At the height of the dotcom era, millionaires were practically created overnight. It was a time when young entrepreneurs dared to live their dreams and risk taking was encouraged, if not the norm. But when the dotcom bubble burst, those whose ventures had no solid business model crashed as quickly as they were created. ?Dotcom? soon became a dirty word and no respectable business wanted to be associated with it.

But that was then. We?re now nearing the end of 2004, and those dotcoms that have survived the crash are still chugging along although unlikely to relive the heydays of the mid- and late-?90s. Given the troughs and peaks that dotcoms have gone through, are today?s entrepreneurs ready to give the dotcom business model another shot? More importantly, what can the new entrepreneurs learn from other people?s past mistakes?

?The heydays of the dotcom era were more like an orgy,? declares Audi Mok, executive director of Malaysian online bookstore Arthursbooks.com. ?Everybody just wanted to be part of it to enjoy the ride and experience.?

?Most dotcommers at that time didn?t really think about how and where they were going to make money. It was all about pushing up the valuation of their dotcom ideas and getting rich through an initial public offering (IPO) exercise,? he adds.

Chok Kwee Bee, executive director of BI Walden Management, shares a similar sentiment noting that most people hardly paid attention to revenue and cash flow management issues at that time. ?As a venture capitalist (VC), my question to dotcommers was always about how they were going to survive if they didn?t think about revenue. And we?re not even talking about profit,? she says.

Chok adds that even if a dotcommer?s plan is for his business to be acquired later, they still have to be able to manage their expenditure and income until a potential suitor comes along.

?Although you have no revenue yet, you still need to plan for when you think revenue will start coming in. And in the meantime, you must have enough cash to last you till then,? she notes, adding that the initial cash that dotcoms have is, in most cases, early funding raised by the VCs on behalf of the dotcoms.

While others agree that the dotcom bust has had a negative effect on the industry, they are also quick to defend the viability of the dotcom business model. Christopher Chan and Tengku Farith Rithauddeen -- both members of the Technopreneurs Association of Malaysia -- believe that the stigma associated with dotcoms is more of a perception issue rather than the viability of the business model.

For Farith, he argues that the dotcom model is still fundamentally a viable one. What wasn?t viable, he points out, was that there were too many people rushing into the business and at the same time too much money being pumped into these ventures without serious evaluation of business models.

?It?s not an issue about whether it is a dotcom or not. Because it sticks out like a sore thumb, the public therefore simplify the problem and think that dotcom is a dirty word,? says Farith, who is also the co-founder and president of e-business solutions provider Skali.net. ?The reality is, there were just too many suppliers and a lack of demand at that given time.?

Chan, meanwhile, says that people have somewhat generalized what a dotcom represents and tended to focus on those that have failed.

?Because the dotcoms and VCs lost a lot of money in such ventures, naturally people would have a negative perception. But dotcoms are just like any other technology companies,? says Chan, who is also the CEO of The Media Shoppe (TMS) -- an e-business solutions company that is soon to be listed on Malaysia"s Mesdaq market.

?The difference is that dotcoms focus on using the Internet as a delivery model,? he adds, noting that some failed not because of a bad business idea but rather the ideas were ahead of their time.

Where?s the money?

While VCs today are still prepared to look into funding dotcoms, they are however more cautious in their approach. Chok says that in the early days, dotcom ideas were sprouting up everywhere although not everyone had a good idea or business model. Yet, VCs were prepared to evaluate these proposals and fund those that had some potential.

?But we are definitely more aware now of what to look out for. In the early days, I would say that we were guessing as much as the dotcommers were when identifying whether a business model would work.?

Chok also notes that there seems to be significantly less dotcom ideas appearing in Malaysia today, and she believes this is partly because dotcommers have to come to realize the risks and challenges. ?I suppose it?s also because money is harder to come by especially after some VCs got burnt during the dotcom crash,? adds Chok.

