Venture Failure and the Timing of Telecommunications Reform
Chapter 8: Conclusion: The Timing of Policy Reform and Internet Entrepreneurship in Europe
From its launch in 1997, the Frankfurt technology stock exchange Neuer Markt developed spectacularly. Many Europeans thought that a new era of entrepreneurship had dawned. Following the severe downturn in the Spring of 2000, however, the search for blame began. Investment banks, which had carried out the initial public oﬀerings (IPOs), were faulted for a lack of research and unreasonably high initial enterprise valuations.1 Several fund analysts, previously the stars of the Neuer Markt, were ﬁred. The Frankfurt exchange itself was criticized for its lax standards. Venture capitalists were blamed for ﬁnancing ‘me too’ concepts and pushing entrepreneurs too early into a stock market listing. Finally, the entrepreneurs themselves were faulted for their gold digger’s mentality. Insider dealing investigations and other reported criminal activities by the management of listed companies conﬁrmed these suspicions. The Frankfurt ‘nightmare’ exchange, as it came to be known,2 went through the most exaggerated cycle of the European exchanges. As a result, the reaction to the internet bubble was stronger in Germany than in other European countries. Elsewhere, however, the search for blame was also focused on the ﬁnancial players and the entrepreneurs themselves. Although this search for blame revealed some weaknesses of the ﬁnancial system in Europe and the inexperience of participants within this system, important aspects of the downturn were not the subject of public commentary. Underlying policy determinants were not cited as having contributed to weak domestic entrepreneurship. Moreover, the downturn in the technology stock markets was not limited to...
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