Introduction 

It’s not uncommon to hear “98% of NFT projects will fail” on an almost-daily basis given the explosive growth of the market in the past 18 months. 

OpenSea, the leading marketplace for NFT purchasing and selling, recently raised $300 million in funding at a $13 billion valuation. 

Less than a year ago, the company was valued at $1.5 billion. 

However, the new valuation isn’t crazy. The platform takes a 2.5% cut of sales and based on sales data from October to December of 2021, it projects out to have annual revenue of $826 million. 

But is $8.26 billion of volume in NFT sales sustainable for the future? 

That’s the question everyone in the NFT space asks, so it’s time to dig up history and revisit the dot-com bubble to see what we can learn from it. 

Highlights of the Dot-Com Bubble and What it Means for NFTs 

“Most people knew it was unsustainable, but no one wanted to admit it. If you could squeeze your IPO out before the window closed, then you could pick your moment to cash out, hopefully before everyone else got the same idea.” — Brian McCullough

When the internet became more popularized and widely accessible, a slew of new companies was founded to take advantage of the technology and redefine the world. 

Sound familiar? 

In 1999 alone there were 457 Initial Public Offerings and the Dot Com Bubble Wikipedia lists 90 companies that got caught in the web of severe overvaluations, but many more were lost in the dot com bubble of the early 2000s.

The companies found on this list were created as early as 1993 (with some companies founded in the 80s who pivoted to become internet companies) and by March 2000 it all started to unravel. 

On March 10, 2000, the Nasdaq hit an all-time high of 5,048.62.

A month later, it lost 34.2% of its value. 

By October 9th, 2002, it lost 78% of its value. It wouldn’t reach its previous all-time high again until April 2015. 

There are examples of companies on this list that reached $7.5 billion valuations but are worth nothing today. 

The majority of companies reached high valuations despite losing money and entering the market with a mindset of spending as much money on marketing as possible and figuring out the business model later. Grab a piece now, before someone else does. And most investors ignored classic investing fundamentals.  

We’re going to break down 17 failed companies during the dot-com era, and why they failed, revealing insight as to what to look out for in the NFT market. The crazy part is that some of these companies had brilliant ideas that succeeded through different companies in a later time period. For example, there were grocery delivery and digital currency companies during the dot com bubble. 

However, not all is lost in the mess of this bubble. 

Companies like Amazon IPO’d during this time period and is one of the largest companies in the world. It IPO’d at $18 per share, hit $107 at its peak, and dropped to under $7 per share. Even Amazon lost money ($149.1 million in 2002) but reported a profit in 2003 of $35.3 million. 

1 share of Amazon stock is now worth $2,852.86. 

eBay IPO’d in 1998 at $18 per share, hit $53 per share, and now trades at $59.54 per share two decades later. Companies like Google, Priceline, and others also weathered the storm and are relevant today. 

If we make comparisons to today’s market, it’s clear that project launches behave similarly to IPOs. Many people trading into the project likely know that the window of easy flips or selling out a project is likely closing fast. 

The longer-term problem centers around how many NFT projects will be able to continue creating demand, even during tough markets, like Amazon, Google, Salesforce, and Priceline during their bubble-eras. 

The other fear is that some valuations are so high, even for quality projects (think eBay) that a market crash could force years of operational delivery to recover initial investments. 

The final, major challenge is that NFTs aren’t yet securities. A project creator can’t share profits as they could if they were a business . . . yet. I think many misunderstand this and will cause market corrections. 

Before we dive into 17 companies that stumbled during the dot-com bubble, what’s the best action for you to take? 

Don’t spend money you can’t afford to lose. Period. And if your NFT goes up in price significantly, ask yourself if you would pay its current price to own the asset. If not, you should consider selling. If yes, take accountability and acknowledge it may be worth a fraction of that in two years. 

Also, no one can predict the future. Maybe the NFT market crashes. Maybe it doesn’t. 

(1) Pets.com 

Source: CBI Insights

Pets.com is by far the most famous example of a failed company during the dot com boom. It had a smart idea — selling pet supplies online, but the business lost $147 million in the first 9 months of 2000. 

Pets.com went public at $11 per share, rose to $14 per share but fell below $0.22 per share, and folded in November 2000 laying off 300 people. 

Many cite Pets.com's flawed business model as a reason for its demise, centered around shipping its goods (like dog food) in a cost-efficient way to remain profitable. 

Chewy.com runs a similar business model and is valued significantly more ($13 billion) than Pets.com was ($400 million). Chewy cites that its scale allows it to succeed, where Pets.com was just too early (only 22% of Americans had purchased something online in 2000). 

