Return to search falls in second-round rout

Unable to convince investors it had a future, management yesterday called in the liquidators.

Another search-in-vain for second-round funding; another dotcom dream brought to a premature end. This time it was London-based Internet news and information service that yesterday was forced to tell the world, including via its own website, that it had called in the liquidators after failing to convince investors it deserved a required cash injection.

Like, the online clothes retailer that flamed out last week, could not persuade its original backers – investment and research firm Durlacher and Internet incubator – that it was an investment worth persisting with, despite having met all performance targets set for it.

And Boo and Netimperative are unlikely to be alone in suffering “second round routs”, with venture capitalists predicting the shakeout among dotcoms to continue over the coming months. Apax Partners' Max Burger-Calderon predicts that all but the most successful start-ups should expect a tough inquisition from investors once they burn up their seed and first rounds of funding and approach them for more. He cites the E898m poured into Internet-related investments last year, up from E52m in 1998, as an indicator of the scale of the shakeout ahead.

Some observers are also think the shakeout will be exacerbated by European venture capitalists themselves, who appear less willing than their US equivalents to accept the rate at which Internet start-up companies burn capital. If this borne out over the next few months, it could lead to Europe's new economy being dominated by clicks-and-bricks operations, shutting out the new businesses that give the US scene such dynamism.