E-Commerce Times Talkback
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At mid-year, in terms of dollars and number of deals made, venture capital funding for
U.S. investments was less than half of what it was in 2000, according to VentureWire,
which tracks private equity investment. Even so, the high-tech desert has more than
one venture capital oasis.
In this article, the second of a multi-part series, the E-Commerce Times takes a look at
another e-commerce sector that is getting VC funding: online stores aimed at consumers
with the disposable income to buy the high-end products they want -- but do not
necessarily need. In a word, luxury.
venture capital concept is created to groom the rare breed of entrepreneurs world over. The rich benefits can be reaped when the grooming of the enterprising youngster is done through mentoring.
Back in 1999 when I was seeking venture funding, VCs tried to tell me the rules we learn in business school don't apply to the new economy. I turned down the money.
Choosing luxury products/services that are rare with high margins is one of the first lessons in Marketing 101. This is a strategy for launching a new business or product line that has been proven successful for hundreds of years. It doesn't surprise me VCs are interested in this area of e-tailing. Anyone with a degree in business should already know this. It's companies like Amazon that buck conventional knowledge by selling commodity items with low margins and requiring extensive marketing budgets that were a surprise when they succeeded.
Hign margins do not insure sucess in e-commerce. Until sites become more consumer friendly and high speed internet connections becomes more commonly available, even luxury merchandise e-tailers may not survive. Also, at this point, it is not know whether Amazon will ever show a profit. Remember, e-commerce it is nothing more than electronic mail order.