The Startup Owner's Manual

CHAPTER 1The Path to Disaster: A Startup Is Not a Small Version of a Big Company

The definition of insanity is doing the same thing over and over and expecting different results.

—Albert Einstein

WHILE THIS STORY IS OLD, ITS LESSONS are timeless. In the heyday of the dot-com bubble at the end of the 20^th century, Webvan stood out as one of the most electrifying new startups, with an idea that would potentially touch every household in America. Raising one of the largest financial war chests ever seen (more than $800 million), the company aimed to revolutionize the $450 billion retail grocery business with online ordering and same-day door-to-door grocery delivery. Webvan believed this was one of the first “killer applications” for the Internet. Customers could just point, click, and order. Webvan’s CEO told Forbes magazine that Webvan would “set the rules for the largest consumer sector in the economy.”

Beyond amassing megabucks, the Webvan entrepreneurs seemed to do everything right. Backed by experienced venture-capital investors, the company raced to build vast automated warehouses and bought fleets of delivery trucks while building an easy-to-use website. Webvan hired a seasoned CEO from the consulting industry. What’s more, most initial customers actually liked the service. But barely 24 months after the initial public offering, Webvan was bankrupt and out of business. What happened?

…barely 24 months after the initial public offering, Webvan was bankrupt.

This was not ...