that was, until March 10, 2000. The world as we knew it came crashing down, well at least online. Fortunes were lost, stocks slumped, companies folded, and the economy began to slip down like a mudslide. The end result: a full-on recession in North America.
Sound familiar? It should, because right now at this very moment we are in the middle of another booming, technology-based industry that is heading towards a slump: blockchain technology and cryptocurrency.
Just like the dotcom bubble, blockchain and cryptocurrency is on everyone’s lips. It’s popular to be in the blockchain technology industry and everyone is racing to get their “revolutionary” product to market. As with any commodity, when excitement grows, so to does the value of cryptocurrency. While this frenzy to jump on the cryptocurrency train makes for plenty of excitement, just like the dotcom bubble, things will likely burst, and they are already headed that way, as prices have fallen significantly.
In the late ’90s, access to the internet expanded and computing became an important part of people’s daily lives all around the globe. It turned everyday people into entrepreneurs. Online retailing became “big business,” meaning virtually everyone was launching a home-based business, rapidly turning to e-commerce, and throwing money at every “great” idea. Companies went to market with Initial Public Offerings (IPOs). They managed to fetch insane prices because of the excitement, with some stocks doubling on the first day. Visionary innovators went to market with their idea with the hopes of finding a gem that would make them millions.
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Unfortunately the good times didn’t last, with the market depleting and the dotcom boom coming to a crashing halt in March 2000. The NASDAQ regressed from $6.71 trillion on March 10 to $6.02 trillion by end-of-month. Six days later, on April 6, the market fell even further to $5.78 trillion. In less than one month, nearly a trillion dollars worth of stock value evaporated, along with it, people’s investments and dreams. Companies started folding and advertising dollars shrivelled up. During the 2000 Super Bowl, 17 dotcom companies had paid $44 million for ad spots. Just one year later, only three dotcom companies ran ads during the game.
So many dreams came to a crashing halt in a matter of a couple of years. The majority of those who sunk their life savings into a dotcom business ended up going bankrupt due to the instability of the market. But not everyone failed, those with innovative ideas remained thanks to consumer demand. Really great companies rose from the ashes of the NASDAQ fire, while the other ones slowly disappeared from memory. You probably don’t realize how many mega corporations were formed during the dotcom bubble. Companies that you use every single day.
The rest, the companies that were good on paper but were not sustainable or the ones that were just an okay idea, fell away for a variety of different reasons. You may remember companies such as Pets.com. The company launched in August 1998 and became famous for the millions it spent on TV advertising with a sockpuppet. The company IPO-ed in February 2000 and raised $82.5 million, but was liquidated just 268 days later. According to experts, the online pet store did not offer a compelling reason for people to shop online. While it is was convenient to order online, it took too long for customers to receive their orders.
To be quite honest, many of these projects should have never been launched. Many grew too quickly and could not keep up with not only demand but changing logistics. Webvan.com was a grocery delivery service that expanded to eight cities in just a year and a half. In the summer of 1999, Webvan announced it was making a $1 billion investment in warehouses and would expand to 26 more cities by 2001. At its IPO in November 1999, Webvan raised $375 million and the company was valued at $1.2 billion.
Unfortunately, the company’s customer base wasn’t large enough to support the planned expansions and it closed up shop by July 2001.
We’re currently living in the shadow of the dotcom bubble, and personally, we think it’s a great place to be. But, right now the blockchain space is crowded, too crowded. There are hundreds of ideas already in the conceptual phase and even more already in their alpha phase. So many of these projects don’t require blockchain technology and they definitely don’t require their own cryptocurrency. But, just like in late ’90s, everyone wants to be a part of something exciting, sexy, and cutting edge. We need to learn from our mistakes and blockchain ICOs are a perfect example of history repeating itself. Just because you can launch an ICO that doesn’t mean you should. Many ICOs fail for several reasons, including lack of a physical project. If you have a great idea, see the need for it to be on the blockchain, and hope to fund it through an ICO, you need to have several things in order first.
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Having your project in beta or alpha is a great start. People want to see your platform or ecosystem in motion before investing. Having a concept and then asking people for money to put it in motion isn’t good enough for savvy investors. Why would anyone invest in something that doesn’t have a working prototype that can easily be manufactured or launched with the right amount of funding? Many ICOs fail because the innovators go to the public without a product, a clear direction, or even a product that is needed.
While what is happening right now is very different from the dotcom bubble, it is similar in many ways. Just like 18 years ago, the market was oversaturated, money was flying, and excitement was contagious. And, just like 18 years ago, the market will soon clear out and only the best ideas and projects will survive.
We are currently overwhelmed with ICOs, investment opportunities, and scams. It’s virtually impossible to know who will end up finishing their proposed project and who will run off to a tropical island.
With companies such as Google, Facebook, Twitter, and Mailchimp cracking down on advertising we expect the landscape to clear away and for the dust to settle, allowing only those truly unique and innovative ideas to set roots and flourish. These restrictions are being looked at by legitimate startups as an opportunity to show how valuable their project really is and how it differentiates from the clutter. The crackdown from these companies will only help increase awareness for cutting edge companies and highlight who the scammers really are. Those who cannot navigate around these restrictions, or choose not to, will fall away just like the failed dotcom companies. Because the value of cryptocurrency is so low at the moment, many may choose to drop out of the game and pursue other options. While those who see longevity in their projects will stick it out and hopefully come out successful while providing useful technology to the world.