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about Asia Buzz
Asia Buzz: Last Supper
The Asian Internet boom runs the risk of being over before it really began
By ERIC ELLIS
May
16, 2000
Web posted at 3:00 p.m. Hong Kong time, 3:00 a.m. EDT
The moment of truth is arriving on the Asian Internet scene. These are the times when the dreaded term "burn rate" starts to take on particular resonance.
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 ASIAWEEK
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So far, the Internet has been a bit of fun. You've read the stories: funky kids armed with designer clothes and a foreign degree come back home and set up websites. Jargon spouts from young mouths in copious amounts. Lavish parties are thrown in groovy bars. Beautiful people dressed in black drape themselves around computers. Photos are taken, hype is generated and, bingo, you're a dotcom tycoon.
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It's a bit like being a rock star. It's easy and best of all when you are in your early 20s, it's cool. Hey, no one said anything about actually running a business. That's something Daddy did, so you could go to Stanford.
That's a bit what it was like until two months ago. But enter the reality check. The corporate bank account (that's right, the company's, not yours) is suddenly rather smaller than it was. That $20 million you and your colleagues raised from your rich Stanford friends' fathers is starting to look a little thin. And there's not much coming in the front door. The unwelcome phone call from the accountant tells you you've only got three months life at best if you continue to burn money at this rate. Perhaps you should be staying at the YMCA, instead of the Ritz-Carlton, the next time you are in Hong Kong (perish the thought, you think to yourself).
Burn rate is an Internet killer and venture capitalists' patience is no longer the same as it was three months ago. Dotcoms are starting to hurt. I know of at least five companies in Singapore and Hong Kong that are knocking on heaven's door, their principals rather less accessible today than they were when they wanted free press. Yesterday's cool idea is today's absurdity. That's because the questions journalists ask them today are a little more discomfiting than the upbeat ones six months ago.
We've had a bit of a window on that already with the performance (if you can call it that) of the hugely hyped Tom.com and Hongkong.com, both of which reported their results this past week. Tom.com posted a loss of $5.83 million in the first quarter of the year. Turnover was just $94,580. That's right, less than $100K. It was a similar story at Hongkong.com, where the loss came in at $1.46 million in the March quarter.
With numbers like that, there is little point even documenting the companies' operations. The numbers are what analysts and journalists call "Mickey Mouse," so insignificant as to not bother with them. The only reason we are doing so is because of the hype that has been generated around them.
O.K., so Li Ka-shing, the billionaire behind Tom.com, probably has a bigger burn-rate threshold than your average VC, but he's not running a charity either. Indeed, it was painful to watch Tom.com's bosses Frank Sixt and Carl Chang explaining to the media how their business was performing. Everything was "under development this, next quarter that." They seemed to me to be singing for their proverbial supper. I wondered if they'll be around in a year's time.
The question we ask ourselves is how long faith and belief can be suspended. It's about 6 to 9 months into the Asian Internet boom and so far it runs the risk of being over before it really began. Twelve months is about when burn rate starts to flame companies out. Expect more bonfires to come.
Eric Ellis is the Southeast Asia and technology editor of web-based finance portal AsiaWise.com
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