Review of ‘Noodlenomics’ investment in 2010
The old way of carrying out e-commerce was to have internet start-ups that tended to be funded before they launched. That was typical: entrepreneurs first put their energy into writing business plans — a map that spelled out what they hoped to build. After the money was in hand, they got to work. There were two drawbacks to that model, both related to the risk of investment. The first was that founders frequently ended up owning a tiny percentage of their company as their ownership was diluted each time they brought in a new round of investment. The second was that there is often no correlation between the assumptions in a theoretical business plan and reality. Many great business plans turned into lousy start-ups — one reason for the last dotcom crash. According to the article, e-commerce was built on internet technologies and the dot-com era, and what made them run was money – at least it used too. Investment bankers were using what is called initial public offering (IPO) of stock, analyzing the companies worth and using the information of how much the public might be willing to pay for the shares and then underwriting the stock (sell stock on public stock exchange), and in the process received enormous fees. Well this is deemed illegal in 1999 by the SEC when they started to trade purchases of fixed number of shares prior to actual trading day – became known as “stock spinning” because they hoped to obtain business from larger institution, friends of investment bankers, and other privileged reservists in the future. By doing so the dot com era and Wall Street started to crumble.
The mentality of get rich fast is reversing because at no other time in recent history has it been easier or cheaper to start a new kind of company and possibly a very profitable company. Let us call these start-ups LILOs, for "a little in, a lot out." These are Web-based businesses that cost almost nothing...
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