The Dot Com Bubble Companies

the stories themselves are interesting. And I think that the story we're gonna cover today or begin to cover today spoiler alert, this is a part one of a multipart episode. I think this is a particularly interesting story. It's got a lot of morals to it, write a lot of lessons to take home. And today we're gonna talk about the dot com bubble and what happened to some of the folks and companies that we're affected by that bubble bursting.

And it's actually a really fascinating series of stories. And as I said this as part one of the discussion, it turns out there are more companies that are really important or were really important, that we should cover, including a couple that weathered the dot com disaster and stuck around and are flourishing even now. Cough Amazon, cough cough. But before we jump into a where are they now discussion, I should backtrack and talk about what the dot com

bubble was. Some of you may even be young enough where you weren't around during the dot com bubble days, or maybe you were very young when it happened. I was actually entering into my professional career at the time of the dot com bubble bursting, and it was a rough time. I did not work directly in the dot com sector. I worked in a company that had a lot of clients that were dot com clients. There were there were companies that were using the company I worked for.

I worked for a consulting firm back in those days, the dark dark days, pre health stuff works, and a lot of our clients were dot com companies. When the bubble burst, most of those companies ended up going away or otherwise having severe restrictions put in place, and that affected the company I worked for. So this was a big thing. It wasn't just that certain companies went under and people lost their jobs. There was a ripple effect

that was felt throughout commerce in general for quite some time. Now, let's address this concept of what an economic bubble is in general, so that we can just understand what we're

talking about. Business Insider offers this helpful definition. And economic bubble exists whenever the price of an asset that may be freely exchanged in a well established market first sores then plummets over a sustained period of time at rates that are decoupled from the rate of growth of the income that might reasonably be expected to be realized from owning or holding the asset. Thanks Business Insider, that clears

things right up. Let's break that down because it's actually a pretty simple concept when you when you really look at it. But for some reason, some entities find it necessary to obviuse skate things with language rather than just say things in simple terms. And an economic bubble occurs when people are essentially paying more for something, then what that's something is ultimately worth. And keep in mind what something is worth is based upon our perception of its value. Right.

There's nothing intrinsic about any one thing versus any other thing that makes it automatically worth more or less. It's how we perceive it. Uh. Some things are necessities, right, like food and water. Those clearly have a value in the sense that they keep us alive. And depending upon how hungry or thirsty you are, it may be of

much greater value to you at that time. If you are absolutely stuffed with the last visit to the all you can eat buffet over at the Golden Corral, you're probably not really ready to pay a whole bunch of money for a steak. But if you haven't eaten for a couple of days, that might be worth everything to you. So the point being that while they were talking in absolutes, really you should remember these are gradients. So people start paying more for something than what the perceived value of

that thing actually is. Eventually, this imbalance reaches a tipping point, and you might say people wisen up, or maybe they get cold feet. They realize that they're probably not going to get a return on any investment they put into that company. The point is everyone starts to pull away from that thing that they had been pouring money into, and then the vacuum created causes the market to destabilize and ultimately collapse in on itself, at least in the

case of a bubble collapse. And there's been a lot of economic bubbles over the years, generally speaking. The dot com bubble began in the spring of nineteen ninety seven and collapsed initially around two thousand, two thousand one. That's when we started seeing the first major trouble spots arise, and then you would see the aftershocks of that continue further into the future of that time. Our past time is linear, and so it kind of shook out by

two thousand three. So seven to two thousand three is generally the period of the dot com bubble, with a lot of the company's going out of business around two thousand two thousand one. So what caused this bubble and its collapse. Well, I've done a few episodes about the dot com bubble, so I'm just going to give you

a summarized version of what happened this episode. In the f c C in the United States lifted restrictions that had up to that point outlawed commercial use of the Internet, so now people could actually use the Internet for commercial purposes starting in ninety one. One year earlier, back in Tim Burners Lee had built the first web server and

web client. He was working with CERN, that's the institution that runs the large Hadron Collider, so he had built the first one of those back in So in ninety one, the web is brand spanking new, almost no one has heard of it. Really, it's in research facilities and universities.

I remember the first time I saw the Worldwide Web, first time I ever saw a web client was when I was going to a college in North Georgia, probably three so that's a few years after the invention of the web client and the web server, and I remember thinking when I looked at it, this is never gonna take off. It was way too slow. Even with our our our colleges computer connections, web pages just took forever to load, and they were really boring to look at.

