Webvan was a

dot-com company A dot-com company, or simply a dot-com (alternatively rendered dot.com, dot com, dotcom or .com), is a company that does most of its business on the Internet, usually through a website on the World Wide Web that uses the popular top-level domain ". ...

and

grocery A grocery store ( AE), grocery shop ( BE) or simply grocery is a store that primarily retails a general range of food products, which may be fresh or packaged. In everyday U.S. usage, however, "grocery store" is a synonym for supermarket, ...

business that filed for

bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debto ...

in 2001 after 3 years of operation. It was headquartered in

Foster City, California Foster City is a city located in San Mateo County, California. The 2020 census put the population at 33,805, an increase of more than 10% over the 2010 census figure of 30,567. Foster City is sometimes considered to be part of Silicon Valley ...

, United States. It delivered products to customers' homes within a 30-minute window of their choosing. At its peak, it offered service in ten US areas: the

San Francisco Bay Area The San Francisco Bay Area, often referred to as simply the Bay Area, is a populous region surrounding the San Francisco, San Pablo, and Suisun Bay estuaries in Northern California. The Bay Area is defined by the Association of Bay Area Gover ...

;

Dallas Dallas () is the third largest city in Texas and the largest city in the Dallas–Fort Worth metroplex, the fourth-largest metropolitan area in the United States at 7.5 million people. It is the largest city in and seat of Dallas County wi ...

;

Sacramento ) , image_map = Sacramento County California Incorporated and Unincorporated areas Sacramento Highlighted.svg , mapsize = 250x200px , map_caption = Location within Sacramento ...

;

San Diego San Diego ( , ; ) is a city on the Pacific Ocean coast of Southern California located immediately adjacent to the Mexico–United States border. With a 2020 population of 1,386,932, it is the eighth most populous city in the United States ...

;

Los Angeles Los Angeles ( ; es, Los Ángeles, link=no , ), often referred to by its initials L.A., is the largest city in the state of California and the second most populous city in the United States after New York City, as well as one of the world' ...

;

Orange County, California Orange County is located in the Los Angeles metropolitan area in Southern California. As of the 2020 census, the population was 3,186,989, making it the third-most-populous county in California, the sixth-most-populous in the United States, a ...

; Chicago;

Seattle Seattle ( ) is a seaport city on the West Coast of the United States. It is the seat of King County, Washington. With a 2020 population of 737,015, it is the largest city in both the state of Washington and the Pacific Northwest region of ...

;

Portland, Oregon Portland (, ) is a port city in the Pacific Northwest and the largest city in the U.S. state of Oregon. Situated at the confluence of the Willamette and Columbia rivers, Portland is the county seat of Multnomah County, the most populous co ...

; and Atlanta, Georgia. The company had hoped to expand to 26 cities by 2001. Long after the failure of Webvan, the concept of companies delivering groceries very quickly grew from about 2020, and several companies were vying for business from dark stores.

History

Webvan was founded in the heyday of the

dot-com bubble The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet. Between 1995 and its peak in March 2000, the Nasdaq Compos ...

in 1996 by

Louis Borders Louis Borders is the founder of both Borders (in 1971) and Webvan (in 1996). The original Borders bookstore was located in Ann Arbor, Michigan, where it was founded in 1971 by brothers Tom and Louis Borders during their undergraduate and graduat ...

, who also co-founded the

Borders Group Borders Group, Inc. (former NYSE ticker symbol BGP) was an American multinational book and music retailer based in Ann Arbor, Michigan, United States. In its final year, the company employed about 19,500 people throughout the U.S., primarily in ...

in 1971.

Growth

The company's investors pressured it to grow very fast to obtain

first-mover advantage In marketing strategy, first-mover advantage (FMA) is the competitive advantage gained by the initial ("first-moving") significant occupant of a market segment. First-mover advantage enables a company or firm to establish strong brand recognition ...

. This rapid growth was cited as one of the reasons for the downfall of the company. Webvan started taking orders in the San Francisco Bay Area in June 1999. Webvan placed a $1 billion order with

Bechtel Bechtel Corporation () is an American engineering, procurement, construction, and project management company founded in San Francisco, California, and headquartered in Reston, Virginia. , the '' Engineering News-Record'' ranked Bechtel as the se ...

to build its warehouses, and bought a fleet of delivery trucks. In 2000, Webvan bought HomeGrocer, a competitor that was also losing money, for $1.2 billion in stock. At its peak in 2000, Webvan had $178.5 million in sales but it also had $525.4 million in expenses.

Financing

Benchmark Capital Benchmark is a venture capital firm based in San Francisco that provides seed money to startups. History The firm's most successful investment was a 1997 investment of $6.7 million in eBay for 22.1% of the company. In 2011, it invested $12 milli ...

