The British Venture Capital Association (BVCA) said that conditions are
different. Speaking just before the Astia Investor’s forum in May 2011, Tim Hames, head of public affairs, communications and campaigns at the BVCA, said, “In recent months, and
heightened in the light of the Microsoft-Skype deal announced yesterday, a
claim has emerged that the dot com boom of a decade or so past and the
consequential bust are in the process of being repeated. This seems to me to
fly in the face of the evidence. The dot com boom was characterized by a glut,
indeed a veritable splurge, of IPOs of internet companies. Many of these
businesses were little more than a domain name, a website and a concept.”

“The false premise was that there would be a huge premium for whatever
companies could pitch their tent in a particular section of the market ahead of
any other possible rivals. Furthermore, this was a craze in which hundreds and
hundreds of companies attracted cash from thousands and thousands of
investors.” The full press statement is here.

An article entitled “The new tech bubble” in The Economist says those that claim
it’s not the same as the 2001 tech bubble are right: it says, “This time it is
indeed different, though not because the boom-and-bust cycle has miraculously
disappeared. It is different because the tech bubble-in-the-making is forming
largely out of sight in private markets and has a global dimension that its
predecessor lacked.”

The Economist adds:

“The bubble is being pumped partly by wealthy ‘angel’ investors, some of
whom made their fortunes in the late-1990s IPO boom. Their financial firepower
has increased and they are battling one another for stakes in web start-ups. In
some cases angels are skimping on due diligence to win deals. When it comes to
investing in more established companies like Facebook and the bigger web firms,
traditional venture capitalists now face competition from private-equity
companies and bank-led funds hunting for profits in a bleak investment
environment. Gucci-shod leveraged-buy-out kings may appear to be more
sophisticated than the waitresses buying dotcom shares a decade ago—but many of
the newcomers are no more knowledgeable about technology.”

The Economist concludes that with luck the latest web bubble will do less
damage than its predecessor.

The BVCA also relates its argument to the number of IPOs. In 1999 there were
308 technology IPOs in the United States. In 2010 there were 20. The companies
attracting attention today are well-established ones which have proved that
their technology is robust, that they have a large customer base and can
accumulate substantial revenues. Furthermore, the current deal pattern involves
a relatively small set of businesses being acquired by an even small set of
large businesses. This is a very different story.

Chris O’Brien at San Jose Mercury News also supports this broadly with his
article “Time for reality check on the return of IPOs”, claiming that
while Silicon Valley is getting all excited about the number of IPOs to date
this year being up (Renaissance Capital says there have been 21 so far this
year while the NVCA says there were 14 in the first three months of this year),
they should not consider the IPO drought being over – far from it, he says.

O’Brien says that according to Renaissance, tech IPOs this year have produced an 11.4 percent return, which is just so-so. One of the highest-profile tech IPOs, Demand
Media, is down 28 percent since its January IPO. NeoPhotonics of San Jose is
down 45 percent since its February IPO. A number of these companies have come
out the box and done OK for a week, but then tapered off, says one source in
the article.

He adds that there are the larger structural issues facing any company considering an IPO – “it’s going to remain incredibly difficult for smaller and mid-sized companies to go public. Investment banks are focused on the very largest deals, such as Facebook and
Zynga, and don’t have the staff to handle smaller potential IPOs.”

The conclusion from these and other reports is that we are indeed in a
different scenario altogether. While there may be some high-profile big deals,
it doesn’t seem that we’ve yet reached the dizzy heights of the dot-com boom.

The week – organised by Work Wise UK, a national not-for-profit initiative, now in its sixth year – culminates in a ‘National Work from Home Day’ on Friday 20th May 2011.  The press release from Work Wise UK says that “during the recession and current age of austerity, many organisations have realised the benefits of smarter working practices. Enabling staff to work more flexibly has saved costs and at the same time significantly increased staff wellbeing.”

The concept of working from home long-term is already familiar to an older generation of workers who may have been affected by previous recessions.  The trick with  an initiative  like this is surely to encourage discipline when working from home, and ensure factors like IT security area also addressed.

On the former point, for those who are new to working from home, they might find it difficult to get into a working day if there are no boundaries to the day (such as travelling to and from the office on the daily commute).  It also requires significant self-discipline to carry out tasks as if you would in an office.

On the second point related to IT security, with data losses and breaches causing potential havoc as seen by several examples in recent years, it is something employers may wish to take into account before letting workers and their data go wandering unchecked.

For further information about Work Wise Week and National Work from Home Day, visit the Work Wise UK website.

As the Ewing Marion Kauffman Foundation (often referred to as one of the world’s largest foundations devoted to entrepreneurship) said in its letter to president-elect Obama, “Entrepreneurs invent, innovate, and advance living standards for society. They are the growth-drivers and job-creators of our economy.”

So entrepreneurs will be the key to bringing a turnaround, and to date, many successful entrepreneurs around the globe got to where they are through their strong desire to do something different, make a major impact or to create something new. And whether they are in North America, Europe, or Asia, the message always tends to be the same: they make many upfront sacrifices for deferred rewards, and often have no idea how successful they are going to be when starting out.Mr. N.R. Narayana Murthy, co-founder of Infosys – India’s second largest software and services exporter which now employs over 91,000 employees in more than 40 offices and development centres in India, China, Australia, the Czech Republic, Poland, the UK, Canada and Japan – not only forms an excellent role model, but personifies and embodies all those noble qualities of a successful entrepreneur.

In an interview that I carried out for him on behalf of The Chilli, we covered various topics – from the start-up spirit and what it was like then in 1981, to what it is like now for start-ups and also his tips for other start-ups. We also talked about what he would do differently if he were to start again, and also his mentoring and philanthropic values.

The start-up spirit – the obstacles and the perseverance

When asked about the mood during the start-up days, he talks about how in those days India was a closed country and where there was a tremendous ‘friction’ towards business.He contrasts the conditions then with those now – and in particular, how India was an unfriendly environment for start-ups looking to operate globally. While they encountered many difficulties, he said that entrepreneurship is all about a passion that drives you to overcome those hurdles. Mr. Murthy says, “We saw every bottleneck as an obstacle race, as a chance to show we were smart and perseverant and we were optimistic.”

One of the key things that came out from the discussion with him about starting up is that he wanted to prove that entrepreneurship could find a place in India.

When I asked him about his tips for start-ups today, whether they are in Europe, the USA or India, he was very enthusiastic about the opportunities for entrepreneurs today.  “The issues today are not infrastructure, or bureaucracy. The issue today is the market, competition, and how smart you are.”

The full interview and audio podcast is available on The Chilli’s web site – click here.

The 10 questions below, which are part of a framework called The Chilli Value Test™, are a good start for you to be able to validate your business idea, to see if it will form the basis of a sustainable business.

Not only will these questions help flesh out your thought process, strengthening the idea, but it will also prepare a would-be entrepreneur for the creation of the business plan and the due diligence from potential investors.

The questions to ask are:

1. What problem are you solving?
2. What value are you adding?
3. Is the market big enough and growing?
4. How will you make money?
5. What are the barriers and paths to entry?
6. What is the competition?
7. Have you validated your idea?
8. How will you overcome customer inertia?
9. Risk analysis.
10. Key ingredients for a business plan.

For the full details of this test, click here.