I thought, why bother with that? Just use tell net. So I probably would be one of these pulled back in the dot com days who made some misguided decisions, because I certainly didn't see the Web becoming nearly as popular as it did, nor would I have guessed that the Web would one day serve at least in part as the reason why I had a job. And now I am totally there. Anyway, The point was, it was

early days, but everyone was really excited about it. The potential for the Internet was enormous, and everyone kind of recognized it. Eventually started hearing people talk about something called the Information super Highway referring to the Internet, and it was just starting to take hold. Even by the mainstream public was still largely unaware of the Internet and what it was all about. There were a lot of folks who thought that the Internet and the Web were the

same thing. You could argue that there's still a lot of people who think the Internet and the Web are the same thing. They're not. The Web is just one facet of the Internet. It's kind of like a layer on top of the foundation that is the Internet, with other layers like email and FTP servers and that sort of thing also existing on this foundation. Remember, the Internet itself is a network of networks. It's the interconnectivity of all these different machines and the protocols that allow them

to communicate with each other. That's what the Internet is now. You may have even seen some news clips from the mid nineties of various news anchors and television show hosts trying to suss out what the heck all this Internet terminology actually meant. There's a great clip a Bryant Gumbel who is trying to figure out the structure of an email address, and he's talking about the AT symbol. You know, the A inside the circle, and he's like, is that

an AT? I heard it was an AT, but that can't be right, right, And so it's kind of charming really to see a time when the Internet had been around for a few years, people in the know had been using it, but it was just now starting to

get into mainstream consciousness. Uh. It was a really exciting time and technology and a lot of companies were looking at the Internet as the next possible way to reach customers or to convert people into customers, and because the FCC had lifted those commercial restrictions on the Internet, companies had the opportunity to create a presence there and define

their online brands. In an interview that same year that Bryant Gumble was trying to figure out what the ADS symbol was, Eric Schmidt, who would later on make a really big name for himself over at Google, proclaimed that by the year two thousand, every major company would have a presence on the Web in some way, and he was right on the money right there. Everyone needed to get on the web, even if they didn't understand exactly

what they were going to do. Once they had a web presence, they knew that they needed to be there because people were going to go there. And while in the early days no one was really sure how the web might serve as a way to generate revenue apart from Internet service providers who were making money by charging people for Internet access, everyone was sure that the web was the pathway to fame and fortune or if you prefer if you're an Indiana Jones fan, origin and Glory kid,

fortune and glory. Many people were becoming Web citizens, meaning that you had a lot of people subscribing to services that would allow them to access the Internet. Good Old American Online would be one of those, America Online giving me free CDs to act as coasters since six uh. But a lot of people were starting to subscribe to Internet service plans and start to serve the web. So there was definitely an audience there for companies, and the

potential for customers was also there. So there was this unprecedented method of reaching out to people who would become your customers. That gave companies a chance to have a more personal connection with their customers instead of just blasting

out ads everywhere. And this became something of a land grab, and in the midst of all this chaos, a new entity emerged, and these were companies that didn't just flock to the Web in order to extend an already existing brand like Coca Cola or Nike or something like that. These were companies that could not have existed before the web. These were the web based or web integrated companies that depended heavily upon the Web for their respective business models.

These were the dot coms. Now, not every dot com was a web based company, I suppose. I mean, the dot com bubble affected more than just Internet related companies. Some possibly fell more into the general technology category, but many of the famous ones either depended solely or heavily on the Internet as part of their business. And in April nineteen seven, business was booming. Startup companies were receiving

enormous amounts of investment capital. They were going to initial public offerings super early, so they were turning into from privately held companies into publicly traded companies at an enormous rate. I mean, we were seeing I p o s every few weeks, it seemed like, from these various startup companies, and people were eager to purchase shares in them and to join in this gold rush that was the early

days of the commercial web. Uh so dot com companies represented this idea of of opportunity and potential, and no one was really sure where it was going to go, but everyone was pretty sure it was gonna get really awesome. If you back the right company, you would strike a vein of gold and you would be set for life. Companies that were a little more than a name and a cool sounding idea, we're getting millions of dollars and investments long before they could prove that they had any

sort of working business plan or strategy. And so these new startups began to sell lots of stock, and those stock prices were skyrocketing. Many startups rewarded employees with stocks, paying them in shares of the company. Typically you'd be promised a salary that would be pretty good, but the stock options had the potential to turn you into a millionaire. Several companies had employees who, at least on paper, had

become millionaires because of these stock options. Uh Normally, you can't sell your stock options right away, so you have to wait for them before you can. You have to wait a certain amount of time before you can exercise them and then sell them, which meant that on paper. Sure, you're a millionaire, but you can't actually access any of

that money or spend it in any meaningful way. If you started spending, you would essentially be going into debt and you would have to wait for your stocks to mature or you're really you're for you to be able to exercise your options is really what you would need to be able to do, and then sell that off in order to actually get access to that money. Meanwhile, you had companies creating ridiculous head hunting tactics in order to gain the right talent, and folks would jump from

