Martin Cowen – Only clever start-ups need apply

There is a new dot-com boom out there. Despite the credit crunch, venture capital investment in online start-ups is getting back to 2000 levels; the dot-com darlings who sold out are moving back in, anyone can make a mint with a blog and some adwords, the Skype is the limit, click here for more…

If you believe the hype, that is. Businesses have been starting up since the seed capital was, er, seeds.

There will always be individuals and companies willing to speculate to accumulate, whatever the economic conditions in play. Potential investors’ interest in businesses that will make them money is a constant in a market-driven global economy.

If there is a new dot-com boom out there, then online travel start-ups should be leading the charge.

Online travel businesses can be launched with relatively small amounts of start-up capital, affording some individuals the chance to have a better lifestyle than as part of some corporate machine.

But for big-scale investors, the online travel market is maturing. People who know what they are talking about insist that either scale or niche is the only way to succeed, as happens in any mature market.

And as a market matures, the scale gets bigger and the niche gets more defined and those in the middle get crushed.

But you need the funding to get the scale, while the niches get harder to find.

Throw into the mix the fact that when travel suppliers are operating on such razor-thin margins, the intermediary – be that an online travel agency, a vertical search operator or an affiliate-led Google real estate operator – will have to succeed on a share of that slither.

The reality of this so-called dot-com boom is that investors will always be interested in making money.

Travel is as big a global business as cars, oil and food so the investors will always listen to an idea that could give them access to this massive sector.

But the dynamics of any mature market is that start-ups need to be more clever, more realistic, more focused. The funding issue is almost an aside…

Martin Cowen is chief writer for Travolution

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