Small Ideas, Big Ideas, Bad Ideas, Good Ideas: 'Get Big Fast' and Dot Com Venture Creation
University of Maryland
Brent D. Goldfarb
University of Maryland - Robert H. Smith School of Business
Robert H. Smith School Research Paper No. RHS-06-049
In this paper, we establish a series of starting points for understanding the emergence of the industries associated with the commercial internet. First, we report baseline estimates of the number of internet technology companies created from 1994-2001. Approximately 50,000 companies solicited venture capital to exploit the commercialization of the internet. Of these, less than 15% followed the GBF-model of venture-backed growth. Fewer than 500 companies (<1%) had an initial public offering. Within the larger set of initial entrants, however, the five-year survival rate was 48%. The survival rate is higher than most observers typically predict and similar to that associated with the introduction of other general purpose technologies. Standing in stark contrast to the popular picture of the Dot Com era consisting of a boom phase followed by an unprecedented bust, our findings suggest underlying continuity in the exploitation of entrepreneurial opportunities arising from the diffusion of a new general purpose technology.
Number of Pages in PDF File: 30
JEL Classification: Dot Com Eraworking papers series
Date posted: November 22, 2006
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