The late 1990s were an interesting time for entrepreneurs. With the internet revolution in full swing and investor confidence at truly ridiculous levels, almost any business idea was able to generate interest from venture capitalists – quite often, interest that extended well into the hundreds-of-millions of dollars.
And while the bubble eventually burst, the 1990s did leave us with some great companies. There’s publishing giant Amazon, search empire Google, and email powerhouse Hotmail. But alongside those ultra-successful online giants are some true shockers – websites that shouldn’t have progressed beyond the planning stages.
We’ve tracked down seven of the most ill conceived dot-com startups. From disastrous delivery services to truly idiotic online currency ideas, these seven businesses were destined for failure right from the beginning. For one, business recovery is possible, but for the others bankruptcy proved to be the only option.
Founded by university friends Stephen Paternot and Todd Krizelman, TheGlobe.com was one of the internet’s first social networking and entertainment websites. The two college buddies built the website together after stumbling onto a series of chatrooms while at university and realizing the medium’s potential for generating income.
After securing $20 million in funding and generating a huge amount of online interest, the two 23-year-old founders were each earning over $600,000 annually in stock options and salaries. The company went public in 1998 and Paternot and Krizelman enjoyed the fruits of their labor – both founders were worth almost $100 million.
Unfortunately, the success was short-lived. After Paternot released a statement claiming he’d “got the girl. Got the money. Now I’m ready to live a disgusting, frivolous life.” media groups took a closer look at the company and realized it was almost worthless. Stock prices dropped from almost $100 to less than ten cent within a year, and the two founders found themselves significantly less wealthy.
Financial observers have named Webvan as the biggest dot-com disaster in history, and for good reason. After raising over $1 billion in venture funding, this Silicon Valley startup managed to burn through every cent building infrastructure on the United States’ western coast, all without a long-term revenue model or strategy.
As expected, things didn’t quite go as planned. Despite plans to dominate the home delivery industry – a field in which none of Webvan’s executives were experienced – the company failed to generate any profits before folding in 2001. Two years down and over $1 billion wasted – Webvan managed to burn through more cash daily than some cities do on a monthly basis.
Flooz was an experiment in online currency – a precursor to virtual currencies and what was meant to be an all-in-one online shopping center. Launched with goals of becoming the internet’s dominant online currency, Flooz.com billed itself as an alternative to credit-card-based online shopping and a safe option for consumers.
Unfortunately, online shoppers weren’t particularly happy about buying ‘Flooz credits’ in order to purchase their books and movies. After failing to generate any real business, the company folded in early 2001, leaving all of their customers without any method of refunding their credits.
Ning is the odd-one-out in our dot-com countdown. This social networking service wasn’t launched in the 20th century, it wasn’t backed by hundreds of clueless and non-techie investors, and it didn’t have plans for world domination and huge profits. In fact, it’s a relatively modern company – one that’s still around, albeit in a struggling state.
After raising over $100 million in venture capital, Netscape founder Marc Andreessen launched Ning as a do-it-yourself social networking service. The website was immensely popular, finding millions of users within a year, but performed very poorly as a commercial property. After struggling to monetize the website’s free networks, Andreessen announced a change of strategy in early 2010; Ning would focus on their paid members, leaving their free users with two months to permanently leave the website.
Kozmo.com specialized in one thing: delivery. They’d deliver anything you wanted, be it a foamy latte, a new stereo, or a selection of dips and finger foods. The New York City company specialized in deliveries around Manhattan island, bringing office workers lunchtime meals and delivering groceries to homes in the late evening.
Despite offering a valuable service, the company struggled to generate income. After a $25 million loss in its first year on just $3 million in income, Kozmo’s founders did what any failing business owners would – they raised even more money to throw at their failing venture. Two years and almost $250 million later, the company closed for good after failing to generate any long-term profits.
6. Think Tools
Think Tools was the most bizarre of all dot-com bombs. Unlike other dot-com companies, which generated income from sales or services, Think Tools made their money through consulting, an activity with little room for long-term growth of scalability. Founded in 1993 and built into a large company over the years, the Swiss consultancy firm developed several pieces of software, few of which even began to approach profitability.
In one of the strangest business moves ever, the consultancy company decided to go public. Share prices rose quickly as investors grew interested in technology firms, yet dropped even faster when people came to realize that Think Tools had virtually no long-term business model. Touted as the European Webvan, this IT consultancy corporation just wasn’t a good public business idea.
UK fashion startup Boo.com is remembered as one of Europe’s most sudden corporate collapses. The Swedish-backed online fashion store opened in 1999, slowed to the market by numerous delays and funding worries. Backed by over $130 million in venture funding and the experience of several keen online entrepreneurs, the startup managed to burn through every single cent of available capital in under a year.
After its collapse, the website enjoyed a renaissance as one of the dot-com era’s least well-planned investments. From poor usability to a questionable revenue model, Boo is thought of by many Britons in the same way as Americans observed the Pets.com or Webvan disasters.