Webvan

Webvan's 2001 collapse after burning through $1.2 billion demonstrated that being right about the future doesn't guarantee survival until the future arrives. The company built automated distribution centers for grocery delivery, designed to serve markets that wouldn't achieve sufficient density for profitability for another 15 years. Webvan was a time-travelers' tragedy—correct about where retail was going, fatal in its timing. The mechanism failure was capital allocation assuming future demand. Webvan invested $1 billion in distribution infrastructure before validating that customers would pay for grocery delivery at prices that covered costs. Each automated warehouse cost $30 million; the company planned 26 markets before any single market proved the model. This is overbuilding for hypothetical scale—creating infrastructure for demand that didn't yet exist. The company's unit economics were negative from the start. Grocery delivery required dense order concentration to make routes profitable; Webvan achieved neither the density nor the prices needed. Each delivery cost more than customers paid, but the company expanded anyway, assuming growth would solve the math. When the dot-com crash cut off capital, Webvan had massive infrastructure, minimal revenue, and no path to profitability. Instacart would eventually prove grocery delivery viable—but through a capital-light model that didn't require owned warehouses. Webvan's lesson: being right about the destination doesn't matter if you run out of fuel before arrival.