Investors turn cold on UK dot.coms

Britain's dot com scene is beginning to resemble a desert after another week of bad news. The BBC's Rory Cellan-Jones reports.

More companies are closing down and the finance industry is warning that it is in no mood to provide new funding for dot.coms.

This week has seen the owners of easier.co.uk put the business up for sale after disappointing revenues. A year after it was founded, Easier had just over 15,000 properties on its books but its most recent results showed a loss of £6.7m.

There will be a little more space in the crowded online travel market after United News and Media announced it was closing its holiday site, utravel.co.uk.

The company said further investment "could not be expected to achieve the required return in the near future." In other words, companies like United are now deciding it is not worth throwing good money after bad.

Fighting shy

There are still plenty of people aspiring to start dot.coms - but the venture capital companies that were so keen to back them earlier this year are now fighting shy.

First Tuesday, the networking organisation dedicated to bringing entrepreneurs and venture capitalists together, held an event called Wireless Wednesday this week.

We have a saying in this industry. In a tornado, even turkeys fly

Maisi Ng, ADD Partners

It was designed to help companies promoting the wireless internet get the contacts they need.

But the lapel badges handed out by staff at the door told their own story. Badges with green dots were for entrepreneurs, red dots were for venture capitalists - but the few red dots soon found themselves besieged.

Flying turkeys

Maisy Ng of a new venture fund ADD Partners says there is still great interest in funding people with unique technology - but she believes far too many flimsy companies got funded at the height of the dot com boom.

"We have a saying in this industry, " she says. "In a tornado even turkeys fly." Now some of those turkeys are hitting the ground.

Mikki Moimen of a Scandinavian venture fund, Nordic Wireless says "A lot of people have lost a lot of money. Now they are looking for people who can actually make money for them - people who can show they will make a profit."

The Lastminute founders remain optimistic

The venture capitalists, who made extraordinary sums by investing in start-up internet companies like Netscape and Yahoo, are now finding there is no easy exit from dot.coms which looked promising six months ago.

Even if the businesses are meeting all the targets set for them by their backers, it has become virtually impossible to float a new internet company on the London Stock Exchange.

After seeing the shares of many of the best known dot.coms fall by more than 90%, investors are unwilling to back new firms now.

Investment bankers who were fighting to take companies public at the beginning of the year are now finding little to keep them busy. One insider says there is unlikely to be any new activity until the Spring.

Lastminute cheer

The two best known figures in Britain's dot.com industry refuse to be downhearted.

Investors have deserted dot.coms around the world

Martha Lane Fox and Brent Hoberman, the co-founders of lastminute.com, have seen their personal wealth fall along with the travel site's share price. Lastminute shares, which climbed above £5 on the morning trading started in March, closed the week at just 68p.

"Of course it's upsetting," admits Martha Lane Fox, "we want to grow this business for all our investors and it's unfortunate if shareholders have lost money. But in brutal terms, it just does not affect the business. It does not stop consumers coming to the site."

Brent Hoberman says investors must not take too short-term a view: "Everyone wants to buy into the next Microsoft or Yahoo - but those companies took more than two years to establish themselves."

And for those, like lastminute, who have survived this far there is one comfort. It is now far more difficult for new rivals to get the funding they need to mount a challenge.