Pets.com (defunct)

Greg McLemore founded Pets.com in 1998 during the height of the dot-com boom with a simple premise: selling pet food and supplies online. The business model had a fundamental problem that was visible to anyone who examined it: Pets.com was selling 50-pound bags of dog food below cost and shipping them for free. Every sale lost money. The company's plan was to build market share first and figure out profitability later — a strategy that Amazon had successfully used, and that Pets.com's investors apparently believed would work equally well for commodity pet supplies.

Amazon invested in Pets.com in 1999, lending the company enormous credibility. Venture capital followed. Pets.com raised $82.5 million across multiple funding rounds. The company launched a national advertising campaign featuring a sock puppet dog that became one of the most recognisable mascots in America — appearing on Good Morning America, in a Macy's Thanksgiving Parade balloon, and eventually at the Super Bowl. The sock puppet was more famous than the product it was advertising.

Pets.com spent $11.2 million on a Super Bowl XXXIV advertisement in January 2000 — one of the most expensive commercial buys in television history. Three weeks later, the company raised $82.5 million in an IPO. The stock opened at $11 and closed its first day at $11. The market valued a company that had never made a profit, was selling products below cost, and had spent its entire marketing budget on a sock puppet at approximately $300 million.

Pets.com announced it was shutting down on November 7, 2000 — exactly 268 days after its IPO. The company had burned through its cash, could not raise additional funding as the dot-com bubble deflated, and had no path to profitability. The sock puppet mascot was sold at auction. The domain name was eventually acquired by PetSmart. The story became the canonical example of dot-com era excess: a company that raised hundreds of millions of dollars without ever having a viable business model.

The Pets.com collapse was used for years as a cautionary tale about irrational exuberance and the danger of growth-over-profit business models. Then, in 2011, Chewy.com was founded — another company that sold pet supplies online. Chewy focused obsessively on customer service and built genuine loyalty. It was acquired by PetSmart for $3.35 billion in 2017 and went public at a $8.8 billion valuation in 2019. The business model that Pets.com had failed to execute was viable. Pets.com had simply executed it very badly.