Webvan raised over $800M to deliver groceries online — and went bankrupt in two years

Webvan, founded in 1996, was one of the most hyped startups of the dot-com boom. Its vision was to deliver groceries ordered online from huge, highly automated warehouses directly to customers' doors. Investors poured in more than $800 million, and at its peak the company was valued in the billions, seen as the future of grocery shopping.

Webvan's mistake was to scale massively before proving the model worked. It built enormous, expensive automated distribution centers and expanded into multiple cities at once, betting that online grocery demand would be huge. But the unit economics didn't work: the cost of building the warehouses and delivering small orders of groceries far exceeded what customers would pay, and demand was far lower than projected.

The money burned fast. With no path to profitability and demand that never matched its ambitions, Webvan ran out of cash and filed for bankruptcy in July 2001, just two years after its splashy IPO. It became one of the most famous dot-com busts — a cautionary tale about building enormous infrastructure for a market that didn't yet exist, and spending a fortune to scale a business model that didn't work.