Kozmo Gone: Learn To Cook

Well, you'll have to get your own pint of ice cream and movie now. The decision to shutter Kozmo Inc., the online -- and on bicycle -- delivery service, puts to rest to the notion that while it may be more convenient to have someone else do the schlepping, it's a lousy business idea.

Hatched as the bright idea of two New York urbanites back in those salad days of Internet glitter (just three years ago, but who's counting) the company managed to rack up monumental losses, finding a way to throw away $260 million from New York-based venture capital firm Flatiron Partners and other professionals. Indeed Kozmo, which dropped the dot-com suffix last month, said its New York, San Francisco and Boston operations were profitable last December had expected another infusion of money as the year ended, but published reports said investors had started backing out.

Obviously, the glowing press headlines for delivering supplies through New England's blizzard season didn't sway investors to dip deeper into their pockets.

Problem was, the company -- with operations in nine cities -- was never a real business, at least if you define business by something that consistently makes money doing something unique, with definable barriers to entry. Perhaps New York-based Kozmo thought paying Starbucks Corp. $15 million for rental space in its upscale coffee shops was a good idea so customers could return rented videos, DVDs and video games. Part of the deal would have meant Starbucks serving up $150 million over five years.

Well, someone must have put the caffeine back in the Seattle-based coffee firm after it dumped $25 million down the Kozmo tube, since it backed out of the agreement last month.

Signs of Kozmo's troubles appeared last year as it shut unprofitable ventures in Houston and San Diego. It had already canceled its initial public offering back in August, and an attempt to combine with a similar delivery service -- New York-based Urbanfetch.com Inc., which was backed by San Bruno, Calif.-based VantagePoint Venture Partners Inc. -- apparently died because of differing management visions of the future direction of the company. At the end of last year, Kozmo started charging a fee for orders of less than $30, but it was too little, too late. The saddest part is the fate of Kozmo's 2,000 orange-clad winged Mercury delivery people. They'll have to go back to toting packages, letters and other business material around city streets. But at least they'll still have their bicycles.

Copyright © 2001 IDG Communications, Inc.

Bing’s AI chatbot came to work for me. I had to fire it.
Shop Tech Products at Amazon