Sequoia Capital Sequoia Capital is an American venture capital firm. The firm is headquartered in Menlo Park, California, and specializes in seed stage, early stage, and growth stage investments in private companies across technology sectors. , Sequoia's total a ...

, and Borders each invested $3.5 million in the company in a

Series A round A series A round (also known as series A financing or series A investment) is the name typically given to a company's first significant round of venture capital financing. The name refers to the class of preferred stock sold to investors in exchan ...

in 1997, buying shares for $9.58 each. Sequoia later invested another $50 million,

Softbank Capital SoftBank Capital is a venture capital group in the United States, focusing on technology and telecom early stage businesses. It was founded by SoftBank. Since 2015 it does not actively make investments, but it continues to oversee its prior portfo ...

later invested $160.3 million, and Goldman Sachs' venture arm invested $50 million.

E-Trade E-Trade Financial Corporation (stylized as E*TRADE) is a financial services subsidiary of Morgan Stanley, which offers an electronic trading platform to trade financial assets. The company receives revenue from interest income on margin balanc ...

and

Yahoo! Yahoo! (, styled yahoo''!'' in its logo) is an American web services provider. It is headquartered in Sunnyvale, California and operated by the namesake company Yahoo! Inc. (2017–present), Yahoo Inc., which is 90% owned by investment funds ma ...

each invested $10 million. In total, venture capitalists invested more than $396 million in Webvan. The company raised an additional $375 million in an

initial public offering An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investment ...

in November 1999, during the

that valued the company at more than $4.8 billion. Up to that time, the company had reported cumulative revenue of $395,000 and cumulative net losses of more than $50 million.

Management

None of Webvan's senior executives or major investors had any management experience in the supermarket industry, including its CEO George Shaheen, who had resigned as head of Andersen Consulting (now

Accenture Accenture plc is an Irish-American professional services company based in Dublin, specializing in information technology (IT) services and consulting. A ''Fortune'' Global 500 company, it reported revenues of $61.6 billion in 2022. Accentu ...

), a management consulting firm, to join the venture. Webvan had a contract to pay Shaheen, who gave up a $4 million per year salary at Andersen, $375,000 per year for life. When the company filed bankruptcy in July 2001, Shaheen was an

unsecured creditor An unsecured creditor is a creditor other than a preferential creditor that does not have the benefit of any security interests in the assets of the debtor. In the event of the bankruptcy of the debtor, the unsecured creditors usually obtain a '' ...

. Shaheen resigned in April 2001, while the company was on the verge of shutting down.

Bankruptcy

The company lost over $800 million and shut down in June 2001, filing for

and laying off 2,000 employees. As part of its shutdown process, all non-perishable food was donated to local food banks.

Reasons for failure

Commentators point to several reasons for Webvan's failure: * Aggressive expansion to many cities without proving its business model in its first market * A business model targeting price-sensitive mass-market consumers rather than upmarket consumers who would be more profitable * Building its own warehouses and fulfillment infrastructure from scratch, in contrast to services such as

Peapod Peapod Online Grocer (US), LLC is an American online grocery delivery service. By February 2022, it changed its name to Peapod Digital Labs. The company is based in Chicago, IL and operated in several U.S. cities. It is owned by Netherlands-bas ...

which survived the dot-com bust and used the infrastructure of existing supermarkets (as did the later successful but not profitable

Instacart Instacart is an American company that operates a grocery delivery and pick-up service in the United States and Canada. The company offers its services via a website and mobile app. The service allows customers to order groceries from participatin ...

)

CNET ''CNET'' (short for "Computer Network") is an American media website that publishes reviews, news, articles, blogs, podcasts, and videos on technology and consumer electronics globally. ''CNET'' originally produced content for radio and telev ...

named Webvan one of the largest dot-com flops in history.

Legacy

Large number of Webvan's colored plastic shipping tubs are now used for household storage. The company's distinctively shaped vans, now repainted are still seen. Some executives of the company went to work for

Amazon.com Amazon.com, Inc. ( ) is an American multinational technology company focusing on e-commerce, cloud computing, online advertising, digital streaming, and artificial intelligence. It has been referred to as "one of the most influential economi ...

. From about 2020 many companies were vying to provide ultrafast delivery, similar to the Webvan concept.

References

External links

Archives pages of Webvan
{{Dot-com Bubble 1999 initial public offerings Online retailers of the United States American companies established in 1996 Retail companies established in 1996 Transport companies established in 1996 Internet properties established in 1996 American companies disestablished in 2001 Retail companies disestablished in 2001 Transport companies disestablished in 2001 Internet properties disestablished in 2001 Defunct companies based in the San Francisco Bay Area Defunct Softbank portfolio companies Companies that filed for Chapter 11 bankruptcy in 2001 Defunct websites Online grocers Dot-com bubble Defunct online companies of the United States