job to job. They get lured away from one company to another with a promise of more cash or better benefits and more stock. And this was really a crazy time to be working in any sort of tech industry. There was no such thing as loyalty on either side, because you had companies that were overinflated and then going under in the course of just a couple of years, and you had employees who would desktop from one company to another at the slightest indication that they would be

able to get a favorable deal. So it really destabilized the workforce, and I think we're still feeling effects of that more than a decade later. The stock inflation in particular was ultimately unsustainable back in before the bubble began to inflate. The Nasdaq Stock Exchange, which is home to many tech company stocks, it typically has younger industry companies. The the old companies are on the Dow Stock Exchange, but the really the young, scrappy ones tend to be

on NASDAC, including most of the tech companies. Uh. Well, the Nasdaq index was at one thousand points, but hang on, what the heck are NAZDAC points and what did those points even mean? Well, to get at this number, you have to follow a few steps, and to understand this, I'm going to use a hypothetical example. So let's say I have a company and I've launched my new company. We'll call it um Oh Ben would like this. I'm gonna call it Baby Jay's Lemonade stand and it gets

listed on the Nasdaq Stock Exchange. So the number of shares I issue and the price that those shares trade at decide my company's market capitalization, which is the market value of my company. So for this example, let's say Baby Jay's Lemonade standards trading at ten dollars a share, and I have a hundred thousand shares available on the market. So we take those hundred thousand, we multiply that by ten,

and that gives me one million dollars. That should mean that Baby Jay's lemonade stand has a market capitalization of a million bucks. Well, that's how much my company is worth according to the market. But what about the NASDAC points. Well, those points represent a market capitalization weighted approach, meaning the points give you a quick glimpse of the value of

the stocks traded inside the index. Now, I'm talking about a collective value here, not an individual company, and the bigger companies have a stronger influence on the overall point value than the smaller companies because the bigger companies typically have way more shares on the market. So it has a relationship between the value of the shares and the number of shares that are out there in total across

all of NASDAC. So if a few big companies are doing really well and a bunch of smaller companies are doing really not so well, the NASDAC point system may still indicate a healthy growth because those larger companies are making a bigger impact on the points than the smaller ones. Anyway, back in April nineteen nine five, like I said, the

NAZADAC points were at about thousand. Five years later in two thousand, in March the index was closer to five thousand, so it had grown incredibly over the course of those five years. Keep in mind, when the Nazdac launched, it had one hundred points. That's how much they determined we're in there in nineteen seventy one when the NAZDAC launched one hundred points. So from nineteen seventy one to nineteen ninety five it went from one hundred points up to

a thousand points. From ninety five to two thousand it went to five thousand points. That's an incredible amount of growth. The actual combined value of all those stocks back in March two thousand, before the bubble began to deflate, was six point seven one trillion dollars. Wow, that's a lot of cheddar By April sixth two thousand, so March two

thousand six point seven one trillion. April the next month it had dropped to five point seven eight trillions, So, in other words, in one month, the market had lost nearly one trillion dollars, or if you prefer a real world scenario. During the two thousand Super Bowl, there were seventeen dot com companies that had ads that played during that Super Bowl, and collectively those ads cost about forty

four million dollars. During the two thousand one Super Bowl, one year later, only three dot com companies had ads played during the Super Bowl. Most of the other companies that had advertised during the previous year didn't even exist anymore. That's how brutal this bubble bursting was. So what happened, Well, the big thing that happened was that people lost confidence in the tech sector in general and the dot com

sector in particular. A bit of a panic began in March two thousand when Dell and Cisco, which are two large tech companies that had predated the dot com era and we're large enough to weather those issues. They had been growing more organically over time than the dot com startups had, so del and Cisco would get big, but they got big at a slower pace. These startups would suddenly just inflate to huge size out of nowhere. Well, del and Cisco both gave a little bit of a scare.

