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Reminds 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

Reminds 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 ago
These 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
> Why would you want to grow as fast as possible? Because they thought their business model was so amazing that everyone would copy it, and thus they wanted to build and maintain a first mover advantage. They overestimated how much competition they would face and underestimated the logistical challenges of their model.

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 ago

These 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

> Why would you want to grow as fast as possible? Because they thought their business model was so amazing that everyone would copy it, and thus they wanted to build and maintain a first mover advantage. They overestimated how much competition they would face and underestimated the logistical challenges of their model.