The Dot-Com Survivors

Lessons Learned
Some dot-com survivors are embracing their pasts as part of their corporate identity. Among the most common traits in companies that went bare-bones during the recession is a continued focus on business value and the bottom line. "We're still going to operate as if we're covering payroll out of personal checks, and we're still going to share hotel rooms," says The Active Network's Alberga. "Those same survival operating procedures are going to allow us to drive industry-leading earnings."

The same goes for VistaPrint. "Every decision we make in this company has to fit into a contribution margin equation: revenue minus cost of goods and marketing," says CMO Holian. "Whatever project will bring the biggest contribution margin wins."

Holian is proud of her company's continued efficiency, but points out that the bigger transformation the company experienced was emotional. "We all believe in what we are doing. Our value proposition is that we offer beautiful-quality print and extremely low prices," she says. "We believe we're actually helping people with our commitment to small business, and that's made us a better company."

The philosophical transformation is what astounds OpenAir CEO Panner. The greatest problem of the 1990s boom, he says, was that companies were built on advance revenues and overstaffed their organizations. Too many people were walking around with redundant jobs on all levels, and lacking a sense of purpose or control.

The people at OpenAir who survived the recession feel like they're bringing value to society and are proud of what they do, says Panner. That wouldn't have happened before the recession. "We came out with a much better sense of ourselves as businesspeople," he adds. "Today everyone in the company has an aggressive and empowering sense that they have to deliver their part of the equation if we're going to be successful."

Just Don't Call It A Dot-Com
Now that the economy is recovering, the dot-com survivors are finding success with real products, real business plans, and serious strategies. 2004 wasn't the greatest year for IPOs, but 21 of the 93 venture-backed companies that went public were Internet-specific, says the NVCA's Mark Heeson, and those that have gone public are trading at about 75% over their IPO level. "Last Christmas saw a huge upswing in consumers purchasing over the Internet, and that's only going to grow as confidence continues to build," he says -- so logically more Internet companies will come to the forefront.

But you won't see another Amazon.com, Heeson warns, or even another Pets.com. "We're at the point where general services has been done and done well," he says. Smaller e-commerce survivors are in niches with small competitive sets, such as eBags.com, an online retailer that sells only bags and related accessories.

And if Google has proven anything, it's that the Internet isn't just about retail. Using an ad-based revenue model, the company made its public offering last August at $85 per share and today is trading at $215.81 per share with a market cap of $59.24 billion. Its most recent earnings report, released April 21, showed record revenues of $1.3 billion and a net income up over 400%. That type of performance will keep the fires burning for the Internet sector for a long time, says Tracy Lefteroff, global managing partner of the VC practice for PricewaterhouseCoopers.

"Many VCs strongly believe that there's a lot of ways to make money on companies that are based on the Internet," Lefteroff says. But odds are good they won't call their companies dot-coms. "That word still carries a bad connotation."

That means that innovative companies will continue to be funded and rise to the top. The smart ones will look to their predecessors who survived the great rise, fall, and rebound of the Internet economy for guidance on building strong, healthy businesses.

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