Worst venture capitalist moves in U.S. history

Monday, December 23rd, 2013 By

There's always one cupcake in the bunch that doesn't quite meet expectation. In this case, the frosting has boiled over and it’s a hot, sticky mess.

Venture capitalists can make things happen. Sometimes, those things fail miserably. (Photo Credit: CC BY-ND/Mr T in DC/Flickr)

Almost any startup business needs advance loans in order to get off the ground, which is why venture capitalists (VCs) are vitally important. For every venture capitalist with money to lend that has tasted the sweet success of funding such giants as Google, many others have not been so lucky. Thanks to Focus Research, here are some of the worst VC investments in American history. These titanic startup flops seemed filled with promise, but in execution, they were financial sinkholes.

Webvan drove your groceries off a cliff

As with other disgraced entries on this VC bomb list, Webvan was born at the height of the dot com bubble in the late 1990s. A home grocery delivery company, Webvan pumped its infrastructure to the max ($1 billion in warehouses nationwide), but neglected the profit-thin reality of the grocery business as a whole. At IPO, the company earned $375 million. By 2001 (when Webvan went bankrupt), that money had gone up in smoke and venture capitalist Sequoia Capital had asphyxiated.

When getting Amp’d is a bad idea

Venture Beat called Amp’d Mobile a “hard-charging mobile content company,” but the $360 million in IPO funds failed to protect the company as it charged straight into the volcano of bankruptcy. The mobile carrier relaxed its credit standards for customers as the company began to char around the edges, and as these credit-constrained consumers began to fall into collections. Highland Capital Partners, Columbia Capital Equity Partners, Vivendi/Universal and MTV Networks lost every hot cent they funneled into this cellular lava pool.

Pets.com waved the white sock puppet

Americans love their pets, and Pets.com thought pet owners would shell out major dollars to buy pet supplies online. Hummer Windblad Venture Partners and Bowman Capital put up $50 million in loan credit to get Pets.com’s sock puppet puppy onscreen for a Super Bowl commercial. That series of advertising and an $82.5 million IPO seemed to promise big things, but Pets.com was unable to deliver. Its stock bottomed at 19 cents per share after going as high as $14 per share, reported CNet. Now the dog is long gone.

Since when is free a business model?

New York-based Kozmo promised “free one-hour delivery of anything from DVDs to Starbucks coffee in major cities and metro areas,” writes NationMaster. People love free, so Kozmo garnered serious attention in the late 1990s. It doesn’t take a business expert to see where this went. Charging no fees forced Kozmo to lay off 1,100 staffers and shut down. It raised $280 million (including $60 million from Amazon) for nothing.

Boo! to complex websites on dial-up

Boo.com was actually based out of the U.K., but it’s still a colossal failure in the annals of VC history. The apparel website of the late 1990s tried to dazzle consumers with fancy Flash animations and JavaScript bling, but this was the dial-up era. Load times were astronomical and business suffered, says Business Pundit. In addition, Boo.com’s efforts to become a global retailer were buried by language and tax barriers. More than $160 million in venture capital was lost in translation.

Sources:

Focus Research

Top mistakes entrepreneurs make when working with VCs

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