Section E: Top of the Dot.Coms - Venture capitalists continue to demonstrate their faith with hard cash for internet start-ups, in spite of the absence of really hard results. Bain & Company reviews the UK's top 25

Section E: Top of the Dot.Coms - Venture capitalists continue to demonstrate their faith with hard cash for internet start-ups, in spite of the absence of really hard results. Bain & Company reviews the UK's top 25 - The most heartening discovery abou

Last Updated: 31 Aug 2010

The most heartening discovery about the second Management Today/Bain e25 is that it bears any resemblance whatsoever to the first, published in November 1999. Sceptics suggested that such was the volatile, immature nature of the e-commerce business, our league table would comprise an erratic, topsy-turvy list of shooting stars, flame-outs and one-hit wonders. This has not proved so. Only three companies have dropped out and the top 10 has three new entrants - a similar movement to the football Premiership.

Before looking at the results, it is worth mentioning the purpose of the e25. We have attempted to measure, firstly, the power of the idea: the three criteria are business fundamentals, execution and innovation, and each is assessed from a broad range of material, including interviews with the management.

Second, we have evaluated success by giving scores for funding, e-activity and fame.

A reminder about what the e25 is not: our decision from the beginning was that the league table should consist only of pure UK internet start-ups. So we have not allowed in the bricks-and-mortar likes of Tesco and Freeserve, the latter being more than half owned by Dixons (and how vital it is now to that company's value).

Our estimation is that 85% of the 25 - the exceptions being gameplay and netbenefit - make no profit whatsoever. The burn-rate at the bigger enterprises, such as, is millions each week, but this no longer raises eyebrows. Not making any money for the forseeable future is now an accepted way of life in e-commerce.

Gerry Mulvin, Partner in charge of e-commerce practice at Bain & Co keeps a watchful eye on the changing fortunes of's and has been eagerly awaiting the new e25. He observes, 'In the early days market success can snowball but so can failure. The most recent version of the e25 illustrates this - with a couple of emerging leaders and some pretty hard fallers.

'There has been a huge amount of new start-up activity since last November - some of these recent start-ups will eventually break into the e25 but most will fail. There is still room for innovative, exciting new start-ups, but it is getting harder - the incumbent start-ups are getting stronger and more professional, and the bricks-and-mortar corporates are also getting their acts together.'

On to our winner, and we have a new number one: QXL, which has tipped off the perch. It was a close-run thing, but QXL's IPO last autumn was the decisive factor - it is now capitalised at an extraordinary pounds 1.7 billion. On funding, e-activity and fame, the company is some way ahead of - which expects to IPO within the next few months - although on business fundamentals, execution and innovation, it scores below its rival.

The important factor about QXL is that it works; the site is generally easy to navigate and operationally straightforward. Twenty million pages were downloaded in December 1999, the roll-out across Europe is continuing and goods get delivered on time - the first delivery company was fired in favour of Securicor. With Jim Rose (see profile on page 17) at its head, QXL has a heavyweight manager who knows how to gets things done.

E-commerce may have its eyes turned skyward, but it must keep its feet on the ground and remember the basic rules about selling. It will be interesting to see if QXL has maintained its position in three months' time.

More generally, it is clear that and QXL are now moving away from the following pack and stand out there alone as leaders. It could well be that in four years' time, barring disaster, this pair will have become the first true e-blue-chip companies.


There are three new entrants into the top 10. First is freecom, which has come from nowhere to number eight. Freecom provides small to medium-sized retailers with a one-stop service to create, run and manage a shop on the net. It was founded back in 1990 specialising in video and multimedia products, but began concentrating on the net three years ago. It does not score high for innovation/sizzle, but it has classic 'first-mover advantage' - it moved quickly and achieved an IPO last November. The share price soon more than doubled from an initial offer figure of 130p, valuing the company at pounds 49 million.

Ernesto Schmitt's peoplesound has made steady progress, rising eight places to number three. Music and the net are becoming closely entwined, as the mergers between Time Warner, AOL and EMI have shown, and Schmitt's clever idea of bringing musicians, consumers, recording industry personnel and media folk together in a radical way scores the highest innovation figure of all.

WGSN is the other new entrant, rising from 16th to seventh position as a result of strong growth in both revenue and page impressions. In a fickle industry such as fashion, which traditionally has been woefully short of data, the need to be one step ahead of the opposition is vital.


Since the first e25, has had an unhappy time and as a result has slid from ninth to 24th position. It was launched finally in November, but has been dogged with now notorious technical problems due to the technological sophistication of its site software. Punters did not come flocking and if they did they could not get in; by late January a 40% across-the-board sale was in action, along with a wave of redundancies.

As the ugly spectator sport of boo-baiting and bashing both inside and outside the industry has shown, it is vital to deliver what you promise. Our 'Cybershopper' column shows that boo can execute and deliver the goods on time, but actually making a purchase can be maddeningly long-winded.

