
Webvan - 29_29
https://en.wikipedia.org/wiki/Webvan
======
rmason
Webvan's main problem was they expanded before they had their model figured
out. They invested tens of millions in warehouses they didn't need with their
current volume as well.

If they had spent time on their model they'd have figured out that it only
made sense to target the upper middle class neighborhoods at the time
profitably. With that realization they'd never have built all the warehouses
and with a lower burn they'd have survived only to eventually own the market.

The founder was a really smart guy who had already created a very successful
startup. But he was under an imperative from his investors to ramp up fast.

A lot of the hard learned wisdom from that time would create a different
outcome possibly today. I know that I'd have done a lot differently with my
own startup back then if only I knew what is common wisdom today ;<).

~~~
Gabriel_Martin
such an important insight, that the investors were the ones pressuring him to
structure it in this way.

~~~
rmason
Back in that time everyone placed an over importance on being first and then
locking up the market quickly. Sometimes like maybe Uber that's important.

Reid Hoffman is still a proponent of this tactic with what he calls
blitzscaling. Course nowadays he's a VC ;<).

But as Google demonstrated you can enter after the market is mature with both
a better product as well as a better business model and dominate.

~~~
robocat
> But as Google demonstrated you can enter after the market is mature [] and
> dominate.

I don't think Google (founded 20 years ago) is a good example of entering a
mature market.

I think a better example is Facebook (founded 15 years ago) which won against
MySpace.

I thought Salesforce (founded 20 years ago) should be a good example, but
their market cap is still well below SAP's.

~~~
davidjnelson
Search was “mature” and “solved” prior to google. Altavista, webcrawler,
infoseek, etc. Obviously it wasn’t actually solved ;-)

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wil421
Webvan brings up old memories and I really thought of it as the future. My
neighbors tried it a few times and I can remember it showing up. When I asked
my parents to do it they thought I was crazy. Pretty sure cost had something
to do with it. I’d still fill up a shopping cart just because.

Webvan failed but if the gig economy was around it could’ve succeeded for a
time. These companies need non-employees to make it viable I believe.

Will Uber eats and the like become the next Webvan? Grocery store delivery?
Paying someone to shop for you then picking it up?

IMHO, robots will not be picking people up and delivering our groceries in the
near future. Your business can’t depend on the weather. Gig economies are not
good for the gig seekers long term.

~~~
londev
Almost every one I know in the UK has their groceries delivered. According to
the official stats it’s only 7% of grocery spend though.

~~~
cameronbrown
This is definitely the kind of thing heavily influenced by location. I'm from
the north and I don't know anyone who gets them delivered.

~~~
pushpop
I think it’s more of an income thing than a location thing.

Most supermarkets will have a minimum spend and then there is a delivery
charge on top. Both are pretty cheap but if money is tight then that is one
easy convenience to go without.

~~~
kalleboo
I know people with not great income who use delivery due to working parents
and can't afford a car, so ordering delivery from a large supermarket is
cheaper and has better range than the walkable corner store alternative, and
frees up a ton of time.

~~~
pushpop
Ironically I find I spend less when shopping online too because I’m less
likely to impulse buy stuff. Though I do often break the “don’t go shopping
when you’re hungry” rule, which doesn’t help.

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jedberg
In 1999 and 2000, I worked for a startup in the Bay Area. Twice a week our
kitchen was stocked with fresh food delivered by WebVan. We had a ton of their
crates sitting around that we used to store computer parts and other
facilities needs, since they never seemed to collect them.

Right around mid-2000, the deliveries stopped as the market started to tank
and we had to "tighten our belt", and the free food disappeared and the
vending machines went from free to 10 cents each (and there was a small riot).
I suspect we weren't the only startup that did that. It makes me wonder how
much of their revenue was from other startups. Kind of reminds me of 2019...

They actually brought good food. I considered signing up for myself at my
house, but it was just too expensive for a single guy. Might have been good
for a family though.

~~~
friendly_chap
Can you please explain the bit about 2019? Do you feel a downturn is
happening/coming?

~~~
danko
The implication here is that a lot of value associated with 2019-era VC-funded
startups is derived from the revenue they receive by selling to _other VC-
funded startups_.

