European Internet startups aren't giving up, according to a new study, which found that fewer dot-coms went out of business over the past year than researchers had expected. The researchers attributed the surprising results to a new focus on cost controls and a willingness to re-examine business models.
Management and consulting firm PricewaterhouseCoopers (PWC) studied dot-coms in France, Germany, the Netherlands, and the UK, and found that some 90 per cent of those surveyed a year ago are still in business, PWC said in a statement Wednesday. The researchers queried managers of 400 Internet companies in July 2000, following up in June 2001.
While some larger, higher-profile companies have gone under, making waves, many others are still plugging along, said Markus Ehret, one of the authors of the study.
"There's a lot of companies out there doing their basic business -- small companies you don't see, but they're doing fairly well. But you see the big ones, and they're struggling . . . The big ones have a lot of staff, a lot of marketing expenses, and so on."
German dot-coms stacked up best financially, with 66 per cent reporting profitability this year, followed by 61 per cent in the Netherlands, 49 per cent in France, and only 24 per cent in the U.K.
Managers in the various countries are taking different approaches to achieving profitability, PWC said. Among the German and UK companies, cutting costs was cited as a high priority, while French managers focused on improving product quality, and their Dutch counterparts placed their faith in intensified marketing efforts. Overall, 24 per cent of managers said they had already changed their original business model.
Not surprisingly, companies have slowed down hiring, with only 35 per cent currently planning to add staff, as against 78 per cent last year. Less than a quarter of small companies -- those with 10 or fewer employees -- have added staff in the past year, the researchers said. Hiring priorities have changed, with more weight placed on management experience, and less on flexibility, creativity, and willingness to take risks.
But Ehret said that doesn't mean it's all work and no play in today's dot-com world.
"There's still a lot of fun in these companies. The people love to work there, and there's a high degree of motivation," he said. "I don't know how this might be one year from now, but that was, from my point of view, pretty surprising."
Contrary to last year's expectations, companies in the business-to-consumer (B-to-C) space grew faster than those in the business-to-business (B-to-B) sector, PWC added.
The European Internet branch has suffered from media and investor skepticism, making it harder for companies to raise financing for expansion plans, PWC said. Nonetheless, 41 per cent of the managers surveyed still expect to raise funds from venture capital firms.