Bubble Blowers: Companies That Fueled The Tech Bubble

Companies That Fueled The Tech Bubble

From 1998 to 2000, nearly 1,500 technology companies went public, raising $114 billion. That avalanche of capital was laid at the doorstep of countless companies whose busineses would never turn a profit. But that didn't stop them from taking it.
Don Farrall | Photodisc | Getty ImagesPosted 04 Dec 09

From 1998 to 2000, nearly 1,500 technology companies went public, raising $114 billion. That avalanche of capital was laid at the doorstep of countless companies whose busineses would never turn a profit. But that didn't stop them from taking it.

At the same time, parade of stock pushers made their name and often a small fortune trumpeting the merits of almost every company whose name ended in dot-com. And investors took the plunge.

Perhaps the greatest speculative bubble the stock market has ever seen, the tech bubble finally reached its apex with a handshake on the tenth day of the new millenium with the merger of AOL and Time Warner. But before it was clear that this, the biggest deal in history would ultimately go down as the worst, Internet fever would only grow.

Click ahead to see some of the companies most intrinsically linked to growing, and ultimately bursting the tech bubble.

Companies That Fueled The Bubble

One of the biggest and worst deals in histry that marked the end of the Internet boom. AOL, the best-known Internet company of the 1990s announced it was buying Time Warner for $180 billion. An upstart just out of its infancy buying a pillar of the old media establishment was the coming of age moment for the Internet era. It was also a deal that left analysts scratching their heads.
Background Photo Credit: Don Farrall | Photodisc | Getty ImagesPosted 04 Dec 09

One of the biggest and worst business deals in history marked the end of the Internet boom. AOL, the best-known Internet company of the 1990s announced it was buying Time Warner. An upstart just out of its infancy buying a pillar of the old media establishment was the coming of age moment for the Internet era. It was also a deal that left analysts scratching their heads.

"What I mostly thought was, 'boy, that's a great deal for AOL' and 'boy, that's a horrible deal for Time Warner,' " recalls analyst Jonathan Cohen. "You're basically exchanging real assets for assets that are much less sustainable — value that's much more tangible — again, a great one-sided trade."

Today, after losing tens of billions as a result of the merger, Time Warner is about to spin off AOL as an independent company valued at about $2 billion — just over 1 percent of what it paid to buy Time Warner 10 years ago.

Companies That Fueled The Bubble

Founder Sabeer Bhatia sold the company to Microsoft in 1997 for $400 million. At that time Hotmail had 9 million members. It was rebranded as MSN Hotmail, with the current version, Windows Live Hotmail, released worldwide in 2007. In 2008 it had more than 270 million users worldwide.
Background Photo Credit: Don Farrall | Photodisc | Getty ImagesPosted 04 Dec 09

Founder Sabeer Bhatia sold Hotmail to Microsoft in 1997 for $400 million. At that time Hotmail had 9 million members. It was rebranded as MSN Hotmail, and the current version, Windows Live Hotmail, was released worldwide in 2007. In 2008 it had more than 270 million users around the globe.

Companies That Fueled The Bubble

This online travel agency was founded by Martha Lane Fox and Brent Hoberman in 1998. The company's March 14, 2000, IPO in the U.K. coincided with the bursting of the dot-com bubble. Shareholders at the time of the purchase by private equity were compulsorily bought out at a deal price of 165p ($2.75) per share — a 215p ($3.58) per share loss for anyone holding them since IPO.
Background Photo Credit: Don Farrall | Photodisc | Getty ImagesPosted 04 Dec 09

This online travel agency was founded by Martha Lane Fox and Brent Hoberman in 1998. The company's March 14, 2000, IPO in the United Kingdom coincided with the bursting of the dot-com bubble. Shareholders at the time of the purchase by private equity were compulsorily bought out at a deal price of 165p ($2.75) per share — a 215p ($3.58) per share loss for anyone holding them since the IPO.

Companies That Fueled The Bubble

Amazon.com-backed Pets.com raised $82.5 million in an IPO in February 2000 before collapsing nine months later.
Background Photo Credit: Don Farrall | Photodisc | Getty ImagesPosted 04 Dec 09

Amazon.com-backed Pets.com raised $82.5 million in an IPO in February 2000 before collapsing nine months later.

During its first fiscal year, Pets.com earned revenues of $619,000, yet spent $11.8 million on advertising. The company lacked a workable business plan and lost money on nearly every sale because, even before the cost of advertising, it was selling merchandise for approximately one-third the price it paid to obtain the products.

The Pets.com management stayed on to provide an orderly wind down of operations and liquidation of assets. During this period, CEO Julie Wainwright received $235,000 in severance on top of a $225,000 "retention payment" while overseeing the closure.

