Have you seen this Trick Report-type site?

Hi Boyd,

Thanks for the great link.... :)

Speaking of internet companies....

I saw somewhere else where someone asked a question about these dot-coms losing money and shutting down.... I thought it was an interesting topic... Here are my thoughts on the issue... :)

I have two good friends who are founders of venture-capital backed high-tech companies, who have helped me to get some insights into how the high-tech venture capital world works....

One friend started a dot-com company. My friend may be the youngest (female) CEO in Silicon Valley, she's only 28. Yet her internet start-up managed to get financial backing and support from a giant like Time-Warner. I've known her since childhood, and I spoke with her at length when I visited San Francisco (on the way back from Boston to Sydney) a few months ago....

The other friend is a physicist -- in fact, he and I collaborated on a physics research paper which was published this year in the physics journal Physical Review A. He was giving a presentation at a conference of some of his work, and there was a venture capitalist (VC) in the audience. After the talk, the VC approached my friend about starting a company to develop his work for future applications, and he decided to do it.

I've spoken in detail (to the extent which they are allowed to tell me) with them about both their situations.... So, from conversations with them, as well as other reading I've done, I have some insight into how the process works....

Essentially, going into high-tech innovation of any kind is a high risk/high reward activity. The risk of failure is huge, yet if it succeeds, the potential rewards are also huge.

From the point of view of the VC, they never are only funding just one of these companies. They are simultaneously funding a large number of such companies. Therefore, they can afford for 99 of them to fail if only 1 succeeds, since the amount of money they'll make from the 1 company that succeeds will outweigh the money they lose from the 99 companies that fail. (That's how big the potential returns really are....)

So for high-tech companies to fail is not a surprise on their part -- it is part of the high risk/high reward game they are playing.

From the entrepreneurs' point of view, they also know it is a high-risk/high-reward venture. In many cases, the founders have actually put little or no money into the company at all. What they have to gain is the great rewards if it is a success, and what they have to lose is mainly their time (and a lost opportunity). So, for many of them it turns out to be a worthy risk to take.

In any high-risk venture, it is expected that a large number of companies will fail, so the failure of many dot-coms has been expected from the beginning.

However, the few who survive could go on to become even bigger giants than they are now....

And that's the bet that the Venture Capitalists and the founders are making....

It seems like quite a different world... :)

- Dien