210 Dot-coms Closed in 2000, E-Commerce Leads the Way

In a year when $87 billion was spent on mergers and acquisitions in the dot-com industry, some 210 Internet companies were forced to shutter operations in 2000, according to Webmergers.com.

California led the way with 66 Internet company closures, followed by Massachusetts and New York with 20 each. Washington recorded 10 shutdowns while Texas had nine, the report said.

The study found that shutdowns accelerated in the fourth quarter of 2000 as the funding market for Web-related companies dried up. Nearly 60 percent of the year’s casualties, 121 in total) took place in the fourth quarter. In December alone, the study found that 40 Web plays closed their doors, against 46 for all of November.

“December’s shutdowns had received at least $1.5 billion in investment by venture capitalists and other private and public investors,” the study said. “About 75 percent (157 total) of the failed Internet companies last year addressed primarily a consumer audience. Another 21 percent focused on business audiences while the remaining handful served a general audience of both businesses and consumers.”

Webmergers.com found that e-commerce players accounted for 109 shutdowns, or just over half of the total. Content-oriented plays made up another 30 percent of the total while infrastructure and online services companies such as ISPs accounted for the remainder.

“Between 12,000 and 15,000 employees lost their jobs as a result of the company closures,” the report said.

As the turmoil in the new economy dragged on in the latter half of 2001, the Webmergers study found that the number of mergers remained high as cash-strapped start-ups looked for marriage partners to avoid shutdowns.. Spending on merger activity increased nearly 85 percent from 1999’s total of $48 billion, reaching $87 billion in 2000. The number of deals in 2000 peaked at 910.

Excluding the AOL-Time Warner merger (Webmergers said the mega-deal would have obscured its year-to-year trend), the researchers found that while the number of deals held strong throughout the year, total spending declined dramatically after the Internet market shakeout began in the first quarter.

The first quarter saw nearly $52 billion in M&A expenditures and accounted for 60 percent of the year’s total. Spending declined by about 50 percent in each successive quarter with the fourth quarter’s $5 billion in activity accounting for only six percent of the year’s total. The dramatic quarter-by-quarter decline in total spending was due in large part to the severe erosion in valuations of Internet companies that continued throughout 2000.

This article originally appeared on internet.com’s atNew York.

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