Two investors they decided to UH to authorize selling a huge amount of stock and end up being this kind of domino effect, right, so they placed large cell orders on their stocks. It's spooked some investors. People began to sell off their tech stocks in general. And when you've got a lot of people trying to sell a stock and not a lot of people trying to buy stock, prices began to drop. Demand had diminished. You suddenly had people trying to dump their stock as opposed to buying

up more. And if no one wants to buy it, then your price goes down. If I'm selling lemonade at at Baby Jay's lemonade stand, but I'm selling it at five bucks of glass and no one's buying a glass, chances are I need to start lowering that price. And it might not be until I get all the way down to a quarter of glass before anyone even bites or SIPs. I guess it's lemonade, so you wouldn't bite

it anyway. These startup companies, many of which have been burning through crazy amounts of investment money, had failed to show any signs of actually creating a viable business. Some companies were struggling to turn a profit, and others weren't doing much of anything as far as the average investor could see. A lot of them were spending all that investment money on lavish, trendy office spaces or crazy amenities, partly in an effort to attract talent from other companies,

and partly just as an act of extravagance. It was a house of cards, and once people began to question it and wonder if they were ever going to a return of their investment, the whole thing began to topple. For many of those companies, the stocks they issued weren't worth the paper they were printed on. Employees who were promised a future filled with wealth watched as their compensation shriveled up and all those shares in the company became worthless.

And many of the leaders of those companies were held up to scrutiny and some of them to ridicule. But I want to make this clear. I think most of those folks were genuinely trying to make a viable company. There are a few m M, let's call them jackasses in the group who were boasting about having lear jets and other crazy amenities, and perhaps some of the things that happened to them were well, let's just say they are probably people who were experiencing a sense of shot

in freuda as it was unfolding. Uh. And in some cases they were just trying their best, but they didn't have a business plan that was very solid, or they's got too much money too quickly, and that paradoxically led them down to their eventual collapse. Now we're gonna talk about some specific companies and what happened to them in our next section, but first let's take a quick break and thank our sponsor. Alright, so that was the super

fast version of the dot com bubble bursting. Now let's talk about some of the companies and founders that were involved in this mess. One of those companies was Broadcast dot Com. So the history of this company goes back aways before there was a web actually, So back in there was a guy named Cameron Christopher Jabe. It seems goes by Chris Jabe these days, and I may even be mispronouncing that it's j A E. B. If we're

doing it as old English, it would be jab. Anyway, he felt he could really solve a problem that sports fans run into, and that problem is that if you're traveling, you might not have any way to tune into a station and listen to your home team whoopop on. I don't know. Let's say it's the New York Yankees, because they deserve it. It's my fantasy, let me live it.

Jeb's initial approach was to ask various sports teams if he could get permission to broadcast the events of games to an audience, and he found an early investor in Mark Cuban. Now by this time we were talking about the nineteen nineties, and Mark Cuban had apparently been thinking about a similar idea for a while, and Cuban effectively took control of the company in return for his investment.

Uh he brought on a guy named Todd Wagner who had attended Indiana University as did Mark Cuban, and Wagner held a law degree and was a c p A. And in they formed a company called audio Net. Three years later they would rebrand it as broadcast dot com. The core of the business remained this idea of streaming games over the Internet, or really not streaming a game so much as streaming the commentary about a game over the internet. In the company went public and stock prices skyrocketed.

In Yahoo acquired Broadcast dot Com in a stock purchase deal that was valued at five point seven billion dollars. These days, it's often cited as one of the worst acquisitions of all time now around at that that point, in fact, we did a tech Stuff episode where we talked about this. Around then, there were about a half million users on broadcast dot com and they, you know who, spent five point seven billion dollars in stock, So it essentially worked out to being ten thousand dollars per user

of broadcast dot Com. So yeah, who could have done the same thing by just going to everyone who had a Broadcast dot com active account and cutting them a check for ten grand and they would have spend the same amount of money ten dollars. I guess if I were a user of broadcast dot Com, I would have felt really flattered that I was valued so highly well. Cubans sold off his Yahoo shares, or most of them,

and he secured himself as a billionaire. Todd Wagner also became a billionaire, but he would stay on with Yahoo until the year two thousand and he turned down an opportunity to become the chief operating officer of Yahoo. Jab, the founder of the feast, received a relatively paltry fifty million dollars. So even though it was his idea, and he often is overlooked in discussions about broadcast dot com. If you talk about broadcast dot com, you talk about founders,

it's almost always Mark Cuban and Todd Wagner. They almost never mentioned Jab, who had actually come up with the idea in the first place. As for the company, even with y'all whose considerable wealth and size behind it, it never really turned into anything profitable, and so in two thousand two, Yeahoo effectively shut it all down. Mark Cuban is still an investor. He's also the owner of the Dallas Mavericks, so he's been doing all right. You might have seen him on Shark Tank. He also tends to

speak out on matters of political significance. Todd Wagner has become known as an entertainment investor. He has interests in several television and movie ventures, and he's also the head

of a large charitable foundation. So that's pretty cool. And asked for the guy who came up with the idea of Chris Well, he became the owner of a company called common Ground Kawaii for nine years, and according to his LinkedIn profile, that was a sustainable resource center established to make it easier to gain access to education, products and services that enhance the environment, build community, and support

the local economy. It's pretty cool thinking about making a change, using his money to help make a positive influence on his community. And in twenty sixteen, he founded a new company, all the b Well Media Company, and he said, I envision a uniquely organic, secure health and information service that allows people to create improved relationships between themselves, their community, and the environment. And he's living in Kawaii, Hawaii, which

is pretty awesome. I've been to Kawai and I love it, So if he ever wants me out there to talk about his company, I am willing to make that trip. But moreover, I think it's really cool that he has taken his money and while he might have been essentially written out the history books in large part with this whole story, he really was trying to create a solution to a problem. And then after all of that, he's still working to better his community. I think that's admirable.