The CEO of Malaysia Venture Capital Management (Mavcap), Norazharuddin Abu Talib, readily acknowledges that funding is difficult to attain especially from VCs. He explains that when Mavcap first started operations in 2001, many dotcoms had also approached it for funding but very few were actually successful.

?The business ideas proposed were still the same although most do not call themselves a dotcom anymore. Essentially, the business plans were not presented in a holistic manner,? says Norazharuddin.

?First of all, you need to have a compelling proposal. You must tell VCs why they should invest in you, especially in how you can give them the returns,? he adds.

As a government body set up to invest in the venture capital market in Malaysia, Norazharuddin says that Mavcap does actually take on more risks than VCs when it comes to investing. That?s because the objective of Mavcap is to provide seed funding and nurture young technology companies, he says.

?On average, we take on 17 out of 100 proposals. And that?s way above the industry average where VCs generally take on like one out of 100,? he notes.

Farith believes that VCs have become excessively conservative due to their bad experiences when the dotcom bubble burst. And this, he says, makes the whole situation worse for budding entrepreneurs because the lack of funding makes it difficult to get any business ideas off the ground.

Indeed, the key element in creating an innovation infrastructure in Malaysia is the availability of funding. And although there are entities such as Mavcap, Farith says that more needs to be done to assist local entrepreneurs.

?The existence of Mavcap has certainly helped, but we really need more VCs to participate in giving entrepreneurs more opportunities,? contends Farith. ?As it is now, entrepreneurs can come up with the most brilliant ideas and probably still not get any funding. Basically, the situation is such that even if you?re Bill Gates in Malaysia, you still won?t get any.?

Chan agrees. He says that VCs actually do have a lot of money but they also have an exit plan to get returns from their investments within five or six years. ?Most budding entrepreneurs won?t be able to achieve that because they need more time to reach the next stage of showing profitability. In essence, there is a lack of developmental funding,? adds Chan.

Nevertheless, Chan is hopeful that the Cradle Investment Programme (CIP) that is managed by Mavcap will help alleviate some of these issues. CIP is a 100 million ringgit (US$26.3 million) fund from the Ministry of Finance, which is designed to spearhead seed investment, nurture entrepreneurial development, create a pool of technology ideas and generate new ICT opportunities.

While Mok of Arthursbooks.com agrees that funding is important, he cautions against being too reliant on investments from third parties. His rationale is that once a dotcom gets funding, the business owner will have that added pressure to commit to meeting set targets, which are sometimes quite unreasonable. Furthermore, in some cases, dotcommers who receive funding tend to get carried away and lose focus on what needs to be achieved because they suddenly have so much money at their disposal, says Mok.

?It?s a double-edged sword. The more prudent approach would be to build your business and create a solid foundation first. Once you have that, you can get funding if you require it and also have more control over how your business should be run,? he says.

?I?ve seen dotcommers getting a lot of funding, and they end up losing control of the company. Worse still, is when they mindlessly blow their funds away on unnecessary expenditures, pay themselves a high salary or get a big, expensive car,? adds Mok.

Back to basics

If budding entrepreneurs feel that VCs sound like their mothers, they?re probably right. The constant prodding and advice dished out by VCs may make them sound like a broken record, but what they say have everything to do with going back to the basics and focusing on business fundamentals.

Chok says that VCs always look for certain qualities in dotcoms and this includes among others a solid business model, good cash flow management, and a strong and focused management team.

?Dotcommers need to demonstrate how they?re going to make money because no matter how interesting the business plan is, you still have to prove that your idea is financially viable,? she says.

?But ultimately, it?s still about the people running the company. Walden spends a lot of time looking into this aspect because we need to make sure that the management is made up of people that have integrity, vision and ability to carry out strategies,? adds Chok.

Chan of TMS says that dotcommers should also have the ability to persevere and see out their strategies. If they are fickle-minded and keep on changing their business plans whenever an obstacle appears, then that would make it much harder for them to see any progress, he adds.