The former Pets.com CEO Julie Wainwright, summed up the differences between Chewy and Pets.com: 

“in 2000….there were no plug-and-play solutions for eCommerce/warehouse management and customer service that could scale . . . we had to employ 40+ engineers. Cloud computing did not exist, which means that we had to have a server farm and several IT people to ensure that the site did not go down. There were less than 250 Million worldwide Internet consumers in 2000- now there are 5 Billion.” — Julie Wainwright 

Note: Chewy.com had $2.21 billion in sales in Q3 of 2021 alone. 

(2) Webvan 

Source: Wikipedia

Webvan was a Grocery Delivery service that expanded to 8 cities in 18 months, raised $375 million, and was valued at $1.2 billion. The stock went to $.06 per share and the company was forced to lay off 2,000 people. The company closed in July 2001.

The problems with the business were rooted in the fact that no Senior Executives or notable investors of the company had experience in the supermarket vertical. 

The company also invested a lot of money in building its own fulfillment infrastructure (unlike Peapod, which survived the dot com crash) and expanded too fast without first proving its business model. 

(3) Boo.com

Source: CBI Insights

Boo.com launched in 1999 to bring high-end fashion online but burned through $135 million in venture capital in 18 months. 

The company struggled to economically provide the user experience they intended. For example, the company spent $6 million alone on content for the spring/summer fashion season. 

The need for continued large investments due to lack of technical infrastructure plagued a lot of the companies that failed during the dot com era. 

(4) eToys.com 

Source: Crunchbase

eToys.com hit a high share price of $84.25 in October 1999 but 16 months later it was worthless. 

Founded in 1997 and was the most visited site for holiday shopping (and outsold Toys R Us during the holiday season). However, the company spent tens of millions on marketing and partnerships to compete with Toysrus, Amazon, and Walmart but couldn’t keep up. 

The company lost $74.5 million in Q4 of 2000 and went bankrupt in February. It was acquired by KB toys (which went Bankrupt) and now redirects to the ToysR Us website. 

Some say that the company’s demise was largely from “aggressive” spending including $150 million spent on distribution centers to prepare for incoming demand. 

(5) GeoCities 

Source: CBI Insights

Geocities lasted longer than most companies on this list (it folded in 2009). 

Geocities was a web hosting service that gave internet users their first websites. It was the 3rd most visited website behind AOL and Yahoo in 1998 with 19 million unique visitors per month. 

Yahoo bought GeoCities for $3.6 billion in 1999 but Myspace and Facebook started dominating as social media platforms. While many think Yahoo missed an opportunity to evolve it into a modern social network, it never panned out. 

(6) TheGlobe.com

Source: Wikipedia

The Globe went public on 11/13/1998 and jumped a then-record 600% on its first day of trading. It was offered for $9 per share and jumped to $87. 

The company raised $27.9 million in its IPO with a market cap of $842 million but then was delisted after failing to stay above $1 per share. 

Founded by two twenty-year-olds, the company allowed users to create and post their own web pages but shut down this feature in 2001. It had online gaming sites which stayed popular but finally shut down in March 2007. 

In 1999, CNN happened to film one of the founders of the company at a Manhattan nightclub where he said “Got the girl. Got the money. Now I’m ready to live a disgusting, frivolous life.” 

It was indicative of the coming skepticism about the new tech companies and the true managerial capabilities of their founders. 

(7) Go.com 

Source: Wikipedia

Disney created Go.com to compete with Yahoo and AOL in 1998, but the company never grew its user base past 21 million visitors per month (half of Yahoo and AOL).  

Some suspect its lack of adult content stunted its growth since it was owned by Disney. Rober Iger (President of Disney at the time) said the site failed because its content couldn’t compete with sites like Yahoo. 

Disney shut it down in 2001 and wrote off $790 million. 

(8) Flooz.com 

Source: Wikipedia

Flooz.com sold an online currency that could be used instead of credit cards. Users could buy Flooz to spend at Tower Records, Barnes and Noble, Outpost, and Restoration Hardware.  

Flooz raised $35 million from investors and Cisco and Delta used Flooz for corporate gifts. 

The company spent $8 million on an ad campaign with Whoopi Goldberg but went bankrupt in August 2001 less than 2 years after it was founded.  

A Russian crime organization used stolen credit cards to purchase Flooz currency, redeem it, and ended up accounting for 19% of the site’s transactions. 

(9) Drkoop.com 

Source: Tedium.co

Drkoop.com was the WebMD of the dot com bubble. The health information website was created in 1998 by the Reagan administration Surgeon General Dr. Everett Koop and raised more than $84 million during its IPO in June 1999.

The site was ranked the #1 health care content site and had 1.4 million unique visitors per month in 1999. 

The stock hit $45.75 per share and entered an $89 million 4-year strategic partnership with AOL to get that content on AOL's portal. The site closed in December 2001. 