Although Broadcast dot Com itself obviously didn't stick around, so they were both both Mark Cuban, actually all Mark Cuban and Christi Yap. We're both essentially out of the picture by the time Broadcast dot Com fizzled out, and recently Fortune reported that Cuban is interested in buying back the

broadcast dot Com brand. This was from some articles that were written in mid August, and according to Barbed Darrow, who wrote a piece for Fortune, Cuban wants to use the domain as the home of a private chat app that leaves no trace on servers of messages between people.

And if you were to use the app, if you ever wanted to keep a record of what was said, you could do screen grabs, but they would end up blurring out the names of the people who were involved in the conversation, so everyone would become anonymous in the screen grabs. During the actual conversation, you know who you're talking to, but the records would not leave a trail to follow. And you can imagine in this day and age why people would be interested in such a piece

of technology. With some governments, including the United States, occasionally getting a little nosy about who is saying what and to whom, uh, it's an issue and if you are criticizing our current administration, they seem to take a big interest in that, which is somewhat worrisome when you live in a nation that is supposed to be valuing free speech. So this is kind of a way to train and ensure free speech by removing the ability for other parties to look into it in the first place. All right,

we're gonna stick with the b companies here. We just talked about Broadcast dot com, but now we're going to talk about a different company called Boo dot com. B o O as in what a ghost says when it wants to scurre you. This was an e commerce company that was all about selling branded fashion apparel, mostly in

the sports and active activewear categories. It was founded by Ernst mom Shton, Casa Leander, and Patrick Headland, three Swedish entrepreneurs who founded the company in nine And while I had problems with Jab's name or Jabe, I definitely butchered all three of their names, so my apologies to them. Malmstein and Leander had previously founded an online book store called Bocus dot com b O k u s and then they were able to sell that for Bouckoo's of cash.

They became millionaires, and Boo dot Com was their follow up. They decided they wanted to try a new approach and create a new company. They launched the site in nineteen. Within a year it would collapse. So it goes up in ninety nine and comes down in two thousand, having burned through more than a hundred thirty million dollars in investment money in the process. So that's more than ten million dollars a month. So what went wrong? Well, part

of it was just plain old hubris. The founders wanted to create an instant Amazon like service, but for fashion instead of for books. Remember Amazon started off as simply a bookstore online and it gradually grew into everything. But back in the day, it was a bookstore. So they wanted to do the same thing that Amazon did, except they wanted to go with sports fashion. However, uh, they did it a different way. So they wanted to have that global presence. But Amazon got to its size organically,

it grew. It started originally as a regional company, and it grew into a global company over time. Boo dot Com kind of wanted to skip all of that and go straight to the global company, part rail of the gate, so you could say they bit off more than they could chew. The company had more than three fifty employees at its height, with offices in London, New York, Paris, Munich,

and Stockholm. They had all these moving pieces in play, but they hadn't secured something important, namely the participation of brands. As it turns out that's really important if you want to sell branded clothing in your online store. The brands had established distribution lines that weren't easily disrupted or added to.

So the brands didn't really want to get involved in a company that was marketing itself as a way to save money by buying online, because then your premium brand might look like it's a discount brand, and that's not great as far as perception goes. Plus, there were all these relationships they had with brick and mortar retail stores and they didn't want to alienate their partners by working with this internet startup. So boo dot com was having

some issues just getting stuff that they could sell. In addition, the founders were allegedly unable to answer potential investor questions, important ones such as how many people do you expect to visit your site, how many of those people who visit will convert to customers? How much must each cuss tim or spend for the business to be profitable, and so on, And when they were unable to provide answers

to those questions, investors began to back away. So when the site launched, it had a point to five percent conversion rate. That means one quarter of one percent of all the people who visited the website actually used it to purchase something that's not great. So you had this service that brands were reluctant to work with for fear of alienating the retail partners, not to mention the stigma

