There's likely to be no shortage of troubled dot-coms in the near future. But what happens when the shakeout is over? Marchick says that he isn't worried. By then another industry will be in a downturn, with Bid4Assets ready to scoop up the remains. "That's kind of how it works in bankruptcy," he says.
Emily Barker is a senior staff writer at Inc.
Cyber-kvetching
The downturn among online companies has launched a slew of Web sites for the downsized and the people who love them to complain or commiserate or both. And -- surprise! -- some of those sites are even making money. Here are some of the loudest voices.
FuckedCompany.com, in New York City, publishes a list of troubled Internet companies, based on reports that founder Philip Kaplan collects from disgruntled dot-commers.
What spawned it: Last June, Kaplan, the founder and CEO of a small Web-design company, put up the site as a joke for his friends. He got back from vacation a week later to find his answering machine full of calls from reporters.
Tone: Gleeful schadenfreude. Kaplan even runs a pool that lets users bet on which Internet company will be the next to fail.
Revenue sources: Advertising; job listings; merchandise, including T-shirts and coffee mugs.
NetSlaves.com, in Yonkers, N.Y., posts essays, rants, and other contributions from tech workers. The offerings provide a virtual underground guide to the Internet workplace.
What spawned it: Founders Bill Lessard and Steve Baldwin started the site in 1998 to relieve their burnout after a series of frustrating Internet jobs.
Tone: Grassroots subversion with a high-tech twist. Stories on sweatshop recruiters, articles on drug use in dot-coms, and gift suggestions for the special geek on your list.
Revenue sources: Advertising, plus sales from Lessard and Baldwin's 1999 book, NetSlaves: True Tales of Working the Web, which was launched on the site and has sold 50,000 copies so far. Another book is in the works.
Startupfailures.com, in Castro Valley, Calif., offers advice and a community that help entrepreneurs bounce back after their companies have failed.
What spawned it: Last February, after his third start-up in a row tanked, founder Nicholas Hall came up with the idea of starting a Web site for guys like him.
Tone: Helpful encouragement of the "You get right back in there and keep trying" variety. Hall refers whiners to FuckedCompany.com. "I didn't want to have that karma," he says.
Revenue sources: Sponsorships, plus off-line business coaching, speaking engagements, and workshops.
Q&A
Opportunities Abound
Seth Freeman, managing director of EM Capital/EM Management Inc., a San Francisco consulting firm that specializes in turnarounds, talks about some of the opportunities that he sees in the Internet shakeout.
Inc.: What can turnaround experts do for distressed dot-coms?
Freeman: Venture capitalists, private-equity funds, and banks are beginning to use turnaround managers to evaluate their portfolio companies. And that leads to another opportunity for turnaround people: performing a planned wind down or asset sale that delivers as much value as possible.
Inc.: What are the challenges of working with Internet companies?
Freeman: There's a perception among turnaround specialists that with dot-coms leverageable assets don't exist. There hasn't been much understanding of how to value and use intellectual property as collateral. Also, the ability to appraise the value of a dot-com brand name is still developing.
Inc.: What are the opportunities for new turnaround companies?
Freeman: You're going to see firms set up to work as advisers to Internet "vulture" funds. Those are run by people who would like to buy either the assets or the ongoing companies at a discount. For that, they'll require new-economy-savvy consultants.
Inc.: How long will such an opportunity last?
Freeman: I think it's permanent. We're going to continue to see new Internet start-ups. And many of those will fail.
Q&A
So What's to Sell?
How is liquidating an Internet company different from dissolving any other type of company? Jeffrey Wolf, a bankruptcy specialist at the law firm of Greenberg Traurig, in Boston, who represents Bid4Assets.com and other more traditional liquidation companies in many of their transactions, explains.
Inc.: What are the opportunities for liquidators in the dot-com downturn?
Wolf: Clearly, there will be a lot of failed dot-coms. The real question is, What is there to liquidate? Many dot-coms have no inventory. Obviously, there are the minimal physical assets, like office equipment, used computers, and the like. Then there are the intangible assets: the technology, the licenses, the customer lists, the domain names, and any intellectual property. And each one of those unfortunately comes with its own liquidation difficulties. For instance, customer lists, which everyone at one time supposed would be a very valuable asset, have become difficult to liquidate because of privacy concerns.
Inc.: Sounds as if the opportunities for liquidators could be pretty small, then.
Wolf: Yes and no. If liquidators can find efficient, cost-effective ways to dispose of companies' assets, there could be a lot of opportunity, especially for online liquidations. Since the cost structure of an Internet-based auction is theoretically very low, the net results will be higher.
Inc.: What's the competition like?
Wolf: Some companies have tried to liquidate themselves over eBay and other online auction sites. And some of the traditional liquidators are experimenting with dot-com liquidations. I don't know how successful they'll be without partnering with an experienced online player. The investment criteria of a traditional liquidator may not justify spending a lot of time or expense in that area. I think the traditional liquidators will have plenty of brick-and-mortar retailers to work with very shortly and will not necessarily be focusing on the dot-com sector.
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