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1. What are the reasons you think WebVan failed?
There are many reasons why Webvan failed so spectacularly but I’m going to focus on Webvan’s management team and its technology as the panicle reasons for their spectacular failure. To the outside observer, the management team is comprised of the ultimate all-star high caliber players. Webvan’s executive team has extensive executive management experience and backgrounds that goes back to Anderson Consulting, Marriott, GE, MCI Worldcom, FedEx, Oracle, Goldman Sachs, Border Books, etc. They seemed to be the best and brightest in their field, yet collectively, their “bigger is always better” mentality, combined with a plainly optimistic forecast drove Webvan to bankruptcy. This all-star team figured they had the ultimate solution to the problem that everyone was looking to solve; they call it “to deliver the last mile of e-commerce.” They were so good that they were able to convince investors to put money into Webvan. In 1999, Webvan raised $120M in funding and raised another $275M by selling a stake in Goldman Sachs, Softbank, and Sequoia Capital. In it’s IPO, it raised another $400M and at one point in time, Webvan had market capitalization of $15B.
Moreover, the management team invested huge sums of money into their information technology in software management software and automated systems. The high tech, highly automated warehouse capable of processing up to 8,000 orders a day, a capability that far exceeds it’s demands of only 2,000 orders per day. Webvan's success depended on high volume orders, without it, their elaborate system turn out to be costly and inefficient. Webvan's expensive technology system combined with rapid expansion burned most of the...