being associated with a bargain shopping experience. You had investors who had lost confidence in the team, and you had incredibly lackluster conversion rates. The website designed didn't do a many favors either. You can actually see pictures of the old boo dot com website. It was pretty jankee. At one point, Maumston said, unless we raised twenty million dollars by midnight, boo dot com is dead. Well they failed

to raise twenty million, and bood dot com died. In retrospect, you could say it was a classic case of reaching far beyond your grasp, but of course that's a lot easier to say in hindsight. These days, Ernst Mouston is the CEO of the luxury clothing line Laura Bohnk, named

after the company's creative director. There's also a website bearing his name that was put up by what I assume is a disgruntled former employee, which is yikes, y'all, m I'm not going to share that you r L. But it's easy enough to find if you do a search for his name, and it ain't great anyway. Mouston also wrote a book about the experience of Boo dot COM's

failure and called it Boo Hoo. Kazia Leander, whose name I knew, I'm butchering, went on to become a consultant and lecturer for a while, then became a co founder of a branding agency called Studio Berg. Later, Leander became the produce certain director for a marketing and production agency called Vision and Art, leaving that job in two thousand and fourteen. And these days Leander works with Burga Bruke, a beverage company that makes organic drinks. They look tasty.

I wouldn't mind trying one. Now. I never used Boo dot com and I was never a customer broadcast dot com. So I don't know what my value is, but I bet it's not ten thousand dollars. But there is one service I did use in the dot com days, I think. I mean, I definitely used a service like this one around that time, but the one I used might not have been this one. It definitely went out of business because I had to stop using it, and I was very upset. But my memory ain't what I used to be. Folks,

get off my lawn. The business I referred to by the way as web van. Web Van launched in nine and it was essentially an online grocery store. So web Van created warehouses, refrigerated warehouses where they could store tons of different food. You would go onto the web band site, you would pick the food you wanted and order it, pay for it, and then it would get delivered to

your door. You just pop right there on the web page and do it all there is great and you would get you know, the price of the items plus a delivery fee. It would all be wrapped up. Probably sounds a lot like services that are available in many parts of the world today, but back then it was a pretty much a brand new business idea. And at that time, my wife and I were living in Atlanta, and neither of us had a car, and so a trip to the grocery store involved an hour each way

on public transportation. So you're talking a two hour round trip plus however long it takes you in the actual store, Plus you have to carry all that stuff on public transportation. And since you had to carry it, it meant that you were trying to go more frequently, so you didn't have to do big, big trips. It was a lot of hassle. So this was a really welcome service in

my household. Too bad it wasn't meant to be. You wouldn't know from the heights the company reached, though, according to the next Web at its peak, web Van was worth one point two billion dollars. Louis Borders founded the company. That's the same Borders who created the Border's bookstore chain, and web Van initially launched as a San Francisco area service, so it was regional and it did well, and that's what inspired Borders to expand this to a nationwide company.

It went public in n and like Boo dot Com, it attempted to grow at an incredible rate. They really tried to expand rapidly. They tried to make web van a fully operating service in multiple locations all at the same time, and it turned out to be an unsustainable strategy. The company bought warehouses across the US where else is cost about thirty million dollars each, and it bought out a competitor in the form of Home Grocer and burned

through about a billion dollars. Investors could tell things weren't going well. The company's stock price fell from its high of thirty dollars per share down to an unbelievable six cents per share. Yikes. In two thousand one, there was just no more cash to burn through, and the company laid off two thousand employees and then faced liquidation. So what happened to Louis Borders, the guy who founded it. Well, the Borders bookstore chain closed down in two thousand eleven,

so that was another blow to Borders. These days, he's heading up another go at the home delivery market with hd S Global and HDS stands for Home Delivery Service. So more than a decade later, he's going at it again. He's trying to get another business up where it's a delivery service including groceries to customers. Now there's a new challenge. There's several competing services, many of them regional in nature, that already provide these kinds of services that HDS is

interested in providing. Borders Louis Borders. That is has UH secured a lot of investment partners, and he tells HDS Global as quote the first robotic, highly automated end to end fulfillment system end quote. So we'll see how that turns out. Now. One of the big companies that crashed in the dot com bubble was called Excite e x C I t E like broadcast dot com. Excites roots

date back before the bubble really began to inflate. It was a search engine and it was originally created by a group of Stanford students, including a guy named Joe Krausse, but a lot of others worked on it too. Way back in they built this search engine and at the time they called it Architect. In nine after receiving three million dollars in investments, the service rebranded itself as Excite. Well in nineteen six they decided to bring on George

Bell to become the CEO of this new company. However, George Bell was a documentary filmmaker who had no experience leading a dot com company. Bell's first move was to gobble up some competition in a couple of acquisitions. Uh the Exite ended up buying another search engine called Magellan and another one called web Crawler. I actually remember web Crawler. Web Crawler is what I used before Google came along. I was a big web Crawler user back in the day.

