Need proof that another dot-com boom is under way? Consider Jangl, Jaxtr and Jajah.
They’re not part of a Scrabble game gone horribly wrong; they’re names of new tech start-ups. And they don’t just sound alike. Each offers a similar product — a type of Internet telephone service — and is about a year and a half old.
Standing out would be tough even if it weren’t for the more than a dozen other companies in the same market. Yet Jangl, Jaxtr and Jajah have collectively raised almost $50 million in venture capital.
They’re not that unusual. The tech industry is once again trying to do business like it’s 1999.
U.S. venture-capital investment in the first six months of the year jumped 9 percent from the previous year, says a study from VentureOne and Ernst & Young.
That’s helped make jobs plentiful, parties lavish and tech entrepreneurship hip again.
“You can’t find anybody who doesn’t have a business plan sticking out of their pocket,” says Matt Marshall, editor of the VentureBeat blog.
But undermining the optimistic atmosphere is a huge question: How long can it last?
Many Mouths To Feed
Competition in some Internet markets — often referred to as Web 2.0 businesses — is intense. Marshall counts 34 new companies alone that want to serve one small niche: letting businesses and other groups build their own social-networking sites.
Even entrepreneurs say a bust could be looming. They’re just hoping to be among the survivors, or to cash out before the next crash.
“Our Realtor — the person who found us this office — is doing a start-up,” says Jangl CEO Michael Cerda. “Things need to get reeled in.”
The current Internet frenzy still doesn’t compare with the peaks reached in 2000. In the first six months of that year, companies raised $52.2 billion in venture capital, compared with $14.5 billion in the first six months of 2007, the VentureOne study says.
Relatively few start-ups have cashed out through initial public stock offerings this time. Only 152 companies have held IPOs this year, compared with 406 in all of 2000, says Renaissance Capital’s IPOhome.com.
But that may change soon, says Jim Chapman, a partner at the law firm Nixon Peabody. Interest in tech IPOs began to pick up about a year ago, and lots of deals are in the works, he says. Among those recently announced: credit site CreditCards.com; Classmates Media, parent of high school reunion site Classmates.com; and real estate site Iggys House.
The merger market is also strong, with deals such as Microsoft’s $6 billion acquisition of online advertising firm aQuantive in August making headlines. In the past month, Yahoo alone spent $350 million on e-mail site Zimbra and $300 million on ad firm BlueLithium. Intel spent an estimated $110 million to purchase Havok, a gaming software company.
Getting Their Start
Big IPOs and acquisitions made many entrepreneurs millionaires during the first boom, and that’s when many of today’s dot-com founders got their start. Take Jangl’s Cerda, who worked for several young computer-networking companies during the late 1990s and early 2000s.
After the market collapsed, Cerda consulted and ran a yoga studio. But the appeal of dot-coms was too great. He plunged back into the start-up world by helping found Ooma, an Internet telephone firm. After disagreements about business strategy, he left and co-founded Jangl in 2005.
Jangl is one of many companies that provide phone service that travels over the Internet instead of over a traditional phone line. There are several ways to do this. Companies such as Skype let people make calls via computer, using a headset. Others, such as Vonage, use phone adapters that connect to the Internet to complete a call.
Jangl targets a niche of this market by offering specialty calling services that use Internet technology to link traditional phones. One of these services provides customers with dummy phone numbers to give to potential dates and other strangers. Calls are transferred to the customer’s actual number using Internet calling technology.
Cerda initially raised $2 million to start Jangl, which he said was difficult. Since enthusiasm for start-ups has taken off, he later raised an additional $7 million with relative ease.