Companies That Fueled The Bubble

This online consumer fashion Web store, founded by Ernst Malmsten and ex-model Kajsa Leander in 1998 and launched the following year, could easily be called the poster child for dot.com excess. Chewing through £80 million  before selling a single item of clothing, the founders went on to spend £188 million in just six months. The company went bankrupt in May 2000 after generating just £200,000 in turnover.
Background Photo Credit: Don Farrall | Photodisc | Getty ImagesPosted 04 Dec 09

This online consumer fashion Web store, founded by Ernst Malmsten and ex-model Kajsa Leander in 1998 and launched the following year, could easily be called the poster child for dot.com excess.

Chewing through £80 million before selling a single item of clothing, the founders went on to spend £188 million in just six months doing business. The company went bankrupt in May 2000 after generating just £200,000 in turnover.

Companies That Fueled The Bubble

With $89 million in venture capital financing, a board of directors including InfoSpace founder Naveen Jain and a popular television advertising campaign featuring basketball star Shaquille O'Neal, Freeinternet.com seemed to have everything going its way. But the company filed for bankruptcy in October 2000, soon after canceling its IPO and laying off 90 of its 300 staffers. At the time, Freeinternet.com was the fifth largest ISP in the United States, with 3.2 million users. Famous for its masco
Background Photo Credit: Don Farrall | Photodisc | Getty ImagesPosted 04 Dec 09

With $89 million in venture capital financing, a board of directors including InfoSpace founder Naveen Jain and a popular television advertising campaign featuring basketball star Shaquille O'Neal, Freeinternet.com seemed to have everything going its way. But the company filed for bankruptcy in October 2000, soon after canceling its IPO and laying off 90 of its 300 staffers.

At the time, Freeinternet.com was the fifth largest ISP in the United States, with 3.2 million users. Famous for its mascot Baby Bob, the company lost $19 million in 1999 on revenues of less than $1 million.

Companies That Fueled The Bubble

TheGlobe.com was a social networking service that went live in April 1995. The company made headlines when it went public in November 1998 by posting the largest first-day gain of any IPO in history up to that date. But like many other Internet-based companies, it was faced with restructuring in order to stay in business. Today, theglobe.com is a shell company with no significant assets or operations.
Background Photo Credit: Don Farrall | Photodisc | Getty ImagesPosted 04 Dec 09

TheGlobe.com was a social networking service that went live in April 1995. The company made headlines when it went public in November 1998 by posting the largest first-day gain of any IPO in history up to that date. But like many other Internet-based companies, it was faced with restructuring in order to stay in business.

Today, theglobe.com is a shell company with no significant assets or operations.

Companies That Fueled The Bubble

This Web hosting service founded by David Bohnett and John Rezner in 1994 created a Web directory organized thematically around six "neighborhoods" and allowed users to select a "city" in which to place their Web pages. By 1996, GeoCities had 29 "neighborhoods" including Area51 for science fiction and fantasy, Baja for off-road SUVs and adventure travel, Capitol Hill for politics and government, etc. The company was purchased by Yahoo for $3.57 billion in January 1999, but Yahoo closed GeoCities
Background Photo Credit: Don Farrall | Photodisc | Getty ImagesPosted 04 Dec 09

This Web hosting service founded by David Bohnett and John Rezner in 1994 created a Web directory organized thematically around six "neighborhoods" and allowed users to select a "city" in which to place their Web pages.

By 1996, GeoCities had 29 "neighborhoods" including Area51 for science fiction and fantasy, Baja for off-road SUVs and adventure travel, Capitol Hill for politics and government, etc. The company was purchased by Yahoo for $3.57 billion in January 1999, but Yahoo closed GeoCities on October 26, 2009.

Companies That Fueled The Bubble

Flooz.com, using the star quality of pitchwoman Whoopi Goldberg, was meant to be an online currency that would serve as an alternative to credit cards. Started by iVillage co-founder Robert Levitan, the company attempted to establish a currency unique to Internet merchants, somewhat similar in concept to airline frequent flier programs or grocery store stamp books.
Background Photo Credit: Don Farrall | Photodisc | Getty ImagesPosted 04 Dec 09

Flooz.com, using the star quality of pitchwoman Whoopi Goldberg, was meant to be an online currency that would serve as an alternative to credit cards. Started by iVillage co-founder Robert Levitan, the company attempted to establish a currency unique to Internet merchants, somewhat similar to airline frequent flier programs or grocery store stamp books.

"It was going to be an e-commerce engine," Levitan recalls. "And the simple idea was, it's your birthday, I send you $100 of Flooz and at the checkout across the Web it says 'How do you want to pay? Visa, MasterCard, America Express, Flooz."