The company then later went public, followed by another acquisition in the form of net Bought. They bought net Bought for thirty five million dollars in nine and then in nine Bell made what some people would later consider to be one of the biggest mistakes in technology history. He

turned down the opportunity to buy a little company called Google. Now, the story that everyone tells is that the asking price Google had was originally one million dollars and then later was knocked down to seven thousand dollars, but Bell refused to bite, and we know what happened with Google's right

there in the alphabet. To be fair to Bell, though, he says that part of the deal required Excite to replace their technology with Google's tech that if they did infect agree to buy Google, part of that agreement would require them to strip out the Excite search engine and switch to the Google Technology search engine. But Bell felt that this would cause rifts in his company. I mean, he had teams who had built Excites technology, and he was worried that if he forced this change, he would

alienate those employees. According to Bell, that is so it wasn't just the Bell didn't foresee the impact of Google. He was looking out for his team. He didn't want to create tension in the company culture. On September twenty one, two thousand, George Bell stepped down as the CEO of Excite, and the stock price had dropped more than a hundred dollars per share. In fact, that I lost about nine

of its value over the previous year. By the end of two thousand one, the stocks were down to a dollar per share, and the company ran low on funds and eventually declared bankruptcy. George Bell would go on to join General Catalyst Partners, which is a venture capital firm, so he's an investor. Joe Krauss, one of these Stanford students, who helped build Excite, is now a general partner at g V. G V started out as Google Ventures. It's a small world. Joe Krause goes into working with Google

and now it's been spun off. It's another investment firm that looks to tech and health sectors for an interesting and compelling businesses to invest in. Um. Now we're gonna take another quick break, but when we come back, I've got one more company I want to talk about in this episode, and then some thoughts to tie things together before we look to the next episode. So let's take

a quick break and thank our sponsor. Alright, so we're down to the last company for this first section, and I figure it was time for one more company, uh in this half In our next episode, all there is a few more stories of companies that went belly up in the crash. But now let's in this talk with a conversation about pets dot com. And if you watched television in the late nineties, you probably saw the mascot

for pets dot Com at some point. It was a sock puppet dog frequently holding a little puppet sized microphone with the pets dot Com logo on it and It all started with Greg McLemore, who is an entrepreneur, who in registered the domain name pets dot com, which is incredibly intelligent to do because that's a top level domain name and it's incredibly valuable. It's it's easy to remember, and it's very easy to direct people to it. And in n when McLamore got it, he didn't really have

a plan for it. He just thought that it was going to be valuable, so he bought it and sat on it. He also had a web design firm technically still does called web Magic, it's still a thing, and in web Magic launched the site pets dot com and it sold pet supplies and pet food online. Julie Wainwright would become the CEO of the company in nine after

McLamore sold it off. Now, the story most people tell is that pets dot com eight through its money by trying to attract customers through deals that were not profitable to the company, as in the company was actually selling stuff for less than it costs them to get that stuff. So let's say it cost him twenty bucks to buy this bag of food from a of company, a manufacturing company, and then they sold it for eighteen bucks, and so they were losing two dollars per sale on that particular

hypothetical situation. It was also known for its ad campaigns, which featured that sock puppet I just mentioned, and those were wildly popular, and they were also wildly expensive. They spent more than a million dollars on a Super Bowl ad for example. In the company spent nearly twelve million dollars on advertising while bringing in about six hundred thousand bucks in revenue. So less than a million in revenue

but twelve million in advertising. That's unsustainable. So the general story is that the company was selling stuff for less than it costs them to get it and spending way too much on advertising. But Waynewright says that's not the

real story. In a letter she wrote to Business Insider, she said that the real trouble was an infrastructure and that there were no plug in play solutions that could support a business that needed to grow that quickly in order to become a nationwide or global site, and rather than using an integrated cloud based approach, which didn't exist in two thousand, the company had to employ lots of I T professionals to run the site to make sure

it didn't go down. If it did go down, to get it back up and running, to oversee the UH, the actual inventory infrastructure, et cetera. And on top of that, they had a lot of competitors out there on the market.

