25 Internet Startups That Bombed Miserably

If the Internet could speak with one voice, it would probably groan “oh, not again!” That’s because every raving success story about Internet startups is tempered by dozens more that crashed and burned in a sea of wasted money, bad ideas, or unfulfilled hype. As venture capitalist Paul Graham writes, most of these failures are never written about. No one knew about them, so they were never really expected to go anywhere. But a select few had very public flame-outs – what Graham calls “the elite of failures.”

The list below celebrates not the failure of these companies, but presents us with a conservative reminder of a not-so-distant past and the lessons we can learn from it.

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1. GovWorks

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GovWorks may be the only startup failure compelling enough to have a movie made about it. The film “Startup.com” tells the tale of GovWorks’ tantalizing brush with mega-success as a website where everyday citizens could interact with their local governments. It had all the elements of a tear-jerking fall from grace: company is started by childhood friends (one of them a rainmaker, the other a technical wizard). Friends build multi-million dollar net worths only to lose it all to clashing egos and expectations. Throw in the obligatory theft of company technology and the departure of a crucial partner, and you’ve got all the ingredients for a storybook startup failure. GovWorks ultimately filed for bankruptcy in 2001.

2. Flooz.com

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Flooz is a textbook example of a startup was pretty much doomed from the start. The idea was to create an alternative online-only currency (Flooz) that people would use instead of their credit cards. Once you acquired a hoard of Flooz, you were then free to use it at any number of retailers who had agreed, in advance, to accept it. There was only one problem. No one bothered to ask why someone would use a totally new and unproven currency instead of credit cards or gift cards, which were backed by trusted merchants. No one asking didn’t stop customers from answering, however, as lack of demand for Flooz plunged the company into bankruptcy in 2001. Apparently, dazzling TV commercials featuring Whoopi Goldberg couldn’t stop an astounding $35 million in venture money from being squandered.

3. Beenz

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Beenz was a direct competitor to Flooze who was also forced to close up shop. Amazingly, Beenz raised $80 million over four rounds of venture funding, more than double what Flooz raised for the same, no-demand idea. Unlike Flooz, however, Beenz had the good sense to pull the plug before going under. Once Flooz announced that they were cutting their losses, Beenz followed suit by giving its customers a “spend your Beenz in 10 days or lose ‘em” ultimatum. It is believed that the twin failures of Flooz and Beenz spelled the end of the nascent e-currency market. As C/Net writes, the “collapse of a high-profile trailblazer such as Beenz shows that the Old Economy credit card companies have probably won the online shopping battle.”

4. WebVan

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The online grocery shopping website didn’t fail for lack of a good idea. Rather, it was premature growth that dragged this company under the bus. WebVan’s deadly mistake was, as one Harvard professor wrote, “managing the company from the fiftieth floor when you only have a one-story building.” By creating a mammoth, $1 billion infrastructure of high-tech warehouses across the U.S., WebVan squandered the $375 million it raised at IPO on growth that its revenue simply could not justify. The other major problem facing WebVan was the already thin profit margins of the grocery business. All of this combined to deliver a decisive knock-out punch in the form of a 2001 bankruptcy filing that put over 2,000 people out of a job.

5. eToys

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eToys.com committed what has come to be known as a Cardinal Sin of 90’s-era dot coms: spending tons of money on advertising, regardless of whether there is a market for your product or service. Nevertheless, the mere idea of an online toy retailer was enough to propel the company to a $166 million IPO in May of 1999. All went well early on, with eToys’ stock trading at highs of $84 per share in October of that same year. But by February 2001 the company’s outrageous spending in spite of revenues had caught up to it, sending its stock to an appalling low of 9 cents per share. Their assets were later acquired by KayBee Toys and is currently reincarnated, although not nearly as successfully as first hoped.

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  1. Robert Barr's Gravatar Comment by Robert Barr on July 27th, 2008 at 9:42 pm

    This is a great list! It is a blueprint of what not to do in growing your online business! Should be a class at Wharton!

  2. Chaos Motor's Gravatar Comment by Chaos Motor on July 27th, 2008 at 11:50 pm

    Note to the author: an opening parenthesis, (, eventually requires a closing parenthesis, ).

  3. Richard White's Gravatar Comment by Richard White on July 28th, 2008 at 12:50 am

    FWIW I wasn’t a founder on Kiko. I was their first employee (#3).

  4. Stock Studio's Gravatar Comment by Stock Studio on July 28th, 2008 at 3:23 am

    I remember Beenz, it was almost a good idea… for a 5 yearold!

