The Internet is transforming the way vendors bring their goods to market, creating new opportunities for vendors to sell their goods with the advent of the dot-com. However, the press is abound with stories of the dot-com shakeout. It is predicted that three quarters of the dot-coms will cease to exist, either through consolidation or bankruptcy within five years, according to one venture capitalist.
Liquidation is a growth industry in the dot-com world.
Unfortunately for the vendor, liquidation of a dot-com yields little or no dividend on the vendor's unsecured claim. A dot-com rarely has tangible assets. With a dot-com, the slide into insolvency can be abrupt because of the lack of tangible and intangible assets, and the source of financing operations is usually limited. The vendor must be especially vigilant with a dot-com account, and be prepared to act when a red flag is identified. This is the amount by which a dot-com's expenses exceed its cash flow.