Cash problems for floated dot.coms

The research, commissioned by PricewaterhouseCoopers, will confirm fears that the sector has been spending money at such a high rate that many companies could run short of funds well before their proposed break-even points.

Troubled sports clothing e-tailer typifies the soaring cash burn rates of internet start-ups. The company is reported to be close to calling in receivers unless it can secure a further $30m in the next few days.

Despite raising about $120m last year, the company has had endless technical problems, been criticised for the complexity of its website and mocked for locating its customer support team on Carnaby Street.

Reflecting the problems now facing dot.coms, John Sodden, a partner at PwC, said: ‘Many of these companies have very little time left in which to start increasing revenue or to raise cash.’

In common with other analyses, PwC’s report forecasts that the UK internet sector is likely to consolidate significantly in the next year.

Driven by cash operating expenses exceeding profits, it is widely predicted that the efficiencies and revenue growth brought about by mergers will prove a lifeline for many dot.coms.

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