  5. bdthomas's Gravatar Comment by bdthomas on July 28th, 2008 at 6:23 am

    This would probably take too much time, but what would really be great if you could find/compile a list of the founders of these companies, and what they’re doing now. We all know that most entrepreneurs fail the first time out of the gate, but many go on to do great things. How does “epic” vs. “quiet” failure affect future success?

  6. DaveinHackensack's Gravatar Comment by DaveinHackensack on July 28th, 2008 at 6:38 am

    Startup.com is an entertaining documentary. It’s actually on satellite again tomorrow morning. I’ve got my DVR set.

    Also:

    The main problem with Pets.com was the shipping costs for selling heavy, and relatively inexpensive, bags of dog food and cat litter. An online retailer needs a much lower ratio of shipping costs to product value to be profitable.

  7. Frank Black's Gravatar Comment by Frank Black on July 28th, 2008 at 7:14 am

    No Value America? The subject of Dot.bomb, Value America was a spectacular blow-up. The kicker is that Amazon now does what they set out to do: sell anything and everything.

  8. eric's Gravatar Comment by eric on July 28th, 2008 at 7:16 am

    as I understand it, friendster is quite popular in China…

  9. Iso's Gravatar Comment by Iso on July 28th, 2008 at 7:23 am

    There was a documentary about kozmo.com too: e-dreams

    http://www.imdb.com/title/tt0262021/

  10. OneStep's Gravatar Comment by OneStep on July 28th, 2008 at 7:25 am

    Would you take the risk to work for a startup now? I don’t think I would…

  11. JIm Jones's Gravatar Comment by JIm Jones on July 28th, 2008 at 7:56 am

    Wow dude, I forgot about most of those sites. Good article!

    JT
    http://www.FireMe.To/udi

  12. Zuma Marie's Gravatar Comment by Zuma Marie on July 28th, 2008 at 8:12 am

    another famous flop from 97-98 : iFusion.com

  13. Wendy D's Gravatar Comment by Wendy D on July 28th, 2008 at 8:20 am

    I was a fan of both WebVan and Kozmo. Both delivered excellent product and great service. They were especially helpful because I was living in downtown Atlanta, which has very few stores open at night and no local grocery store, or didn’t at that time. It was fantastic! But I guess both were too good to be true.

  14. Ryan Graves's Gravatar Comment by Ryan Graves on July 28th, 2008 at 8:27 am

    Interesting post, but over 15 of those stories all occurred between 1998 and 2001. Of course there were a lot of flops during that time, I’d like to hear more start-up failures after 2001…follow up post?

  15. Todd's Gravatar Comment by Todd on July 28th, 2008 at 8:50 am

    What did Kibu (#9) do or sell? The article mentions that they began “to attract users from its target market” but never says who that is???

  16. RandomRage's Gravatar Comment by RandomRage on July 28th, 2008 at 9:15 am

    It’s probably misleading to say Go.com “acquired” content from ESPN and ABC, since those are both Disney-owned properties.

  17. Adam's Gravatar Comment by Adam on July 28th, 2008 at 9:27 am

    What did Kibu do? And you should probably note that while Go.com partnered with ABC and ESPN, both of those companies are Disney brands as well.

  18. LocoTx's Gravatar Comment by LocoTx on July 28th, 2008 at 9:34 am

    Great list! Now we need a list of dot.com companies that made it and what they felt was why they were successful.

    I think know what to do is just as important on knowing what not to do.

  19. Rhea's Gravatar Comment by Rhea on July 28th, 2008 at 10:07 am

    Startup.com was a great film. Too bad Govworks didn’t succeed. The idea is now in use all over the place.

  20. rezzer's Gravatar Comment by rezzer on July 28th, 2008 at 10:18 am

    No loser list should be without the miserable failure of …. smallbusiness.com

  21. Anargeek77's Gravatar Comment by Anargeek77 on July 28th, 2008 at 10:31 am

    I think Friendster is still STRONG in numbers. Have you guys visited the site recently? To be honest its more user friendly than FACEBOOK or MYSPACE.

    You shouldn’t include friendster.com as one of the bombed sites. I still use it, they have APIs, WEB 2.0 and they are OPENSOCIAL.

    Being a SELLOUT doesn’t mean you bombed!!!

  22. Beef Jerky Bouquet's Gravatar Comment by Beef Jerky Bouquet on July 28th, 2008 at 10:38 am

    Just proves you can have a great idea, great intentions, etc … but you still need the right minds to push it forward. Great article.

  23. Ad Manager's Gravatar Comment by Ad Manager on July 28th, 2008 at 11:12 am

    Some people are just way into the future and it’s not their time to shine. We’re seeing another wave this time around too, even though only smaller players.

