Cyber fizz

Global Finance, Sep 1999 by Marriott, Cherie

The next big challenge for newly listed Web companies will be trying to find strategic investments to achieve growth via acquisition. At the moment there is too much money chasing too few good ideas. Not only are the listed companies competing with venture capital firms that are showing a huge interest, but governments are raising cash as if there was no tomorrow. China, Hong Kong, and Singapore have raised a collective $ 176 billion for young entrepreneurs with good ideas."We now have A$20 million in the bank to spend, and the pressure is on for us to acquire companies," says Bill Gair, chief operating officer at Travel. com.au in Sydney, referring to the cash raised in its float on the Australian Stock Exchange in April. "Having shareholders to answer to changes the whole dynamic of the company. We have to promise rapid growth, and we have to deliver."

Executives at China.com are said to have set a rigid schedule of at least a dozen announcements each month to keep the market enthusing about the stock, though insiders at the company say pickings are slim, and there are very few good start-ups available at reasonable valuations. Rapid growth will also be difficult to achieve while the infrastructure supporting the Internet in Asia remains poor. Wireless technology may be the buzz in Silicon Valley, but in Asia most users are surfing the Net using a slow dial-up connection on rickety old telephone lines.The wider business community also needs educating to ensure the success of E-commerce in the region.

Internet entrepreneurs in Asia have to be prepared to evangelize. Nearly every start-up in the region is breaking new ground, making it necessary to educate, coax, and console stakeholders every step of the way. It took financial Web sites in Hong Kong months to negotiate access to real-time quotes from the local stock exchange, for example.

There is still no guarantee that the Internet business model being employed in the United States will work in Asia."Because there are no other benchmarks available, we tend to value Asian Internet companies based on the success of similar models in the United States," says the chief operating officer of a private equity firm in Hong Kong, which has investments in a number of small Web businesses."We then discount this by between 50% and 80%, depending on how many years we think it will take for that particular company to reach the same maturity as its US counterpart,' he says.