bye bye boo.com: lessons in ebusiness

It all started so brightly for boo.com. Founded by Swedish entrepreneurs with a track record of running a successful Internet bookshop, the venture attracted backing from JP Morgan and Goldman Sachs. With a stylish site and concept - and not hindered by the fact that one of the founders was a model - the company was for a while the darling of the media.

But problems came thick and fast. First of all it missed its launch date by six months meaning an ad campaign (rumoured to be worth £20m) had no product to back it up. When the site did eventually launch, users found it slow and complicated, and most didn't have the required bandwidth to get the most out of it.

Revenues didn't grow as predicted, and high profile defections in the management team destroyed investors' confidence.

Martin Coles, CEO of fellow European start-up Letsbuyit.com, said: "If anything could go wrong it did go wrong for boo.com." He believes, however, this unfortunate set of events should not be used to tar the Internet economy as a whole.

He added: "If a major bricks and mortar car retailer goes out of business, you don't start asking if clothes shops will close down. It's the same with the Internet. People have got to stop treating the Internet as a generic thing, and realise it comes down to different businesses."

But inevitably the cynics are predicting the bursting of the Internet bubble. Indeed a report earlier this week from consultancy PricewaterhouseCoopers (PwC) said the average dot-com will run out of money within 15 months of an IPO, with one in four running out within six months. But is a shakeout of dot-coms necessarily a bad thing?

Letsbuyit.com's Coles said: "I would never say a failure like Boo's is a good thing, but it's helpful to have a shake-out of the good from the bad."

His sentiments are echoed by many.

Lars Wagstein, analyst at Jupiter Communications, said: "We will see a lot more of these failures. However we will also see many more great successes."

The consensus is that Boo.com took a great risk, and it didn't pay off. But if that serves to make budding entreprenuers think that little bit harder before they launch their start-ups, it will have a positive impact.

Julie Meyer, co-founder of First Tuesday, said: "People shouldn't think they can automatically become millionaires because they have a dot-com idea. Silicon Valley entrepreneurs have a very realistic idea of the amount of work it takes to make a great business, and that is why they are so successful."

But as for the bursting of the Internet bubble: "The Internet is still a whole new channel in which to do business, and we have only just begun to explore the potential. People just aren't going to stop setting up dot-coms because of this."

Venture capitalists also seem to be undaunted. VC company 3i says the Boo.com affair has not made it any more nervous about investing in dot-coms. Paul Vickery, director of ebusiness at 3i, said: "This is not the end of the world for B2C, but people will be more selective."

Some do take a more pessimistic view. Thomas Power, founder of the Ecademy, believes the ebusiness world has a long way to go to match the professionalism of traditional business. For many, he insists, it will be their downfall.

"This news is only the beginning," he said. "Dozens and dozens of these companies will die, and the failure of boo.com will impact on confidence in the sector."

But it needn't. In the traditional sense of build 'em up to knock 'em down, the media has helped hype the boo.coms and the lastminute.coms of the world to a level from where it is hard to succeed.

It will surprise no one in the industry that what success really requires is a watertight business plan, experience and hard work - whether you're in the dot-com world or not.

And the sooner the media, the VCs and the public at large realise that ebusinesses are just businesses, the better for the sector as a whole.