Business fundamentals aside, most also acknowledge that external factors play an important hand in determining the success of a dotcommer?s business plan. The Internet access infrastructure, for one, is crucial if dotcoms are to succeed in Malaysia. Although the adoption rate for broadband Internet in Malaysia is increasing, it will still take some time for it to reach a level where enough users can take advantage of it to transact online.

There also needs to be a critical mass of customers if local dotcoms are to succeed. The experience in China has shown that very basic dotcom business models can flourish if there are enough users accessing the online services. Entities such as Sina.com in China has become a roaring success despite it being positioned as an Internet portal, although it must be acknowledged that this portal does also offer some other compelling services. The most popular service is its online dating service that appeals not only to users in China but also to other Internet users around the world.

Making users pay

The mind-set of local Internet users must also change if dotcoms are to have any chances of success in Malaysia. For instance, most local Internet users are still not at ease with online payment methods. If this trend continues, dotcoms will find it difficult to collect payment for any online service that is rendered.

?The chargeback issue when paying by credit card is a deterrent for many users, especially with credit cards that are under the SET system.

The onus is on users to prove that they did not make certain transactions,? says Norazharuddin.

One mode of payment that has been touted and increasingly adopted by some service providers is payment via SMS. Although it is mainly adopted by telcos for bill payments and top-up of prepaid mobile phone accounts, other companies that offer services such as ring-tone downloads and competitions are also finding this to be a convenient way to collect revenue. Indeed, industry observers believe this mode of payment can be extended to cover other online services provided by dotcoms.

It is a mode of payment that most mobile phone users are comfortable with. However, the challenge is for dotcoms to get telcos to support their business transactions and manage the billing system. Also, the extent to which telcos are prepared to do so really depends on the value of such transactions.

Yet another mode of payment that might work is to use stored value or prepaid cards to pay for the consumption of online services. Online game aggregator and developer Terra ICT is one of several massive multi-player online role-playing games (MMORPG) providers that have introduced this method to get users to pay for their online gaming activities.

Hope springs eternal

Despite the various challenges facing budding entrepreneurs, all those interviewed by Computerworld Malaysia for this story agree that there is still hope yet for entrepreneurs to realize their dotcom dreams.

?I think the success of companies like Jobstreet.com is a good sign for local entrepreneurs, and hopefully this will spur them on to give their own dotcom ideas another go,? says Walden?s Chok. ?As long as they have a solid business model, cash and perseverance I believe they will have a chance to succeed.?

Mavcap?s Norazharuddin believes that those who will succeed in the future are unlikely to be pure-play dotcoms anymore. ?I think it will be a mixture of pure-play and brick-and-mortar concepts. The ones that will work will be those that use the Internet as a delivery model for their services,? he says.

Farith of Skali.net agrees, noting that even the likes of Amazon.com has evolved its business model to incorporate brick-and-mortar elements. ?Entrepreneurs must realize that the Internet is a means to and end and should no longer view it as an end in itself,? says Farith.

Chan of TMS hopes that the new dotcoms will be smarter now in the way they approach the business. ?Previously, dotcoms didn?t really care about how they were going to make money. But now, they?re thinking about how they can use the Internet to provide a better service,? he says. ?Let?s also hope that they?ll pay more attention to business fundamentals.?

?Few, if any, dotcommers ever succeeded because they thought, ?Hey, this idea will make me rich.? Instead, companies like Yahoo and Google succeeded because the founders came up with an idea to solve a problem they faced,? says Mok of Arthursbooks.com.

?From there, somebody probably told them that what they have could be turned into a business. Basically, your idea must serve a real need. If you can do that and it?s not another me-too idea, then you?ll probably have a chance,? adds Mok.

Lastly, Farith says that the industry should also encourage those dotcommers who had failed to try again. ?They might not be a dotcommer again, but their ideas can be applied to large corporations and hopefully these companies can take advantage of the Internet and be successful,? he says.

That might work. After all, dotcom ideas never die; they just reinvent themselves.