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Webvan: Online Grocery Delivery Has Always Been Difficult
Everything old is new again. Many business models from the first dot-com bubble are getting a second chance right now. Below, a look at Webvan, a pioneer in online grocery delivery with a rapid ascent and an equally spectacular bust.
Cash and Burn
Grocery is a tough business. So is delivery. E-commerce too. As Webvan discovered, combining the three doesn’t make anything easier.
During the first dot-com bubble, Webvan was a high-flying grocery delivery startup. It raised $800 million from investors like Benchmark, Goldman Sachs, Sequoia, Softbank, and Yahoo (more impressive in 1999 than 2022) and went public in November 1999. At the time, cumulative revenue was $395,000. Analysts forecast sales mushrooming to $500 million in 2001, as Webvan captured significant share in a rapidly growing market.
The company ended its first day of trading with a valuation of $8 billion, about 40% of Kroger’s market cap. While investors were giddy, grocers were scratching their heads:
Noting the company’s valuation, one Safeway executive whose company had a share price of $40 at that point, bristled, “They have the sales of two of our stores and one fourth of our market cap.”