  24. Fubiz's Gravatar Comment by Fubiz on July 28th, 2008 at 11:39 am

    Funny selection!

  25. zbeast's Gravatar Comment by zbeast on July 28th, 2008 at 12:51 pm

    A friend of mine use to work for friendster.
    What a pile of poo that company was.
    I can’t believe they didn’t sell when they could.

    I don’t know why kazaa was on this list..
    they didn’t fail because they were bad they failed
    because they were destroyed by the music industry.
    People liked kazaa, they didn’t like the free spyware tho.

    Also this list is real short.. there were no just 25 company’s who failed during the dot.com time frame there were 100’s that you may have or not have heard of.
    excite, inktomi, ariba, netscape the list go’s on and on.
    Befor you say that netscape is not out of business, I’ll
    clarify. After netscapes business started going down the tubes, the company was split up and sold off to sun and aol.
    100% of all of the employees quit withing the next 10 months if they were not let go when there managers quit.
    All that remains of “netscape” is it’s name.

  26. Ron's Gravatar Comment by Ron on July 28th, 2008 at 12:57 pm

    Wow, I remember when eToys was rocking on the stock market. Too bad they never survived the bubble burst… here’s a story of how they could of potentially changed their strategy and business tactics to surive (look at the excerpts)… http://www.readtheanswer.com/index.php?RTA=web2

  27. Adam Curry's Gravatar Comment by Adam Curry on July 28th, 2008 at 1:28 pm

    don’t forget PODSHOW

  28. Kevin's Gravatar Comment by Kevin on July 28th, 2008 at 2:34 pm

    Great read…enjoyed it. It seems as though PlanetRX is still up and running though. I even decided to call them directly and place an order and was able to do so.

  29. Thanga's Gravatar Comment by Thanga on July 28th, 2008 at 2:50 pm

    This is a great collection. I have started my internet business few months and this article is a great input to my business decision.

    Great Job. Keep it up.

    -Thanga

  30. Laura's Gravatar Comment by Laura on July 28th, 2008 at 3:09 pm

    eve.com – I had quite a few friends involved with them. They gave a great severence package, though!

  31. katie's Gravatar Comment by katie on July 28th, 2008 at 3:16 pm

    Kick ass list and a great example indeed. I forgot about eToys. Loved their jingle. I can’t believe Beenz raised 80MM dollars. WOW.

  32. Thad's Gravatar Comment by Thad on July 28th, 2008 at 3:49 pm

    Garden.com

    I knew I had wasted my money when the strategy was “kiosks in gardening centers” promptly followed with a 10 minute description of why it was a brilliant idea. Only minimal change in consumer mindset and spending patterns will make a ton of money.

  33. Mark's Gravatar Comment by Mark on July 28th, 2008 at 5:38 pm

    Great list, I was a pretty prominent user on a number of those sites (particularly Altavista).

  34. thermocline's Gravatar Comment by thermocline on July 28th, 2008 at 9:01 pm

    living.com

    $70 million burned in 12 months, and they took a family-owned furniture business with it.

    Context Magazine: http://tinyurl.com/5g7gff
    SF Chronicle: http://tinyurl.com/5akd6k

  35. Michael's Gravatar Comment by Michael on July 28th, 2008 at 11:53 pm

    You would think the time is ripe for a WebVan service, with the gas prices so high right now.

    Safeway has been trying to deliver your groceries for a couple of years.

    Has anyone ever had their groceries delivered?

    Take care,
    Michael

  36. fred's Gravatar Comment by fred on July 29th, 2008 at 2:06 pm

    I was bitten for almost $5g working for SoulMD.com. They went under and refused to pay for some work I did. Talking to the CEO on the phone, his answer was- quote- “Hey, you got screwed! Get over it!” My lawyer sent him a letter and it was returned unopened, and the little shit had carefully colored a box over the entire address with a ball point pen.

    Monte, we have unfinished business if I ever see you on the street.

  37. ridge's Gravatar Comment by ridge on July 29th, 2008 at 4:33 pm

    what? no garden.com ? sheez!

  38. Antinous's Gravatar Comment by Antinous on July 29th, 2008 at 11:11 pm

    Sadly, my stock broker, the person who was giving me investment advice, sank all his money into eToys when it was at its peak price. I derive a little satisfaction from imagining that he’s living in a smaller refrigerator box than me.

  39. WebDrops's Gravatar Comment by WebDrops on July 30th, 2008 at 1:13 am

    SAD!!! they must have put in so much of hard work… :(

  40. Jenn's Gravatar Comment by Jenn on July 30th, 2008 at 2:35 am

    What about “powwow”? the downloaded program to “chat”…man that was awesome back then! *LOL*

  41. ‘Chelle Parmele's Gravatar Comment by 'Chelle Parmele on July 31st, 2008 at 12:03 pm

    There’s a lot of things to be learned from failure. Thanks for the reminder of some of the more fantastic failures out there.

