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Webvan: The dotcom bubble’s biggest bust
- faangiq 3y agoThey should have just raised a series J.
- deleted 3y ago[deleted]
- pavlov 3y agoRaising money after IPO is pretty different because there’s no fantasy element to valuation. Public companies can raise money by selling shares in a registered direct offering, or doing a PIPE (private investment in public equity). They can even register to sell new shares directly on the market (called ATM). But if there are not enough buyers, it doesn’t help to keep printing shares.
- gleenn 3y agoDefinitely interesting TFa points out that Amazon was one of the biggest benefactors from Webvan because they learned from their mistakes and even got people and robot tech later from it.
- addisonl 3y ago> The biggest beneficiary of Webvan’s failure was Amazon.com. Not only did the company learn from the mistakes made by Webvan, but it also hired former Webvan executives to launch its own grocery delivery service: Amazon Fresh. Further, in 2012, Amazon bought KIVA Systems, a company that developed the robotic technology initially used in Webvan distribution facilities, for $775 million. Amazon even owns the domain webvan.com. Never heard of this company before but found this very interesting. Good read.
- deleted 3y ago[deleted]
- fowkswe 3y agoThey used to deliver your groceries in these (https://en.wikipedia.org/wiki/Webvan#/media/File:Webvan_tubs.png https://en.wikipedia.org/wiki/Webvan#/media/File:Webvan_tubs...) tubs, leaving the tub with you. You were free to keep them if you wanted. I had several for years which served as the best moving boxes I've ever had. kozmo.com (https://en.wikipedia.org/wiki/Kozmo.com https://en.wikipedia.org/wiki/Kozmo.com) was another one that was ahead of its time.
- MrFots 3y ago[dead]
- threeio 3y agoI've got my Kozmo bag around here somewhere... used it as my work bag for ages.
- fowkswe 3y agoThey are going for some serious coin on ebay!
- dustincoates 3y agoWere they really? I got mine at a sharp discount online and kept it for over a decade before finally tossing it. I grew up in a small town, and Kozmo epitomized for me both big cities and the Internet. It's a large reason why I'm working in the space now.
- bicx 3y agoThose are really nice tubs to just give away to customers. Worked out well for you though!
- a5seo 3y agoThey cost $50-70 each on Amazon or ULine. Awesome for stackable storage. With some plywood and casters, you can easily stack 6-8 tall in the garage and move them around with ease. Highly recommend.
- fuzzieozzie 3y agoIn 2000 I lived in an apartment block in San Francisco. There were SIX WebVan delivery trucks pulled up out front making deliveries at the same time to different people. It was clear they had not even started to generate the efficiencies they needed to succeed in that business. Of course if they could have raised money like Uber has then .....
- Animats 3y agoWebvan was pushed into too many markets by their VCs. They had 3% market share in 30 cities, but needed 30% market share in 3 cities to be profitable. With customers too spread out, delivery gets too expensive. It was a good idea with a bad growth strategy.
- mergy 3y agoI loved Webvan and when they failed, I think the company I was working for was able to snag some of their conference phones and Aeron chairs. I remember ordering produce for delivery and they allowed different ripeness of bananas so I would order one of each (green, ripe, etc ) just to see if they came and looked differently. This was back in the day of web commerce so fun to play with. Good times. I remember Pac Bell Park had all their seats with Webvan cup holders and scoreboard ads for Webvan too at the time.
- Fire-Dragon-DoL 3y agoDid the bananas arrive any different?
- infofarmer 3y agoFor the record, I'm currently in Saigon, and whenever I order delivery from the local Tops Market (around USD 1.5 fee, within two hours from order placement) they call me to say that bananas are either too ripe or too green and confirm if I still want them. Would love them to digitize this interaction. In response to another comment, the pickers have access to the backroom and frequently deliver better produce than would be available in-store.
