The dark clouds that have settled over the dotcom economy show few signs of lifting soon, promising workers a gloomy short-term outlook dominated by high pressure and violent storms. The vibrant atmosphere of early last year has disappeared as the business-to-consumer sector in particular has suffered a series of body blows, from the loss of market confidence to the slowing US economy and downturn in advertising sales.

Employees of publicly quoted companies have seen their stock options plummet in value, while those in venture capital-funded groups can only watch and hope as their companies run out of cash and compete for increasingly scarce sources.

When Boo.com closed its doors in May 2000, its management was derided for its lack of financial nous. But now even companies that have spent wisely are feeling the pinch and the sector has seen several high-profile closures. Maintaining staff morale in these circumstances is a difficult task. A quick visit to one of a number of finance discussion boards - such as www.FuckedCompany.com or www.Vault.com - reveals how many in the industry are fearful for their jobs.

Robert Bonnier, chief executive of Scoot, the online directory and classifieds service that has been at the centre of acquisition speculation, admits the going is tough but says people should recognise they are working in extreme times. "People do look at the share price and think perhaps I can repay my mortgage', and suddenly they can't do that anymore," he says. "But you have to make people conscious that the pendulum goes to the right and then the left, and at the moment it is at the extreme left, and one day hopefully it goes to the middle."

Mr Bonnier says management must take responsibility for maintaining staff morale. "You need to deal with morale hands on as management," he says. "It starts with you, it finishes with you and you have to set an example."

Mr Bonnier believes too many people joined dotcoms because they thought it was a get-rich-quick opportunity. "People come because they believe in what you are doing, and if you set those parameters right from the outset that is better than people saying I'm coming to make £1m (e1.6m) in the next year'," he says.

The experience of Yvonne Ryan, who lost her job as a page editor on eCountries.com when the professional services and publishing company ran out of money in February, suggests that management sensitivity is crucial.

Fluctuating performance

"The week before the axe fell we'd gone out for a curry at lunchtime and created a disaster scenario predicated simply on the fact that the boss didn't come and speak to us when he said he would one day," she says. "In a roomful of journalists that can only mean one thing." The performance of the site was also an important factor as morale fluctuated in direct proportion to site traffic. "The big factor was the viewer stats that we would get, sometimes there would be a little peak, which had the same effect on morale, others it would flatten out again," says Ms Ryan.

Despite developing an excellent reputation for its editorial content, however, eCountries could not generate enough revenues and folded.

Ms Ryan takes a phlegmatic view of her situation, and does not regret joining a start-up. "It felt like being one of 50 parents of the same toddler. In a way, I feel I have earned my dotcom stripes now I have been involved in a failed venture," she says.

Ms Ryan's undiminished enthusiasm for the dotcom world is reflected in

the views of a sales director, who wishes to remain nameless, in a UK online publishing group. "I find it an incredibly exciting, innovative and creative environment to work in, and could never go back to a traditional media company," he says. "The newness of it all hasn't really worn off and keeps us going. That and the fact we are passionate and ambitious people who want to do things well." Which is not to say that everything is rosy at the company. There is uncertainty as employees feel they are not being told how the company is performing. "We are not kept informed and so we find out from asking other people or reading about it, or eventually you just have to grab someone and demand to know what is going on," says the sales director.

Back in the boardroom, Brent Hoberman, co-founder and chief executive of Lastminute.com, uses the negative media publicity surrounding his company and its plummeting share price as a motivation. "The issue of being the underdog and proving people wrong is a motivation for us," he says. "It's good to be with people who share a common vision when others don't. For people inside the excitement is seeing the improvement in the company every day."

Few companies have experienced the glare of the spotlight more than Lastminute. In March last year, when the company floated, the media created stars out of Mr Hoberman and his co-founder, Martha Lane Fox. Coverage since has become less flattering, with questions asked over the price the company floated at, as well as its business model. "The press is doing its best to make e-commerce unfashionable but it would grow faster if it had the aura it had last year," says Mr Hoberman, adding that a company like Lastminute must be pragmatic about the publicity and take the rough with the smooth. "I'll get worried if I look at yesterday's sales figures and see things have got bad. What is exciting is seeing we had x customers yesterday and knowing we will get better than that at the end of the year," he says.

For many start-ups, simply existing at the end of the year would be an achievement in itself. For their employees, that means more nervous times gazing into the future or watching a share price to work out whether this year's holiday is in Mauritius or the back garden.

ben.hunt@ft.com