From the ashes of Webvan, Amazon builds a grocery business

Tue Jun 18, 2013 5:34pm EDT
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By Alistair Barr

SAN FRANCISCO (Reuters) - The online grocery start-up Webvan may have been the single most expensive flame-out of the dot-com era, blowing through more than $800 million in venture capital and IPO proceeds in just over three years before shutting its doors in 2001.

Twelve years later, though, Webvan is rising from the dead - in the form of an online grocery business called AmazonFresh.

Four key Inc executives - Doug Herrington, Peter Ham, Mick Mountz and Mark Mastandrea - are former Webvan officials who have spent years analyzing and fixing the problems that led to the start-up's demise.

Kiva Systems, the robotics company that Amazon bought last year for $775 million in one of its largest-ever acquisitions, was built on ideas and technologies originally developed at Webvan and is a key part of the AmazonFresh strategy.

Even Webvan's old Web address,, is now part of the Amazon empire.

"We had a lot of Webvan DNA in the room and we drew on that experience a lot," said Tom Furphy, who helped start AmazonFresh with Herrington and Ham before leaving to become a venture capitalist. "That was a good formula for building the business responsibly."

Amazon declined to comment for this story, or make any AmazonFresh executives available for interviews.

Former Amazon and Webvan officials say Amazon drew three big lessons from the Webvan debacle: expand slowly, limit delivery to areas with a high concentration of potential customers, and focus relentlessly on warehouse efficiency.   Continued...

A worker walks past Amazon Fresh delivery vans parked at an Amazon Fresh warehouse in Inglewood, California, June 14, 2013. REUTERS/Jonathan Alcorn