The Dot Com Bubble 

The Five years of Surplus Investments coupled with FOMO

1995 - 2000

Events that led to the Dotcom Bubble - Part I

The US economy (1991-1995) was witnessing a sluggish growth in wages and employement rate.

6th Aug 1991, Tim Berners Lee, Inventor of World Wide Web puts out the code on a discussion forum in a bid to make the internet a little more user fiendly.

Tim Berners Lee

In a few months, Mosaic averaged about 5000 downloads per month.  Several Companies licensed the browser to create their own commercial browsers.

By the year 1994-95, the following companies were established -

Mossaic Web Browser launched in Jan 1993 which was easy to use and had a graphical interface.

Events that led to the Dotcom Bubble - Part II

One Small Problem?

Well we can only imagine how frustrating the wait would have been!

The people using Mossaic Browser experienced long wait times and a blank screen while a webpage loaded.

Shares opened at $28 and reached $75 in a few hours.

Netscape Navigator launched Beta V1.1 of their web browser in March 1995, improving Mosaic's usability.

It solved Mosaic's problem by displaying webpages as they loaded. It was also made free for non-commercial use.

Due to its popularity, Netscape filed for IPO and went public on 9th August 1995

Events that led to the Dotcom Bubble - Part III

New Beginnings

Many companies start operations with their business model, based primarily out of a website.

Netscape's success in the stock market led to a change in the way people looked at Internet companies. The general consensus during 1996 - 2000 was that for an Internet company to survive and grow it should focus on expanding its customer base.

Tipping Point 

Reduction of Long Term Capital Gains tax in 1993 and a higher reduction in 1997 resulted in more investors willing to invest money.

Ease of raising venture funds coupled with profits from IPOs, fueled speculation and interest to invest in companies with “.com” as their suffix.

Unsettling Priorities

The Investors and Companies encountered huge losses in the short term but hoped to make profits in the long term. Many companies with no history, very low sales and almost nil profitability went public eying inflated valuations.

The New Internet Companies spent close to 90% of their capital on Marketing.

In 1999, 301 Tech Companies filed for IPO – out of which only 50 companies were actually profitable before going public.

Fun Facts

Nasdaq valued at 1000 points in 1995 sees a 5 fold increase. It reached an all time high of 5048 points on 10th March 2000.

Calm before the Storm

Factors that led to the Dot Com Bust - Part I

The US Federal Reserve increased Interest Rates 6 times between the second quarter of 1999 to second quarter of 2000. Sudden Change in market sentiment over the valuation of Stocks.


High borrowing costs of capital investment from Investors. Questions arise if a startup is even worth all this money.

Factors that led to the Dot Com Bust - Part II

March 2000, Japan's Nikkei Index fell below 12000 mark with real estate prices also plummeting by 60%


The News sparks fears that a slowdown in demand could crimp earnings.

According to American Electronics Association- US Technology Companies exported 16B USD  in goods to Japan in 1999.

March 13th 2000, Japan announces they are in recession , panic selling of US Tech Stocks begin!

Factors that led to the Dot Com Bust - Part III

Many studies emerge about the "Burn Rate" of Internet Companies


Investor confidence reduces, selling of stocks continue.

March 20th 2000, Study conducted for Barron's indicate that at least 51 Internet companies will burn through their cash reserves within the next 12 months.

Factors that led to the Dot Com Bust - Part IV

September 11th 2000, Twin Tower Terrorist attacks


Significant economic damage - NASDAQ closes for 6 days.  The negative outlook towards the stock market continues for a whole month after this tragic event.


With Investors pulling out all their money, companies were forced to scale down their operations as the demand for their services fell. Companies with flawed business models had to shut shop as they could not survive without Investors money. NASDAQ fell 78% from its peak to 1114 points Stocks lost 5 Trillion USD in market captalization.

Companies that deserve a notable mention 

Business Model - Sold Pet Supplies and accessories online.  Money Spent -  Burnt $ 300M of Investors money on advertisments Status - Filed for Bannkrupty in Nov 2000. Sold their domain name to PetSmart and the famous mascot - Sock Puppet sold to a company that sells automotive loans.

Companies that deserve a notable mention


Business Model - Delivered groceries to customers' home with 30mins of ordering. Money Spent -  Spent a little over $ 800M of Investors money on rapid expansion. Status - Filed for Bankrupty in June 2001 and shut down. Revival - 12 years later, Amazon launched AmazonFresh and hired 4 key executives from Webvan to avoid the mistakes that Webvan did.  Amazon also acquired Kiva Systems which was developed using the technologies from Webvan.

Companies that deserve a notable mention

Business Model - Global Online Fashion Store Money Spent -  Spent $135M on marketing in 18 months Status - Filed for Bankrupty in May 2000. Less than $2M recouped from the sale of its remaining assets.