- a5seo 3y agoI bought Webvan stock on their IPO day. Lost around $5k. (I was 22). Amazing service. Terrible business model: boil the ocean, premature scale, hire the head of Andersen Consulting as CEO. Every bad, nonsensical decision. And yet, the core was valid: a lot of people want their groceries delivered. When I went to business school a couple years later, the CMO of H-E-B spoke to my class (later, President) and I asked when they’d offer delivery. His response: “we believe people enjoy the experience of walking the aisles.” Well, Scott, whose parking lot is now 50% curbside pickup? Who spent 9 digits to acquire Favor? You’re welcome, you rich bastard. It’s a good thing the grocery business had enough margin for error for these people to come around to learn the correct lessons from Webvan.
- 3y ago
- paulpauper 3y agoand now everyone is trying to resurrect it, but this time Uber Eats and Amazon
- yojo 3y agoI lived outside Webvan’s markets, but I had a (then teenage) friend in LA who used Webvan for underage alcohol delivery. Apparently they weren’t doing any kind of age verification. Growth at any cost indeed. I’d say times have changed, but I recently ordered alcohol shipped by GSO (a regional delivery co) and they just left the box on the porch without a signature.
- threeio 3y agoThats surprising, GSO always had me sign for my shipments and required ID. If I wasn't home or no one over 21 was then I'd have to pick it up at the distro center.
- ShrigmaMale 3y agomany retailers have started running verification through 3rd parties w your name and address. i know cigarbid now does this, believe drizly does. i think it may vary by state.
- wcfields 3y agoIn the dot-com boom Flooz (meant to be an "online giftcard currency") was giving out $20 in free credit and through that I bought a single cigar at age 16.
- xNeil 3y agoInteresting! Think I read an article a while back (we're talking several years here) that said the Dotcom Bubble's biggest bust was a company called theGlobe.com - I think the founder was the grandson of the founder of Nestle or something along those lines.
- ChrisArchitect 3y ago(2021)
- jillesvangurp 3y agoThat sounds like they were a bit uncharacteristic as a dot com in the sense that they had intellectual property that survived the company that was actually worth something and executives that weren't half bad that Amazon later took over as well and a target market that was actually somewhat real. Sure, it failed and VCs got greedy and pushed for an IPO. But then ten years later Amazon acquires the tech, and the people, and builds a decent business from it. A lot of dot com companies during the bubble had none of that. An MBA with a silly/incoherent idea and a half baked website were all it took to get funding. VCs were throwing money at anything that had a website at some point. They were desperate to get some of the action. Most of those companies were literally created to tap into that kind of stupid money. The dot com bubble was VCs throwing money at absolutely bat shit crazy stuff; and then losing badly when the bubble burst. This wasn't that bad in comparison. I mean WeWork isn't that different. Or Uber. Or Air BnB. Rapid growth funded. Arguably all cases where the investors maybe got a bit too greedy but also companies that are generating real revenue out of markets that do exist with a service that consumers are willing to pay for.
- usrnm 3y ago> The dot com bubble was VCs throwing money at absolutely bat shit crazy stuff Sounds strangely familiar
- janandonly 3y agoHere in Europe, we have a spiritual predecessor of Webvan, called Picnic. > https://picnic.app https://picnic.app It's a “supermarket on wheels”. Every city has a distribution point and small electric cars bring the groceries to your front door at a time of your choosing. After the launch of Picnic, the other players had to catch up by starting their delivery services.
- janandonly 3y agoNot predecessor. But offspring.
- deleted 3y ago[deleted]
- cjrp 3y agoTesco in the UK have been doing their own grocery deliveries since at least 2008. It feels like one of those things that makes sense for the grocery store to provide themselves (or use a white-labelled solution like Ocado), because they don't have to entirely make their profit from the delivery fee or marking up prices.
- shawabawa3 3y agoI find it absurd that the US solution to this is instacart, where some random guy just walks around a shop picking up items on a list, it's madness In the UK all major supermarkets do their own delivery, where at least parts of it can be automated
- JohnFen 3y agoMany of the larger supermarkets in my part of the US have their own grocery delivery service, for what it's worth.
- dotcoma 3y agoAre DoorDash, Uber Eats and the like really any better ?
- WeylandYutani 3y agoThose companies are currently locked into a fight over the American market. That's why they aren't making a profit over there: the US is still a battlefield and the war is worth spending billions. Americans are lazy and eat lots of fastfood after all. Eventually a shake out will happen and whoever is left standing can start making lots of money.
