Or, how to lose a gazillion dollars in ten easy lessons.
Craig Winn, a born salesman, was a great believer in formulas to explain how the world works, preaching “the seven things consumers wanted from an online store, the five things that brands needed, and the five key principles of e-commerce.” Having endured trial by combat, selling such things as flyswatters, plastic cups, smoke alarms, and lighting fixtures, he believed with diamondlike intensity that his brainchild, Value America, was destined to be a huge hit. And how could it not be? A one-stop online mall in which nothing was unattainable, writes former corporate-communications director Kuo, Value America “would be for the Internet age what Harrods was for the entire British Empire at its height: the shopping source for all things.” It was an inspired vision, all right, but one whose balance sheet looked a little fuzzy from the start, especially after the bankers—who are supposed to be conservative, or so we’ve been told—convinced Winn that what counted was not solvency and cash sales, but spending hundreds of millions of dollars simply to lure in Web strollers, whose mere presence made a given piece of Internet real estate valuable. Whereas Winn had planned to value the company, founded in 1996, on actual revenues—as such things once worked in the world—those bankers “demanded that the company be valued based on revenues two years out. . . . In other words, if Value America got $50 million in funding in 1997 and believed that it could use that money to get $100 million in revenues in 1998 . . . the company would be valued at least two times those 1999 forecasts—or, according to this scenario, at $400 million.” The funny-money accounting, as much as any other failing, drove Value America under, as it did so many e-commerce concerns in the dark days of 2000. Though his writing is often glib and self-congratulatory, Kuo tells the story with a mix of wonky business detail and profile-style journalism, down to the last grisly moment, when “Value America was dead [and] all that was left were the spasms.”
Slightly better than average: a cautionary business tale for readers of Forbes and Fortune.