Have major corporates missed the new economy investment boat?
Absolutely not.

Major corporates versus start-ups
Activity in eBusiness has typically been pitched as a battle between 'old economy' corporates and 'new economy' start-ups. So who's winning? Can they both win? Large corporates have often seemed sluggish compared to the nimble young businesses that first grasped new economy opportunities. But now they are fighting back.

Compared to the dot.com new kids on the block, major corporates have several strategic advantages. Andersen's survey of more than one hundred UK senior executives highlighted a few of those advantages.

• Brand: "Off-line companies already have developed brands. Internet start-ups don't."
• Established market positions: "(Traditional companies)... have the ability to deliver. And they have the experience in this market."
• Robust supply chains: "There is no infrastructure if you set up online from scratch. There would be problems that are simple to deal with for traditional businesses, eg returned products, that might be more complex for online companies."

But these strategic advantages do not mean that major corporates can afford to ignore the new economy. For quite a while, major corporates did lag in new economy investment. Now, however, many have established new economy strategies - and they have access to funds.

They are now in a position where they want to and are able to invest.

3. Spin off new economy businesses
In addition to major corporates investing in and buying new economy businesses, anticipate them spinning off new economy businesses as well. Why?

• Large corporates have trading histories and financial results to defend. The deep initial losses and negative cash flows associated with developing a new economy business can be avoided or mitigated by spinning it off.
• The spin-offs provide a culture and reward environment that is particularly attractive to hot talent (eg Dixons' spin off of freeserve, in which it still holds an 80 percent stake).
• The independent new economy business provides a 'pure play', which investors can evaluate more effectively and, in some cases, assign a higher value. The end result is that the business gains access to cheaper fund

The best of both worlds
An ideal marriage brings together major corporate backing with dot.com savoir faire. It goes without saying that dot.coms with a viable revenue model, in-house talent and a progressive culture bring a lot to the new economy table. Those which are well-versed in exploiting a wired economy - people skills, experience base, speed-to-market mentality - offer a great deal to major corporates who may only, as yet, aspire to having them.

Conversely, in their early stages, most dot.com businesses have inadequate cash flow... often none for the initial period. The reality is that dot.coms will struggle to gain support for additional funding from VCs in the next year. If VC support is not forthcoming, their likely alternatives will be to seek a corporate investor, sell or fold. Scaling back is not an option, as their revenue base is typically inadequate. Major corporate backers can provide more than cash... they can help online start-ups achieve the key criteria for success:

• First-to-market. There has been a great deal of press on the advantages of a first mover strategy. The first entrant into a new market establishes itself quickly, becomes well known, and establishes a virtuous circle of a growing brand, customer base and revenue stream. This attracts cheaper funds and bigger scale investment. This, then, makes it even more attractive to customers, improves the brand, etc. In short, the first mover 'mops up' the whole market. Then momentum simply sustains and strengthens their lead.

• First-to-scale. The first mover story has clearly been discredited as the sole criterion for success - it does not guarantee 'first to scale'. A bricks & mortar brand and an efficient supply chain may prove invaluable. It's not uncommon to see online businesses now acquiring off-line businesses. A good example of such a deal was eBookers' acquisition of Flight-bookers for $15 million in October 2000. Flight-bookers handles most of the online company's UK travel services. The deal eliminated the margin that eBookers paid to Flight-bookers and brought in its 200,000 plus customer list.
  

From bricks & mortars to 'bricks & clicks': be prepared To fund rapid growth, you need cash. You also need focus.

• Clarify the likely impact of the new economy on your business. Assess the relevance of your existing revenue model and business processes in this new landscape.
  
  
• Finalise your eBusiness strategy, allowing for future evolution of the new economy. It may not be possible to migrate your prior competitive advantage to future economic scenarios.
  
  
• Know what type of online business is most compatible with your vision, culture and goals.
  
  
• Evaluate your 'buy or build' options in terms of feasibility, cost and time.
  
  
• If you decide to acquire a new economy business, get ready to act quickly. Once a dot.com looks to alternative funding sources, they won't be available for long. For example, after the failure of boo.com, Bright Station plc moved quickly to snap up boo.com's technology and web site development for Ј250,000. This appears to be a cheap acquisition, given the reputed Ј20 million that boo.com spent in developing this technology.
  
  
• Approach new economy businesses to establish effective partnerships before they suffer funding pressure and their risk profile increases.
  

Get ready... get set...
Whether you invest, buy or build, if you are an established bricks & mortar company moving online, you will need to be proactive and move fast. Otherwise, you could be left watching your competitors seize the best opportunities.