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 conducts most of its businesses on the Internet, usually through a website on the World Wide Web that uses the popular top-level dom ...

and

grocery A grocery store (American English, AE), grocery shop or grocer's shop (British English, BE) or simply grocery is a retail store that primarily retails a general range of food Product (business), products, which may be Fresh food, fresh or Food p ...

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 deb ...

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

Foster City, California Foster City is a master-planned city located in San Mateo County, California, United States. Foster City is sometimes considered to be part of Silicon Valley for its local industry and its proximity to Silicon Valley cities. There are many n ...

, 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, commonly known as the Bay Area, is a List of regions of California, region of California surrounding and including San Francisco Bay, and anchored by the cities of Oakland, San Francisco, and San Jose, California, S ...

;

Dallas Dallas () is a city in the U.S. state of Texas and the most populous city in the Dallas–Fort Worth metroplex, the List of Texas metropolitan areas, most populous metropolitan area in Texas and the Metropolitan statistical area, fourth-most ...

;

Sacramento Sacramento ( or ; ; ) is the capital city of the U.S. state of California and the seat of Sacramento County. Located at the confluence of the Sacramento and American Rivers in Northern California's Sacramento Valley, Sacramento's 2020 p ...

;

San Diego San Diego ( , ) is a city on the Pacific coast of Southern California, adjacent to the Mexico–United States border. With a population of over 1.4 million, it is the List of United States cities by population, eighth-most populous city in t ...

;

Los Angeles Los Angeles, often referred to by its initials L.A., is the List of municipalities in California, most populous city in the U.S. state of California, and the commercial, Financial District, Los Angeles, financial, and Culture of Los Angeles, ...

;

Orange County, California Orange County (officially the County of Orange; often initialized O.C.) is a county (United States), county located in the Los Angeles metropolitan area in Southern California, United States. As of the 2020 United States census, the population ...

;

Chicago Chicago is the List of municipalities in Illinois, most populous city in the U.S. state of Illinois and in the Midwestern United States. With a population of 2,746,388, as of the 2020 United States census, 2020 census, it is the List of Unite ...

;

Seattle Seattle ( ) is the most populous city in the U.S. state of Washington and in the Pacific Northwest region of North America. With a population of 780,995 in 2024, it is the 18th-most populous city in the United States. The city is the cou ...

;

Portland, Oregon Portland ( ) is the List of cities in Oregon, most populous city in the U.S. state of Oregon, located in the Pacific Northwest region. Situated close to northwest Oregon at the confluence of the Willamette River, Willamette and Columbia River, ...

; and

Atlanta, Georgia Atlanta ( ) is the List of capitals in the United States, capital and List of municipalities in Georgia (U.S. state), most populous city in the U.S. state of Georgia (U.S. state), Georgia. It is the county seat, seat of Fulton County, Georg ...

. 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 store A dark store (also dark shop, dark supermarket or dotcom centre) is a retail outlet or distribution centre that exists exclusively for online shopping. A dark store is generally a large warehouse that can be used either to facilitate a "click-a ...

History

Webvan was founded in the heyday of the

dot-com bubble The dot-com bubble (or dot-com boom) was a stock market bubble that ballooned during the late-1990s and peaked on Friday, March 10, 2000. This period of market growth coincided with the widespread adoption of the World Wide Web and the Interne ...

in 1996 by Louis Borders, who also co-founded Borders 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 recogniti ...

. 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 in 1898, and headquartered in Reston, Virginia in the Washington metropolitan area. , the '' E ...

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 founded in 1995 by Bob Kagle, Bruce Dunlevie, Andy Rachleff, Kevin Harvey, and Val Vaden. The firm is known for its equal partnership structure and focus on early-stage investing, typically leading the firs ...

Sequoia Capital Sequoia Capital Operations, LLC is an American venture capital firm headquartered in Menlo Park, California, specializing in seed stage, early stage, and growth stage investments in private companies across technology sectors. the firm had appro ...

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

Series A round A series A is the name typically given to a company's first significant round of venture capital financing. It can be followed by the word round, investment or financing. The name refers to the class of preferred stock sold to investors in excha ...

in 1997, buying shares for $9.58 each. Sequoia later invested another $50 million, Softbank Capital later invested $160.3 million, and Goldman Sachs' venture arm invested $50 million.

E-Trade E*TRADE is an investment brokerage and electronic trading platform that operates as a subsidiary of Morgan Stanley. History In 1982, physicist William A. Porter and Bernard A. Newcomb founded TradePlus in Palo Alto, California, with $15,00 ...

and

Yahoo! Yahoo (, styled yahoo''!'' in its logo) is an American web portal that provides the search engine Yahoo Search and related services including My Yahoo, Yahoo Mail, Yahoo News, Yahoo Finance, Yahoo Sports, y!entertainment, yahoo!life, and its a ...

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 investm ...

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 a global multinational professional services company originating in the United States and headquartered in Dublin, Ireland, that specializes in information technology (IT) services and management consulting. It was founded in 1 ...

), 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 which survived the dot-com bust and used the infrastructure of existing supermarkets (as did the later

Instacart Maplebear Inc., doing business as Instacart, is an American retail media and delivery company based in San Francisco that operates a grocery delivery and pick-up service in the United States and Canada accessible via a website and mobile app. ...

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

Legacy

A 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., doing business as Amazon, is an American multinational technology company engaged in e-commerce, cloud computing, online advertising, digital streaming, and artificial intelligence. Founded in 1994 by Jeff Bezos in Bellevu ...

. 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