Analysts had said the website’s sole dependency on advertising revenue was a large reason that it failed, whereas competing websites (like WebMD) sold services to business customers. 

Dr. Koop was an influencer in his day and was “widely respected” as a Surgeon General. He had the social proof and the audience to follow. 

However, another reason the site failed is that it was so heavily dependent on advertising revenue that the medical advice provided on the site came into question. 

The site sacrificed quality content for advertising revenue and it led to its failure. 

(10) Kozmo.com 

Source: CBI Insights

Kozmo had a familiar business model that could have played out well in current times. The company offered a delivery service for CDs, DVDs, electronics, and snacks. It offered free delivery (within 1 hour) and was available in 9 cities. 

The company ended up challenging UPS and FedEx and raised $280 million from investors (including $60 million from Amazon). It also had a $150 million promotional deal with Starbucks. 

Kozmo ultimately withdrew its IPO in 2000 and was forced to lay off 900 (out of 2,000) of its workforce. 

The company stumbled because it didn’t require a minimum charge for orders (they did change it to $10 minimum orders but it was too late) and shut down in April 2001. 

(11) Garden.com 

Source: CNN.com

Garden.com sold gardening products and advice to customers but the company lasted just 14 months. The company raised $50 million in venture capital funds and another $49.5 million through an IPO. 

The stock hit $20 after its IPO but by November 2000, the stock traded at 9 cents per share and the company shut down. 

Garden.com was a fairly well-run business but had to spend significant amounts of money on marketing to get customers in the door. 56.7% of the IPO proceeds went to marketing. Economically sustaining demand was just not in the cards for Garden.com and likely was due to the fact that the internet was still so new. 

(12) Alta Vista 

Source: CBI Insights

Alta Vista was one of the first search engines on the internet and was founded by Louis Monier and Michael Burrows. It launched in December 1995 and was one of the internet’s popular sites (serving 19 million site visitors each day in 1996 and 80 million by 1997) but it quickly lost ground to Google as it couldn’t keep its strategic edge. 

In simple terms, Google provided a better user experience. 

In 2003, the company was acquired by Overture (later acquired by Yahoo) for $140 million, but ultimately closed its doors in July 2013. 

Burrows ended up at Google and created the Burrows-Wheeler transform, an algorithm used in data compression 

Monier went on to work for eBay and Google and started Qwiki, video sharing which got bought by Yahoo in 2014. 

At the time, no one knew how to make money from an internet search engine, and the acquisitions eroded the strategic ability of Alta Vista to keep up with user experience demands for searching the web.

(13) Startups.com

Source: CBI Insights

Startups.com saw the rush of new businesses forming during the dot com era and wanted to provide traditional business planning services starting at $25,000.

It was a smart model, but the company launched in March 2000, right as the dot com bubble was unraveling and quickly went out of business.  

(14) eXcite

Source: CBI Insights 

Created in 1993 by Stanford students for about $80,000, eXcite later got $3 million in investments and went public in 1996. 

It was a web portal, which was acquired by At home for $7.5 billion (stock deal) which was a high-speed internet provider. The deal was for double Excite’s last valuation and was acquired when the AtHome market value grew to $11.7 billion because of the inflated stock market. 

It was the number three portal behind AOL and Yahoo but went bankrupt in 2001. 

eXcite had the opportunity to acquire Google in 1999 for less than $1 million but the CEO turned the deal down because Larry Page had a condition that eXcite use Google’s technology, which would have been demoralizing for eXcite’s engineering team. 

(15) Infoseek 

Source: CBI Insights

Infoseek was founded in 1994 as an internet search engine. The company built up 7.3 million monthly visitors and was then acquired by Disney. 

The company was merged to create Go.com and its major innovation was selling ads based on CPMs (cost per 1,000 impressions, which is very common in advertising today). It was also the first search engine to employ behavioral targeting but in 2001 it was shut down. 

(16) Ask Jeeves 

Source: CBI Insights

Founded in 1996, AskJeeves was a question and answer search engine that peaked pre-Google. 

AskJeeves went public in 1999 and shares exploded to $190 per share before dropping to just $0.86 per share in 2002. 

Ask Jeeves was renamed Ask.com in 2005 and remains a question and answer site, which is still ranked #321 website by Alexa.

(17) InfoSpace

Source: CBI Insights

InfoSpace was founded in 1996 and was designed to be an online yellow page with simple chat rooms. The company raised $75 million with an IPO in December 1998 and acquired Go2NET in July 2000. 

Infospace lost $282 million, and in June ’02, the stock price plummeted to $2.67 from its high of $1,305 in March 2000. 

The company is still around today (BCOR) and currently trades at $16.07 but only after multiple pivots.