The company announced its closure on August 26, 2001. It was perceived as an early indicator of the growing dot-com bust. Upon the company's closing, all unused flooz credits became worthless and nonrefundable. Over its short history, flooz.com reportedly exhausted $35 to $50 million in venture capital.

Companies That Fueled The Bubble

GovWorks.com was originally called Public Data Systems and produced software to help government clients track contracts and purchasing functions. But the company transitioned toward becoming an Internet portal as the Internet boom accelerated.
Background Photo Credit: Don Farrall | Photodisc | Getty ImagesPosted 04 Dec 09

GovWorks.com was originally called Public Data Systems and produced software to help government clients track contracts and purchasing functions. But the company transitioned toward becoming an Internet portal as the Internet boom accelerated.

The company sold in 2001 to First Data Corporation, which resulted in a loss for both the founders and investors. The company, it turns out, had burned through roughly $60 million in venture capital. It was later profiled in the 2001 documentary film Startup.com.

Companies That Fueled The Bubble

eToys was launched in 1997, with funding from Sequoia Capital, Highland Capital Partners and Idealab. EToys had a highly successful Initial Public Offering in 1999. Shares issued at $20 rose to $76 on the first day of trading. At its peak, the company was valued at more than $8 billion. Share price plummeted to less than $1 when it declared bankruptcy in February 2001. Nearly all the eToys assets were acquired by KB Toys in two separate bankruptcy auctions, then later sold to D.E. Shaw, a New Yo
Background Photo Credit: Don Farrall | Photodisc | Getty ImagesPosted 04 Dec 09

eToys was launched in 1997, with funding from Sequoia Capital, Highland Capital Partners and Idealab. EToys had a highly successful Initial Public Offering in 1999. Shares issued at $20 rose to $76 on the first day of trading. At its peak, the company was valued at more than $8 billion. Share price plummeted to less than $1 when it declared bankruptcy in February 2001. Nearly all the eToys assets were acquired by KB Toys in two separate bankruptcy auctions, then later sold to D.E. Shaw, a New York-based hedge fund.

The eToys.com Web site was eventually reopened by eToys Direct Inc., a descendant of Internet startup and KB Toys partner Brainplay.com. Today, it continues to market toys by mail order under the eToys name through both the Web site and printed catalogs.

Companies That Fueled The Bubble

Kibu.com, an online community for teenage girls backed by prominent Silicon Valley investors, is one of the rare now-defunct dotcom companies that didn't run through all of its cash before calling it quits. In fact, when it closed in October 2000, the company had not run out of the $22 million it raised. 
Background Photo Credit: Don Farrall | Photodisc | Getty ImagesPosted 04 Dec 09

Kibu.com, an online community for teenage girls backed by prominent Silicon Valley investors, is one of the rare now-defunct dotcom companies that didn't run through all of its cash before calling it quits. In fact, when it closed in October 2000, the company had not run out of the $22 million it raised. 

Though Kibu had started to attract traffic from its target demographic (one of the fastest-growing segments of Web users), company officials said in a statement they decided to shut down because "Kibu's timing in financial markets could not have been worse."

The end came just 46 days after the company's launch party.

Companies That Fueled The Bubble

The company that promised free delivery of pretty much anything in about an hour, was founded by young investment bankers in New York in 1998. The company raised an estimated $250 million, including $60 million from Amazon.com, but was frequently criticized for its business model, which used primarily bicycle messengers to deliver goods.
Background Photo Credit: Don Farrall | Photodisc | Getty ImagesPosted 04 Dec 09

The company that promised free delivery of pretty much anything in about an hour, was founded by young investment bankers in New York in 1998. The company raised an estimated $250 million, including $60 million from Amazon.com, but was frequently criticized for its business model, which used primarily bicycle messengers to deliver goods.

While popular with college students and young professionals, the company failed soon after the collapse of the dot-com bubble, shutting down in april 2001.

Companies That Fueled The Bubble

Broadcast.com was a Web radio company founded as "AudioNet" in September 1995. Todd Wagner and Mark Cuban later led the organization to largely capitalize on the dot-com bubble, and the company eventually was acquired by Yahoo for $5.9 billion in Yahoo stock. Yahoo split the company into separate services and discontinued its functionality. As of December 2009, broadcast.com redirects to yahoo.com.
Background Photo Credit: Don Farrall | Photodisc | Getty ImagesPosted 04 Dec 09

Broadcast.com was a Web radio company founded as "AudioNet" in September 1995. Todd Wagner and Mark Cuban later led the organization to largely capitalize on the dot-com bubble, and the company eventually was acquired by Yahoo for $5.9 billion in Yahoo stock. Yahoo split the company into separate services and discontinued its functionality.

As of December 2009, broadcast.com redirects to yahoo.com.

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Companies That Fueled The Tech Bubble
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