Tuesday, December 15, 2009

"The WebVan Economy" But This Time With The Government As The Venture Capitalist

WebVan - Wiki link

Do you all remember the company "WebVan"?
I do.  I made one order from them while they were still in business.

They came to life through the magic of two resources - the Internet and Venture Capitalist Money.

They started off in one town.  The idea was attractive and in the context of anything with a "dot com" after their name getting funding - they blew up large.  They expanded to multiple cities while riding high on venture cash.  Recall that during this time it was not about profitability it was all about grabbing marketshare in this new Internet commerce space before the next guy.

I give WebVan credit - they definitely created jobs and they were a positive mark on our GDP because they purchased a fleet of vans and a complex order management system in every city. This included a conveyor belt for sorting and massive warehouse space for food storage.  Remember GDP does not care about the viability of a commercial enterprise it only measures the values of transactions within a given interval.

We all know that WebVan imploded.  Unfortunately it was true that profits do matter.


Today we have a similar effect except there are no classical "VC" or "angels" dropping money into the marketplace for startups.  Instead we have the GOVERNMENT filling this role.

This notion was made clear to me yesterday as I listened to an employee of a state Department of Transportation on the radio.  He told of all of the projects that are being funded.  Many of these projects were shelved for years.  They were either too expensive or failed the "cost/benefit" analysis.  Bottom line when it was the state's money - they were more prudent.

Today we have Federal "Funny Money" flowing in and, as with WebVan - all bets are off.  The game now is to spend the money as quickly as possible so that the employment situation and the GDP look good for the targeted interval.

No comments: