Webvan was the biggest flop during the dotcom era of startups. At its peak, in 1999, it was valued at $1.2 billion. Two years later they filed for bankruptcy, laid off 2000 employees, and closed up shop. Webvan could potentially be considered a startup ahead of its time, their vision was a home-delivery service for groceries, where customers could order their groceries online, but that’s not where the problem lies. 15 years later it’s still being studied by business schools around the world as a forewarning against excess and ambition. Here’s the cliff notes edition.

Webvan can also be considered a product of its time, the result was that it followed the ‘Get Big Fast’ (GBF) business model that every other startup was religiously following at the time. Much like how Eric Ries’s lean startup methodology can be considered the bible for this generation of entrepreneurs. So in 1999 Webvan announced they would expand to 26 major cities. The following two years became a logistical nightmare with Webvan ultimately losing a total of $830 million before filing for bankruptcy.

At some point every successful startup will have to start scaling up and expanding their business. It seems like common sense, but expansion should only be undertaken when a business model has first proven to be successful.

A few rules of thumb are that a scalable business model should be flexible to be able to adapt to different market conditions, core users and customers are evaluated and understood, and the business model should be able to operate without your direct supervision.

Yet according to Startup Genome Project’s survey of over 3200 startups, 74% of startup failures can be attributed to premature scaling. Another key finding was that startups, on average, need 2-3 times longer to validate their market than the founders expect. This underestimation of an appropriate timelines applies unnecessary pressure on founders to scale prematurely.

Despite early validation Webvan failed to consistently evaluate the data. If they had paid closer attention, then they would’ve seen that their business model was shaky and could not possibly support their desired plans for expansion.

*Source: Chan, J., 2015. Case Studies: These 4 Startups Failed And Lost Millions. [online] Foundr. Available at: [Accessed 8 August 2020].

Pg. 6 Version 1

Complete the following tasks:

3. Evaluate the possibility of establishing Webvan as a business in Oman under the current entrepreneurship ecosystem.

Answer rating: 100% (QA)

Answer The primary purposes behind the disappointment of Webvan can basically be credited to the ... View the full answer