However, there is much to be admired about - the site is sexy and an attractive place to browse. It understands the value of branding and wants people to be associated with boo, to wear it as a badge. QXL may be efficient and functional, but it is not hip. QXL is Exchange & Mart to boo's would-be The Face.

The founders have looked shell-shocked on public appearances recently.

They should not lose heart; nobody should ever have suggested that in this brave new world making a fast buck was going to be easy.

Other fallers include virtualinternet, nCipher and icollector, all of which ran out of steam in the fame category. As for zygon, iOra and mediasurface, they have dropped out of the e25 into the First Division. We look forward to welcoming them back before long.

< COMPANY FOUNDERS CONCEPT INNOVATION EXECUTION 1 auctions Tim Jackson 13.0 5.0 13.5 2 Brent Hoberman, late bookings Martha Lane Fox 16.0 8.0 15.0 3= games Dylan Wilk 14.0 8.0 13.5 3= music Ernesto Schmitt 18.0 9.5 14.0 5 Mark Blandford, gambling Geoffrey Wilkensen 13.0 5.0 16.0 6 Geoffrey Rubins, callbacks John Burnett, David Rothschild 13.0 7.0 14.5 7 fashion Julian Worth, infomediary Marc Worth 13.0 5.0 13.0 8 e-tail Michael Williams, software Caroline Williams 13.0 4.0 11.0 9 Jonathan Robinson, e-solutions Keith Young, Larry Bloch 12.5 5.0 15.0 10 James Corsellis, collectibles Simon Montford 15.0 9.0 13.0 11 data software Charles Muirhead 13.0 6.0 13.0 12 Internet Exchange Robert Proctor, net cafes Simon Henderson 15.0 8.0 13.5 13 Sportal (pangolin) sports portal Rob Hersov 12.0 5.0 11.0 14 Rouzbeh Pirouz, online tenders Alexander Straub 16.0 6.0 14.0 15 David Lethbridge, weddings Andrew Doe 15.0 7.0 13.0 16 Eric Vanderkleij, callbacks J Martin Walker 13.5 7.0 11.0 17 virtualinternet web hosting Jason Drummond 12.5 5.5 14.0 18 net strategy Jeremy White 12.0 5.0 13.0 19 handheld technology Andrew Foyle 14.5 7.0 14.0 20 e-marketing Richard Watney 13.0 6.0 13.0 21 Alex von Someren, encryption Nicko von Someren 12.0 7.0 14.0 22 Paul Barry-Walsh, data backup Geoff Maynard 14.0 7.0 13.0 23 Bob Jones, net access John Sunners, Andrew Hurdle, Keith Baker 14.0 6.0 14.0 24= Kajsa Leander, sportswear Ernst Malmsten, Patrik Hedelin 12.5 8.0 7.0 24= software/ games e-tailer Steve Bennett 11.0 4.0 10.0 COMPANY TRAFFIC FINANCING PROFILE SCORE PREVIOUS 1 auctions 20.0 20.0 10.0 81.5 2 2 late bookings 16.0 12.0 10.0 77.0 1 3= games 4.0 18.0 10.0 67.5 5 3= music 8.0 10.0 8.0 67.5 11 5 gambling 12.0 12.0 8.0 66.0 6 6 callbacks 11.1 12.0 8.0 65.6 3 7 fashion infomediary 20.0 10.0 4.0 65.0 16 8 e-tail software 10.9 16.0 10.0 64.9 - 9 e-solutions 6.0 16.0 10.0 64.5 10 10 collectibles 10.0 10.0 6.0 63.0 - 11 data software 8.7 14.0 8.0 62.7 15 12 Internet Exchange net cafes 8.0 10.0 8.0 62.5 13 13 Sportal (pangolin) sports portal 12.0 16.0 6.0 62.0 25 14 online tenders 13.4 8.0 4.0 61.4 18 15 weddings 10.0 10.0 6.0 61.0 - 16 callbacks 16.4 10.0 2.0 59.9 8 17 virtualinternet web hosting 5.6 16.0 6.0 59.6 7 18 net strategy 17.0 8.0 4.0 59.0 12 19 handheld technology 11.1 10.0 2.0 58.6 20 20 e-marketing 11.2 10.0 4.0 57.2 - 21 encryption 14.0 8.0 2.0 57.0 14 22 data backup 12.8 6.0 4.0 56.8 17 23 net access 11.1 8.0 2.0 55.1 19 24= sportswear 12.0 14.0 2.0 55.0 9 24= software/ games e-tailer 18.0 6.0 6.0 55.0 - Scoring: Total possible score 100 (Innovation + Profile scored out of 10, other categories out of 20). Data Correct January 2000.

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