This question prompted a holiday season re-read of boo hoo (a dot.com story from concept to catastrophe), to re-discover what mistakes were made in the dot.com era, and whether they are being repeated today. It was jaw-dropping to be reminded of what went on, but equally re-assuring that the startup world has come a long way since then.

Boo.com  launched in the autumn of 1999 selling branded fashion apparel over the Internet. The company spent $135 million of venture capital in just 18 months, and it was placed into receivership on 18 May 2000 and liquidated.

With the current valuations in virtually all tech sectors at very high levels, and new unicorns being born every day, many such as The Guardian and The Motley Fool are calling it a bubble, and hence the question.

Back to the dot.com era

I remember reading Bill Gates’ The Road Ahead in 1995, which laid out a vision for how the Internet would change almost everything over the following couple of decades. This excited an entire industry, including my corporate employer at the time, Naspers, a media and pay-television owner. They were determined to get into the Internet (which they did and went on to make a sizeable early-stage investment into Tencent). However, the reality of that time and even in 2000 was that Internet access was slow, but the launch of 3G mobile communications was being widely anticipated, adding fuel to the fire.

Between 1995 and its peak in March 2000, the Nasdaq Composite stock market index rose 400%, only to fall 78% from its peak by October 2002, giving up all its gains during the bubble. During the crash, many online shopping companies, such as Pets.com, Webvan, and Boo.com, as well as several communication companies, such as Worldcom, NorthPoint Communications, and Global Crossing, failed and shut down. Some companies, such as Cisco, whose stock declined by 86%, Amazon.com, and Qualcomm, lost a large portion of their market capitalisation but survived.

Enter boo.com

The fundamental problem with boo.com was symptomatic of the entire industry at that time – too much easy venture capital, too early. As I wrote in an article a couple of years ago When is the best time for your Series A?, successfully raising cash before you are ready for it is the worst thing that can happen to a startup, as it will inevitably be  wasted, making it impossible to raise further rounds.

Well, this was an extreme example. They actually managed to do multiple rounds after their €8.5 million seed round (reflecting those times), but it all caught up with them when the VC market got back to “sanity” in 1Q2000 and then they could not raise any further cash.

As a professional advisor, I was quite tickled that boo.com managed to engage J.P. Morgan as their investment bankers when they were at the concept stage (way pre-revenue, with no MVP and zero market validation). Again, J.P Morgan were caught up in the hype. Try getting that right today! Boo.com had barely launched their website (with its many problems) when they started engaging investment bankers like Goldman Sachs for an anticipated 2Q2000 IPO.

Boo.com made the classic mistake of having too aggressive growth plans, to launch in the UK, Sweden, Netherlands, Germany and the US simultaneously, again fuelled by too much capital, too soon. It was a land grab mentality, trying to own the online fashion space, rather than getting it right in one market first. VCs would simply not entertain that kind of strategy today.

So where did all the cash go? A large proportion went into marketing and PR, spending $25 million before their website even opened for business. For instance, they wasted big bucks on an ad campaign that they could not use because the website was not ready.

Boo.com hired way too many people from the start. Setting the tone, two of the three founders had Personal Assistants before they had even raised a dime, and every problem seemed to be an opportunity to hire a new head. Their monthly burn rate was over $10 million before they opened for business.

Another amusing episode was that they hired Boston Consulting Group to evaluate strategies on how best to leverage their “global logistics network”  handling tax, currency and fulfilment (which was not yet operational) across their footprint as a separate business opportunity.

They probably should have spent proportionally more on the tech. They were looking at a large waterfall tech build with Ericsson as the prime contractor (and many subcontractors), which would have cost a fortune, but then decided to take it in-house. The plans were ambitious for the available tech in those days – a 3-D avatar (Miss Boo) and the ability to view wares in pseudo-3D.

Unfortunately for them, Agile methodology was only founded in the Spring of 2000, just too late for them. Developing towards a Minimal Viable Product (MVP) could have saved them the multiple tech problems discovered during the soft launch and which mostly continued to the end. For instance, the boo website never worked on Apple Mac computers.

The boo website was widely criticised for being poorly designed, going against many of the established usability best practises. The site’s interface was complex and included a hierarchical system that required the user to answer four or five different questions before sometimes revealing that there were no products in stock in a particular sub-section. The same basic questions then had to be answered again until results were found.

The home page was several hundred kilobytes which meant that many users had to wait minutes for the site to load, as broadband technologies were not widely available at the time. The site’s front page contained the warning, “this site is designed for 56K modems and above”. Again, these days, UX is placed at the front and centre of tech architecture and design.

Lessons learnt and yet to learn

I am reassured by the realisation that a lot of what went on then just would not happen today, with the “lean/agile” approach to building startups and VCs sticking carefully to well-defined funding milestones (with specific levels of validation) and related maximum cheque-sizes. The industry appears to have learnt some hard lessons.

However, with valuations (as a multiple of revenue) in most tech sectors super high, and  VCs’ preference for growth at all costs (with profitability secondary), there will no doubt be new lessons to be learn  with the next correction or crash, whenever it comes.