~~~
friendly_chap
I see, thanks for the clarification!

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cVwEq
Boy, this brings back memories. I was working at Andersen Consulting (AC, then
Accenture) at the time our CEO, George Shaheen, left to join Webvan. The
general sentiment at AC (at least amongst the grunts in my circle) was that we
were glad to see George Shaheen leave, but were all left wondering if we
should be jumping ship too, to join the dot-com boom.

The partners at AC were trying to hang on to talent for dear life because of
the dot-com boom. When Webvan went bust many of the the partners/associate
partners were quick to point that out, maybe as some kind of misguided
retention pep-talk or something.

As a funny aside, there were some who used to call George Shaheen "George
Unseen:"

[http://www.bigtimeconsulting.org/remember-
george-4](http://www.bigtimeconsulting.org/remember-george-4)

[http://www.bigtimeconsulting.org/ceo-of-the-
future-4](http://www.bigtimeconsulting.org/ceo-of-the-future-4)

[http://www.bigtimeconsulting.org/george-unseens-
reward-4](http://www.bigtimeconsulting.org/george-unseens-reward-4)

[http://www.bigtimeconsulting.org/webminivan-a-look-
back-4](http://www.bigtimeconsulting.org/webminivan-a-look-back-4)

------
DangerousPie
There is now a very successful company with exactly the same business model in
the UK:
[https://en.wikipedia.org/wiki/Ocado](https://en.wikipedia.org/wiki/Ocado)

~~~
orf
I wouldn’t say it’s exactly the same, it definitely targets the higher end of
the market.

------
dacracot
I worked for Redknife, later renamed OpenLatitude, that was WebVan's primary
B2B exchange hub. We translated their orders/invoices/catelogs back and forth
to their vendors. They were our second best customer behind MicroWarehouse.

When they went down, they took us with them. MicroWarehouse exercised a
contract clause to purchase our software and hired me on a three month
contract to teach them how to use it. I took it because my option was to be
laid off.

Brings back memories, and not all good ones. What a wild ride.

------
CPLX
The part this thread seems to be missing is that like we didn’t have much
internet back then.

Sure you didn’t have it in your pocket, but also most people didn’t have it in
their house either. And if you did you had to dial with a phone line (which is
a thing attached to a wall) and make it so you couldn’t get any calls while
you were doing it.

And it would take like 41 seconds for a grainy picture of a banana to roll in
from top to bottom. And you’d get disconnected and lose your cart. And so on.

It was different back then.

~~~
bjhkx
Disconnected, okay. Lose your cart... why? Cookies and sessions existed back
then.

~~~
useful
cookies are sent with every request, you were lucky to have >28k modem back
then. Json didn't really exist, xml was king.

There were plenty of reasons. Apache needed a mod to store a session in a
cookie instead of a url and HTTPS was really hard to do. Java had its way, PHP
had another, ASP had another... everything was different and there were no
patterns.

~~~
rongenre
56k modems were pretty routine by 1999 and ISDN (It still does nothing) was a
thing. But by 2000, DSL rollouts were starting to happen.

------
femto113
In Seattle we had HomeGrocer and it was _awesome_. Absolutely seemed like the
future of groceries, they had great selection and especially great produce.
The delivery people drove company vans (with a distinctive peach logo on the
side) and wore a uniform (like UPS) and AFAIK were all full-time employees.
Sadly they were acquired by Webvan and it all fell apart.

~~~
clairity
i felt that way about the massachusetts-based lighthouse bank[0] founded in
2000 and unaffiliated with the current santa cruz-based lighthouse bank. high-
interest checking, no-fee, internet-only bank. it was amazing until it got
merged into brookline bank and essentially dissolved.

[0]
[https://www.bloomberg.com/research/stocks/private/snapshot.a...](https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=821638)

~~~
astura
>high-interest checking, no-fee, internet-only bank.