  42. harry's Gravatar Comment by harry on August 1st, 2008 at 9:19 am

    This is great list and i think it shame such great ideas might fail , more research should have been done though i guess

  43. Tamar's Gravatar Comment by Tamar on December 14th, 2008 at 12:17 pm

    This is a very good site, it will help me to know what not to do in starting my own business. Thanks for the info.

  44. Fleemarkets's Gravatar Comment by Fleemarkets on December 19th, 2008 at 9:58 am

    very informative…thanks for the post.

  45. David King's Gravatar Comment by David King on December 28th, 2008 at 5:16 pm

    Wow…

    I guess they did bomb… because I haven’t heard of any of them!

  46. joe gelb's Gravatar Comment by joe gelb on January 9th, 2009 at 10:32 pm

    i still use and love friendster!

  47. Paul's Gravatar Comment by Paul on January 28th, 2009 at 8:29 am

    I worked for an online publisher during the 15 minutes that Beenz was alive.

    Beenz were desperate for us to jump on board. I remember one of their reps trying to convince me that eventually, currencies would be replaced by ‘Beenz’. I laughed so hard I almost wet myself.

    As laughable as their distorted ‘vision’ was, they somehow managed to convince some moron in our marketing dept that it was viable. We rolled it out across several million pages, only to roll back 4 weeks later when Beenz announced they’d pulled the pin.

    Beenz was yet another hair-brain idea sold by enthusiastic 20 somethings to greedy investors and marketing managers so wet behind the ears and desperate to make a buck, they couldn’t spot a stupid idea if it smacked them in the face!

    But having said that, if someone told me back in 2000, a site like Facebook would be worth billions, I’d have told them to get off the crack-pipe.

    Maybe they are the visionaries – maybe they know the odds are slim, but, if it works, then the sky is the limit. I guess it’s easy to take a chance when you’re using someone else’s money.

  48. Ryan's Gravatar Comment by Ryan on February 5th, 2009 at 3:01 pm

    So, with all of these out of the way, where might someone get advice on starting yet another one? Maybe one with a useful purpose, cash flow, wide market, ect., ect.. I have an idea that I want to get off the ground, but don’t know where to go to get good advice before the “beenz” are spilled.

  49. Vince Talerico's Gravatar Comment by Vince Talerico on June 11th, 2009 at 8:47 pm

    I wish there were 100 failures on this list. That was a great read.

  50. Saad's Gravatar Comment by Saad on June 24th, 2009 at 2:10 pm

    great read

  51. Charlie's Gravatar Comment by Charlie on November 16th, 2009 at 8:44 pm

    I’d have added DEN to this, for sure…

  52. Paul's Gravatar Comment by Paul on November 16th, 2009 at 10:32 pm

    Same comment with Todd. I don’t recall seeing what Kibu was about in the article. Also, IMHO, some of the companies don’t deserve to be in the “failed miserably” list. Other than that, it was a good read. ;)

  53. Cal's Gravatar Comment by Cal on November 17th, 2009 at 4:21 am

    Interesting Read, jogging my memory to many, thinking “failed miserably” is in the amount of revenue lost. Ordering kitty litter, waiting for 2-3 days stinks to high heavens.

    OMG, Owners of company must not have ever owned a stinking Cat.

  54. Christian's Gravatar Comment by Christian on November 17th, 2009 at 4:25 pm

    The old ones like boo and webvan are wellknown but what about some more recent epic startup fails? It’s a dilemma that we won’t hear about any big fails unless the big next bubble explodes. Until that happens, the small fails won’t seem big and relevant enough to talk about.

    As Nassim Taleb puts it right in his book “The Black Swan”, people tend to look on the big and colorful successes (twitter, Facebook) but are ignorant when it comes to all the small failures that happen silently and alone.

  55. Internet Business's Gravatar Comment by Internet Business on July 29th, 2010 at 4:38 am

    Unfortunately, it sank and my stock broker, and the person who was giving me advice in the area of investment, all his money in the e-toys when prices were at their peak. I derived little satisfaction from the thought that living in a smaller square me the fridge.

  56. Nitin's Gravatar Comment by Nitin on November 13th, 2010 at 5:50 am

    I heard of Flooz and Beenz. I guess they were really popular and could have used the brand name to sell something that would sell.

  57. Startups's Gravatar Comment by Startups on January 4th, 2011 at 11:58 pm

    friendster is still ok. Great read thnx.

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