- 3 - The Lifecycle of B2B Portals: We are at the Second Stage Mario Caputi, Sept 2000 © 2001 Sixhills Consulting Ltd & Author Another key success factor is the availability of funding. VC funding has dried up and this has led to the death of many start-ups and hence the shift to the second stage of the lifecycle given the fact that BAM’s have far greater access to internal funds and resources. There are two main causes for the drying up of VC funding:  Reducing rates of return: VCs always look for high rates of return on their investment, from a financial more than an industrial perspective. Since many start-ups have not been able to reflect these target rates there has been a dramatic reduction of funds at their disposal. Many have died, others have been sold.  Longer breakeven periods: The VC’s usual goal is to find a new market, invest rapidly in it and sell out quickly achieving high rates of return in a short period of time. They are hence wary now of investing in start-up business models where the competition is increasingly high and the market exceedingly crowded. The engineering and construction industry is a valid example of the second stage of the lifecycle of B2B portals. In Europe there are over 20 portals catering to this industry including AECVentures, E*difica and Globoworks all of which have no venture capital in their equity structures. These portals are talking with each other to partner and concentrate their liquidity in the pursuit of critical mass. Should they succeed, which VC would be willing to touch a young Harvard like team of e-capitalists wanting to build a B2B portal in the E&C arena? Whose transactions would these platforms intermediate? How expensive would it be to find users? A similar proliferation of BAM owned B2B exchanges is now being noticed in other major industries. Examples include Transora.com and CPGMarket.com in the FMCG industry, Covisint (created by the consolidation of AutoXchange and TradeXchange among others) in the automobiles industry and Levelseas.com in the petrochemicals industry. Now that the dotcoms are starved of funds and way short of getting anywhere near critical mass, the corporate BAM’s have the upper hand. The winners will be those corporate players who can make bold decisions rapidly leveraging their key assets, resources and relationships. The key question then is – will the market for B2B portals and exchanges stabilise at the second stage or is there another evolutionary wave in the offing and if so then what are the changes it will bring with it? Mario Caputi, Sept 2000
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