There were a lot of pets supply companies that were springing up online, and pets dot Com acquired a couple of them, but there were others that were popping up as well, and they were offering similar products, sometimes at similar prices, and they all had similar names, which meant that your customer base is divided among all these different companies. It was a tough market to work in, and so Wainwright came to a conclusion as the company began to

run out of money. She said it would make more sense to shut down the company and return the money to shareholders, rather than to just keep on going until you were forced to declare bankruptcy. The business plan at that time was unsupportable. They really needed several years of operation in order to start turning around a profit, but they just didn't have the operating cash to be able

to do that. So it made more sense to return investments rather than push on until the inevitable liquidation other dot com companies around this time, we're suffering worse fates. I mean, Wainwright was looking around and she could see the web vans of the world going belly up. And so this was a tough decision to cut losses and quit,

but it was a tactical decision. All told, it took only two hundred sixty eight days for pets dot Com to go from its I p O to shutting its doors, So less than a year between when they first went public and when they first had and when they had to close up shop. Pretty crazy. Julie Wayne Right, according to Celebrity net Worth, received a severance package of around a hundred sixty five thousand dollars with a one sixty five thousand bonus and a performance bonus on top of

that of fifty thou dollars. Waynewright went on to become the CEO of a company called The Real Real, a consignment website that sells luxury items pets dot com. The domain ended up being purchased by pet Smart for some

undisclosed amount. The sock Puppet found work later on to an auto loan company called bar None Incorporated, bought the rights to the sock puppet for one five thousand dollars, slapped a new logo on the microphone, and gave the puppet a slogan, which was everybody deserves a second chance. So there's a happy ending for a sock. I love that the sock puppet was able to find work afterwards. Know where are they now? Story would be complete without

telling you what happened to the sock puppet. On the next episode, I'm going to cover more companies that had their famous day in the sun back in the dot com bubble, and we'll talk about where their founders are now.

And I can end this episode by saying there are some valuable lessons to be learned from these experiences, and some of those lessons only became obvious over time, such as it might be a good idea to wait for solutions to big infrastructure challenges before scaling up your business, but at that time, those solutions didn't yet exist, and no one was really aware of how hard it would be to go that big that fast, or if there

ever would be solutions to those problems. Now. Granted, typically when you encounter problems and people are able to identify them, that's when folks start trying to think up solutions to those problems. So maybe this was a necessary step in the grand scheme of things, but it really taught us that if you want to become a big power player in the space, it might not be the best idea

to try and tackle every single region simultaneously. It might be better to try and grow more organically so that you can build upon localized success and then scale up as you go, instead of trying to hit the ground running at a hundred miles per hour. As soon as you touch ground, it's tough to do. Another big lesson to take to heart is that you should avoid speculation. That is, you should avoid investing in things because you have the hope that's going to have a wild payoff

down the road. And part of the reason for that is if you do engage in that behavior, it inspires other people to engage in that behavior, and pretty soon you end up with a overinflated market which will eventually correct itself, and maybe you will get out of the market before it corrects itself, and maybe you'll end up being all right. You might make a profit in the process, but maybe you won't. Maybe you'll take a bath and all that money you poured into this company with the

hopes of having these crazy returns will be gone. In either case, there are going to be real people who are affected by these companies suddenly inflating and then deflating, and that's a shame. You shouldn't really be a part

of that either. If you are running a business and you're looking for investment, you probably don't need those ridiculous amounts that are being poured into these companies early on, because you then have the temptation to put that money towards things that are not really important for your bottom line. You might be spending them on extravagances, and so you

are not making good use of that cash. And later down the road, when things start to dry up, you have to start going to the well again and asking for more investment money, which gets harder and harder to do each time you have to do it. Especially if you've already decided to go public, then you've really need

to have your ducks in a row. You need to be able to explain how your company is going to make money, as opposed to just staying afloat on the investment dollars of people who are maintaining desperate hope that they're going to see a return on that investment one day. So these are valuable lessons and there's plenty of other ones we could talk about, and in our next episode will cover some of that as well. Uh, you don't

want to go and spend all your money. You don't want to go and pour money into something that's unproven, at least not a huge amount of money in it. You know, you don't want to brag about how extravagant your lifestyle is when you don't have a business plan.

These are just basic rules that I think people need to follow, and most people do, although we still see examples of folks committing these sort of errors today, well after this startup dot com bubble burst, some people argue that we're in another bubble right now with the venture capital and angel investors that you see out there, which is a slightly different world than what is going on

in the dot com days. In our next episode, I will talk about some more of these companies, tell you what happened to them and where their executives have gone off to. Maybe we'll chat a little bit about some of the big companies that made it all the way through the dot com era and came out the other

side and flourished like Google and Amazon. But if you have suggestions for topics that I should cover on tech stuff, or you've got questions or comments, you can get in touch with me my email addresses tech stuff at how stuff works dot com, or drop me a line on Facebook or Twitter to handle at both of those locations. Is tech Stuff h s W. I look forward to hearing from you, and I'll talk to you again. Releason for more on this and thousands of other topics. Is it how stuff works dot com.