First in, First Out

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Nadero Wealth Management

To chart the course of the future, we have to learn from history. With the disappointing Uber IPO so very fresh, there is a lot to learn from the market’s past to understand how it reshaped the future. With so much going on right now with start-ups and technology companies, this brings us back to the turn of the last century and is reminiscent of the unprecedented dot-com days with their inflated promises and unfulfilled obligations. We look into some of the historical test cases and delve into how the cookie crumbled after so much hype and brouhaha. Surely a lesson is there that not everything popular can be profitable.

For most of America and the western world in the 1990s, Netscape was a name that was synonymous with internet connectivity. It held great promise being the world’s number one web browser way back in 1995. When it went public in August 1995 at around $28, Netscape shares closed at US$58.25 after reaching an intra-day high of US$74.75. Being a groundbreaking application in the internet world, this 16-month-old company was already valued at US$3Billion. Netscape was arguably the first technology stock to set alight the subsequent stratospheric ascent of the entire sector.

At the end of 1995, Netscape share prices reached a high of US$174 - and this was when the trouble started. As market watchers looked back into this era of exciting dot-com promises, most of these technological wonders were hugely overvalued –investors paid more than what they were really worth. We have learned about the history of the internet, Microsoft with its Window’s Explorer began to eat into Netscape’s market - and by the end of 2008, Netscape became a defunct web browser valued at around $10 adjusted for a share split.

Another dot-com worth looking into is Pixelon, founded in 1998. Based in San Juan Capistrano, California, it promised a better/faster distribution of high-end video over the internet. The concept was terrific; however, the company was misrepresented with scams and false claims and its founder, “Michael Fenne,” was later discovered to really be a convicted felon by the name of David Kim Stanley, involved with several stock frauds. In the year 2000, the company underdelivered and filed for bankruptcy without ever reaching the public market place, other than through private equity placings.

Looking at these two companies, for example, someone did take their concept, their direction and – delivered. And we are talking here of Google, Amazon, and YouTube.

The dot-com boom in the early 2000s presented itself with many test cases to ponder. Moreover, it can also be seen as an era of great ideas but at the wrong time. Wrong time precisely because it was an age of prototypes where we tested these technological wonders to see if they would work, or at least create traction and accepted through mass adoption.

If there are any lessons learned from those who went in first then went bust, it is that pioneering a concept does not necessarily guarantee success. We can use these lessons as test cases when we build from their ashes.

Fast forward into 2018, there were so many blockchain companies that held great promise around a powerful technology that did not see the light of day. Primarily because the cryptocurrency market went into bear territory, and these companies were not able to raise the needed funds to deliver their promise. Things are looking to change now as the market revives with some vigor.

Someone should take one of those viable ideas and rise it up from the ashes.

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