SoFi just launched this product, and they are even giving $50 referral bonuses
on both ends to sign up (referer and referee). I'm really wondering if it's a
sustainable business model.

~~~
clairity
it's quite sustainable i'd bet. banks traditionally make money by lending most
of its deposits to other people and earning interest on that lending.

as long as the deposits are large enough, that interest should cover the fixed
costs (employees, infrastructure) and the variable costs (paying out interest,
referral bonuses) of providing the accounts. internet-only banks also lower
their fixed costs by foregoing expensive retail square footage.

------
crawdog
Reminds me of another business in the delivery space:
[https://en.wikipedia.org/wiki/Kozmo.com](https://en.wikipedia.org/wiki/Kozmo.com)

Interesting how some of the business models that were not profitable in the
early 2000's are resurrected with the on-demand workforce - cutting out the
most expensive part.

~~~
thomasjudge
Cloud computing makes scaling the IT side of things much easier & cheaper than
it used to be too. The old model was buy a giant Sun box, buy a bunch of
Oracle software, ... take a look at ORCL in the 2000ish time frame

------
hbosch
Of all the companies to bite in the the dot-com crash, Webvan really did seem
like it was truly viable.

~~~
Ididntdothis
I think they were suffering from too much money that needed to be spent too
quickly. If they had moved slower they may have become like amazon.

~~~
tw1010
What does that even mean? How do you kill yourself with a bucket of money?

~~~
michaelmior
Hire too many employees, build out too much capacity without a market that can
provide the necessary demand, operating costs get too high, and you're done.
Of course if the terms of investments and the discipline of the founders are
combined able to regulate the growth rate, these things become less of a
problem.

------
cuban-frisbee
Webvan is an interesting case because it could have succeeded if it was not
for some strategic blunders (i.e. the idea was good and to some extend the
execution in the beginning).

The main thing they did wrong was buying and the fumbling the Home Grocer
acquisition [1]. Web van was investing heavily in their own warehousing system
so they scrapped Home Grocers which at that time was actually better. The
acquisition was a large financial cost (1,2 billion) but also a large
opportunity cost.

[1][https://www.academia.edu/11307477/HomeGrocer.com_Anatomy_of_...](https://www.academia.edu/11307477/HomeGrocer.com_Anatomy_of_a_failure)

------
subpixel
The CEO of WebVan negotiated a contract to pay him $375,000 per year for life
- including his wife's life, if she survives him.

I'm not sure what to say except: well-played.

~~~
koolba
Not really. The company went bankrupt and it’s an unsecured debt. It would
have been a good play if it was collateralized or the company actually
succeeded.

~~~
abraae
Yes, that seems the opposite of the kind of deal you'd want to make with a
hotly burning startup.

------
Theodores
[http://www.webvan.com/](http://www.webvan.com/)

As resurrected by Amazon in 2009. How the mighty have fallen.

------
themark
The cup holders...

[https://www.sfgate.com/bayarea/matier-ross/article/Webvan-
gh...](https://www.sfgate.com/bayarea/matier-ross/article/Webvan-ghost-at-
ball-yard-42-000-cup-holders-3314941.php)

------
davidu
There are no bad ideas, just early ones.

(I believe this was first said by my partner Marc)

------
thesausageking
They raised a pile of money from Benchmark, Sequoia, and Softbank. Does anyone
know what happened with these investments? Did they get out post-IPO while it
was still high flying?

~~~
firasd
Bill Gurley answers on behalf of Benchmark here,saying they lost about $3.5
million but he would do it again (this answer is from 2004, seems he's
addressed it in later interviews as well): [https://www.quora.com/How-much-
money-did-Benchmark-capital-l...](https://www.quora.com/How-much-money-did-
Benchmark-capital-lose-on-Webvan)

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davidjnelson
I remember how excited people were about webvan. And look, 20 years later we
have it! You can order from Whole Foods and get it in 2 hours thanks to
Amazon.

------
vmarshall23
Textbook example of: GOOD_IDEA < GOOD_EXECUTION

------
jbverschoor
[https://www.youtube.com/watch?v=I6IQ_FOCE6I](https://www.youtube.com/watch?v=I6IQ_FOCE6I)
;-(