- dotcoma 3y agoNot so sure about the lots of money. Will Uber make lots of money? I doubt it.
- wcfields 3y agoModernMBA has a video [1] that hypothesizes that food delivery in general will never be a profitable business. I'd say that it's pretty apt, that it's all running on VC money for market share. There's a reason that before mobile devices the only restaurants that offered delivery were pizza & Chinese. [1] https://www.youtube.com/watch?v=IlZ51zeabhM https://www.youtube.com/watch?v=IlZ51zeabhM
- dotcoma 3y agoNice video, thanks, and terrible business. Why did pizza places and Chinese food places offer delivery, in your opinion?
- wcerfgba 3y agoThe current unicorns are definitely not overvalued.
- rwmj 3y agoWebvan were so late to market ... https://en.wikipedia.org/wiki/Supermarket_Direct https://en.wikipedia.org/wiki/Supermarket_Direct > Supermarket Direct was a pioneering online grocer, providing a home grocery shopping and delivery service in London from October 1995. The company sold Sainsbury's-provided groceries until it was bought by Somerfield and integrated into the Somerfield Direct home shopping service
- dustincoates 3y agoLong before that, even (although you could argue it's a different type of grocery delivery): https://en.m.wikipedia.org/wiki/Schwan%27s_Company https://en.m.wikipedia.org/wiki/Schwan%27s_Company > The Schwan's family maintains 100 percent ownership of Minnesota-based Schwan’s Home Service, a privately held, independent entity traced to the company’s home-delivery business launched by Marvin Schwan in 1952. Schwan's Home Service sells frozen foods from home delivery trucks, in grocery store freezers, by mail, and to the food service industry. As of 2022, Schwan's Home Service will be rebranded as Yelloh.
- gslaller 3y agoStill a good idea overall, perhaps they did a silly execution and had made efficiencies error which a team wouldn't do now a day(listed some in these comments). They somehow went for growth-at-all-cost instead of increasing their density to check the unit economics of a single location and then move on with the gained knowledge.
- captainmuon 3y agoReminds me of "We lose money on every sale, but we make it up with volume". > These eager investors pushed the management of Webvan to grow as fast as possible. I don't understand this. Why would you want to grow as fast as possible? Yeah there are economies of scale, but it seems like they were far from a point where that would kick in. Rather scaling made them lose money even faster. As a startup, you only have to grow faster than the competition. And it is not like you would be surprized by a competitor building distribution centers overnight. They should have better taken it slow and tried to become profitable before scaling out.
- rchaud 3y ago> Why would you want to grow as fast as possible? Short answer: to juice the numbers ahead of an IPO. Long answer: In the short term companies need quick and dirty ways to get market share. Showing growth tells investors that they've established product market fit and opens the door to acquiring more funding to scale up. Once public, the stock market will be forgiving of fast growing but unprofitable companies offering the distant promise of massive profits.
- yardie 3y agoThese businesses that are not unique, not patentable only have scale as their moat. So you want the widest, deepest moat and fill it with customers. This is the early 2000s and deindustrialization is in full effect. If you want a cheap warehouse near a top tier city they weren’t hard to find. So it’s quite possible a competitor could surprise you and do a 10 city expansion overnight. Everyone during this time was trying to ape the Amazon model. Which at this point still wasn’t profitable. No one was interested in going slow. Because there were irrational investors just looking to spend money on the next unicorn. If you weren’t taking it your competition would and you would be another dead company on a list. Trust me, there is nothing rational about how money works. Even the experts who were expecting recession any day now have decided to shut up about it. In retrospect it’s easy to see why a company failed: no viable plan, burn rate, expensive, etc. But a lot of it is just gambling and luck. We can could have worked. Cosmo could have worked. Yahoo could have bought Google. We’ll never know.
- cainxinth 3y ago
- nitwit005 3y agoInvestors lost millions, but the rest of us got these nice plastic boxes that we kept after they went belly up.
- kelvinjps 3y agoIn latin america there is always multiples groceries stores within 5 minutes of walk, where I live there is at least 4