The Dot-Coms' Salad Days Are Over

It is getting harder and harder to start a Net venture from scratch -- and the trader is mighty relieved.
Author:
Publish date:

In order for Net companies to become investable again -- instead of just tradeable as they have been since the

DOT

topped out earlier this spring -- we have to have dot-com projects on the drawing board get killed. That can only happen if the venture capitalists get antsy and the entrepreneurs get so nervous that they decide to keep their day jobs.

We got some good news this week on both fronts. First, we saw the unwinding of

Toys R Us

(TOY)

, which had been rumored to be making a

barnesandnoble.com

(BNBN)

type of spinoff of its e-tailer sometime between now and Christmas. These kinds of derivative dot-coms are killer because they raise a lot of money and can destroy whatever else might be out there. The resignation of Toys' Nakasone shows me that these guys are in too much disarray to create something that could hurt an

eToys

(ETYS)

. I am sure the eToys folks are feeling good at the dimming of all TOY prospects.

Secondly, in the business that

TheStreet.com

(TSCM)

resides in, the financial information dot-com sector, we got some long awaited news that shows me that the investable nature of this segment may be coming back. In Beth Piskora's excellent column, "Bull's Eye, in this Sunday's

New York Post

, (a must-read business section available online for nothing) she reports about the demise of a potential competitor to the

FT.com

. It seems some enterprising reporters and editors had planned to start a totally online rival, which would compete for "top-end investors and professionals." The journalists would have gotten equity (this all must sound very familiar to those who helped start

TheStreet.com

).

The

NY Post

report says that

FT

Editor Richard Lambert is breathing easier because of the premature demise of this potential dot-com. But in truth it is guys like me who are breathing the true sigh of relief. As long as every good writer or editor figures that she could go start a dot-com and compete against us with venture capital funding,

TheStreet.com

was threatened. When we started this thing we did not envision going up against a gazillion other people doing what we were doing. We knew we couldn't make it if they did.

As long as the stock market for this segment stayed hot, we were vulnerable to the top people at

CNBC

or

Dow Jones

or the

Financial Times

or

Bloomberg

departing these firms and getting big funding to go against us. But this failure of the anti-

FT

to get off the ground says the window is being nailed shut for people wanting to come into this space. If the once-renegade

FT

people, without a competitor in the U.K., can't swing it, how could the bigger names at the U.S. media outlets get any funding? I don't even think

Lou Dobbs

could get funding if he wanted to switch

Space.com

into a site about business, let alone an important cog at the

Wall Street Journal

or another important business television show. The venture capitalists now know it is too risky and would cost too much to start from scratch, especially when they tried to cash out and the stock market said "NO WAY." They will thumb their noses at any popular biz/fin journalists looking to go up against the big guys.

Did you hear that sigh? That was from me saying, it is about time that bankers and journalists became realistic about how much it would cost now to start a new dot-com from scratch in the media. No one who does it now is ever going to get a free pass again from the rest of the media. Every bit of publicity is going to have to be paid for.

That's too daunting for just about everybody, but particularly for those who have nice safe day jobs and were on the fence whether to take the plunge.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, Cramer was long TheStreet.com. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.