Kozmo.com – Overdue for Extinction

You know how there are some things in life that sound good on paper, but turn out to be not-so-great in real life? An idea where, when put into practice, you’re confounded by why it didn’t work, because it seemed so brilliant? Kozmo.com was one such idea. …except for that it wasn’t even good on paper.

Anyone remember them? They were one of the goofiest internet startups of all time. Founded in 1998, the basic premise was: Consumers could turn on their computers, “dial up” (as we said back in those days) www.kozmo.com and put in an order for almost anything under the sun, and in less than an hour, a delivery boy would arrive at your door via bicycle, with whatever you ordered. And I really mean anything. You want celery sticks? Check. Peanut butter? No problem. Rambo III on DVD? Yep. All in the same order? Or by themselves? Delivered for free? In less than an hour? On a bicycle? At 2:00am? Yes, yes, yes. You get the point.

Oh wait, there’s a catch though… you had to live in D.C., Seattle or New York. I’ll never understand how they even raised a single penny of Venture Capital. But raise it they did—to the tune of a cool $250 million.

Say what?

It’s true—this company actually existed. They had over a thousand employees too. One axiom we learned in the dot-com bust was that just because a business idea sounds good, doesn’t mean it can actually make money. Pets.com was the perfect example of that. But here came the mighty Kozmo.com “bike riders”… in all their variegated green and orange bike-suit glory, prepared to tear down any preconceived barriers you may have had in your mind (or in reality) to instant gratification. After all, why shouldn’t I be able to order a six-pack of Mountain Dew at midnight from the comfort of my New York City apartment while cramming for my Math final? That’s what the internet is all about, right? Removing hurdles and making all of our wildest dreams come true?


That’s the cold, harsh reality that the world came to in 2001. There is no magic pill, and there never will be. Not even the internet can satisfy your every fantasy. And why is that? Because business is business, no matter if it’s run in a physical store, or online. Every business has to make a profit, or it ceases to exist. Unless you were a 2000s-era internet startup… in which case you could ride the wave of hundreds of millions in Venture Capital until it finally petered out to nothing, and then your company ceases to be. And you’ve just squandered more money than a small nation’s entire defense budget.

That’s the number one lesson from the 2000s. You can’t stop being a business just because you have a cool idea that nobody else has thought of yet. The dot-com bust was rife with poorly-run businesses doomed to fail from day one. Why? Because it was a gold rush. Everyone got greedy. How else could a relatively unknown financial advisor whose single credential was a brief stint at Goldman Sachs raise a quarter billion in investment cash for a long-shot business fairy-tale like Kozmo.com?

Unlucky for Kozmo, some companies actually were able to get away with their stuffed-shirt-eschewing, purple-mohawk-sporting, flip-flop wearing paradigm, but that’s only because they made a solid product that sold and they actually made money. Those companies are few and far between. Yahoo!, Google (arguably), and Amazon.com are the big hitters that didn’t bite the dust (though it looks like the jury’s still out on Yahoo!).

Don’t get me wrong—Kozmo and GovWorks were the Lewis & Clark of the brave new internet world. They are due massive respect for the simple fact that they tried. But even so, c’mon. The USA lost over 5 trillion dollars in the dot-com bust. That’s not chump change. Five trillion dollars is more than Japan’s annual GDP for 2008. So in essence, the equivalent of Japan vanishing off the map overnight is what the dot-com greed did to the world. That hurts everyone.

I remember hearing about folks in my own town in 1999 who were making over $80,000/yr without a college degree, snatched up by corporate giants that wanted an internet presence, super-quick. Where are they now? I have no idea. But I do know that by 2001, they were flipping burgers at McDonalds. Think I’m joking? I knew of married men who were (attempting) supporting families of three or four children who couldn’t even get a job at Burger King because they were “overqualified candidates,” and Burger King was already flooded with degree-toting career men taking orders at the counter.

You can’t solely blame the corporations for the mess though… A man who quits his steady job at the bank making $60k to work in an extremely high-risk groundbreaking industry and has no savings, or even a “plan b” is no victim. He’s reaping what he sowed when the layoffs come around and he’s got nothing in the bank and is begging his old employer to take him back.

What it comes down to in the end is this—as I’ve stated for years, the internet is not a magic pill. It can’t turn a bad business idea into a good one. It can’t take an unprofitable company and make profits for it. It can’t overcome poor habits, bad business practices, unsustainable growth, or hyper-inflated markets. What it can do is take a smart idea with a solid company and sound fiscal practice, and turn it into a money-making machine. But only when and if you’ve done your due diligence before hand.

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