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The Dotcom Bubble Explained In A Nutshell

If you hired a Republic web design company Kuala Lumpur to build your website in the 90s, chances are that you are the owner of a company looking to launch itself to the public as a new dotcom company, even though your business plans aren’t fully realized yet. A big mistake, as you will see at the end of the decade.

The Internet wasn’t really an infant in the 90s, but when it was commercialized, businesses jumped into the opportunity like rabbits and were so eager in taking pieces of the pie that when the bubble finally burst, many fell back into the earth like raining bodies.

The climb

From 1995 to around 2001, internet-based companies emerged on the Internet and got themselves funded through venture capitalist firms, lenders and investors. The excitement of a new, “revolutionary” internet age fueled the hypetrain among investors and many poured money into Internet startups, hoping to profit from them.

This period is proof that careless investing is already a thing before communities like the subreddit r/wallstreetbets even exist. Rather than sticking to investing fundamentals, a lot tossed that book out of the window and eventually themselves through the computer terminals. Pure speculations are one of the reasons why the bubble happened.

Investors would throw their money like frisbees based on the wrong factors such as website traffic. The fire was stoked further when the media jumped into the bandwagon and told the public to invest in startup dotcom companies. FOMO grew like a behemoth as the gold rush kept the bubble afloat and expanding.

Low interest rates also made speculative investments very attractive in addition to cheap funds and fewer barriers in acquiring money to invest. 

If you want an easy comparison, cryptocurrencies are popular among investors because the trading commision fees of many trading applications are little to non-existent. With that advantage, you can already pool so much of your money in crypto, contributing to the bull frenzy.

Besides, many dotcom companies did not have sufficient business plans or cash flow managements, yet they still held initial public offerings (IPO) when demands increased. The high multipliers used on tech company valuations also resulted in values that are too bullish, making said companies overvalued as a final result.

The fall

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As the pinnacle of greed reached its peak the bubble can no longer be sustained by excess investments, it finally burst at the end of the 90s. The inevitable market crash caused many investors to panic sell and is further exacerbated by lower demands and more restrictions in investing. 

In the technology sector, your ears may already be bleeding from hearing so many bosses telling their employees that they are laid off. Many dotcom companies were pushed to the cliffs of bankruptcy or acquired by other companies. This was more guaranteed when they did not have a concrete business plan to begin with.

Despite the grim period, there are big tech companies that survived through the crash and thrived as we know it today, even when they still lost a lot of their shares. Some names that you may have already heard of include Amazon, Adobe Systems, Moonpig, Oracle, eBay, IBM and a few others.

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