Kozmo: A Tragic, Comic, Cautionary Tale

Timing is everything in life, so the people who made a movie about the man behind the rise of the one-time Internet phenomenon known as Kozmo.com have to be grinning right now.

The movie, “e-Dreams,” debuts this week in New York City, and it’s likely that some of the 1,100 people who used to work for Kozmo will be among those who see it. They can even go to the matinee, since Kozmo’s shutdown has left them abruptly jobless.

But is Kozmo a tragedy? A cautionary tale? A comedy? Maybe it’s all of the above.

The movie is said to be an eerily revealing documentary of the financial feeding frenzy that was the dot-com bubble before it burst. At one point, Kozmo founder Joseph Park gets up on a piano amid a bar full of partygoers and starts screaming “IPO.”

More like IP-No. Kozmo’s IPO never went anywhere, and now neither does its swarm of bicycle couriers. It’s over and it happened pretty quickly, even by dot-com standards.

Gee Whiz

As always in this shakeout era, it’s easy to see now how absurd it was for so many investors to put so many millions into an idea that really was more about coolness than anything else. Park reportedly would woo venture capitalists by asking them their favorite ice cream flavor during meetings and then ordering a delivery through his laptop.

No doubt, the investors had the reaction that Park intended: “Hey, that’s cool.” And it was. In the context of the times, it seemed like it couldn’t miss.

But cool doesn’t make money. That might be the funniest part of the Kozmo story. That a simple gimmick like ice cream at a pitch session could have helped free up so much cash.

Value Proposition

If so, then the tragedy is that no one saw the instant-gratification nature of Kozmo as too good to be true.

Was it sensible to build a business that is all about spending extra money, just so you can have whatever it is you want — that video, that pint of ice cream — immediately? How many consumers could afford to be so self-indulgent?

Of course, there is a caveat. If the economic good times had rolled on forever, maybe everyone would have been more than willing to continue paying a premium to be waited on hand and foot.

But reality did set in. And the fact is that it had to set in eventually. The New Economy may have new rules, but perpetual good times isn’t one of them.

Lumped In

So Kozmo runs through US$180 million in venture capital in just over three years and leaves hundreds of people out of work and gets a movie made about it. No doubt, some business school will make it required viewing before long. But let’s hope that the messages aren’t blurred along the way.

Not all dot-coms are bad ideas. In fact, not even all of the dot-coms that have come and gone were bad ideas. Some deserved, or deserve, to have successful IPOs and make lots of people rich.

So when seen in that light, the Kozmo crash-and-burn saga is only a cautionary tale to the extent that Kozmo was a good idea too. In other words, not very much of a cautionary tale at all.

What do you think? Let’s talk about it.


Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.


11 Comments

  • I had the opportunity of meeting Joe Park in the summer of 1998. (Joe – I was with the "NYU" people that decided not to invest). Kozmo was seeking to raise "angel" financing from a group of investors I was working with.
    I was very impressed at what the Kozmo team had put together on a shoe-string budget. At the same time, I was quite puzzled at Park’s expansion plans. Although his financial model was quite impressive, he lost sight of issues taught in Operations 101. My back-of-the-envelope estimate was that in order for Kozmo to reach its NYC delivery goals, they would have needed every bicycle messenger in Manhattan during a 3-hour window on Friday and Saturdays!
    Also, another questionable deal was their $150 million 5-year deal to have drop-off boxes in Starbucks. Yes, a deal with Starbucks was great on the PR front, but what Kozmo didn’t get was that once you subtract the dozen or so markets they were in and maybe another 10-20 with urban residential markets where they could generate economies of scale, the only way they could have taken advantage of the Starbucks deal was to create a local Domino’s-type auto delivery service in most suburban communities.
    I give credit to Joe in that he utilized my suggestion to get mopeds to increase their delivery zone in order to deliver to uptown NYC neighborhoods. Kozmo wanted to open a second warehouse for maybe 100k or so $$$$ that he didn’t have at that point.
    Joe was astute in the idea of instant gratification and what a royal pain it was to return them (that’s why the Starbuck dropboxes were quite appealing), what he missed was that having a video already there was better than having to order it and wait an hour…and then making sure the videos were returned on time. Now that Videotapes are being replaced by DVD’s, Netflix has leapfrogged Kozmo with a very operationally efficient operating model (and consistent revenue stream) and the ability to always have DVD’s waiting for you when you want to watch….

    • IMHO, younger execs are vital to inject new ideas and perspectives into a startup’s business plan and corporate philosophy. BUT, if they don’t hire older, more experienced execs as the business expands — and then (this is key) LISTEN to their advice — the company will be a narrowminded, shortsighted entity and will likely fail.

      Another BUT is that company founders are often highly creative people, get bored with slow-and-steady growth and maintenance, and don’t like to take orders.

      What do all of you think? Can companies ever find a balance where young founders can still be happy and feel creative in a more established organization once the upstart startup phase is over? Any examples to throw out there?

      • Kozmo was a clown act. Neither retailer nor transportion company trying to exact premiums from price sensitive industries. They offered convenience to those with corporate cash to burn.

        They did not serve a real or sustainable need by the consumer.

        The puzzle is why the money peddlers did not see it? Why did so many smart people sign the investment checks?

        What is the German word for what so many observers are feeling?

        • I must agree.. I was a manager with walgreens Drug store before I became Kozmo.com’s general delivery Manager in Seattle. We could have made money but upper managment was to busy trying to be a fortune 500 company. I would inform them of that and all they could say was "you don’t know what your talking about, I have a degree in economics". I don’t care about the degree they had, they had no consept of "profits". It is sad because actually it could have worked if they would have listened to some of the older people with managment experience.

          • More important than the question of whether dot-com company founders — as you say, “often highly creative people” — are able to take orders, is whether they are able to understand business fundamentals and show *leadership*. Kozmo was run like a dream, and so like a dream it ended with the smell of coffee burning in the business world.

          • Ironically, order it from Netflix. It won’t show up in an hour but if you put it at the top of your queue, it will be there in 1-2 days.

          • Does anyone know what former founder Joe Park is doing these days? I read he was at Harvard Business and was "incubating" ideas near Boston? Has anyone heard anything recently about Mr. Park?

  • Kozmo.com was great. I used it all the time. Spending two bucks extra to get a new release video — instead of all the time and effort of going to the video store yourself and the money on gas (!) was WELL WORTH IT. I am really sorry Kozmo.com is gone — I just found out when I tried to go to their website to have some stuff delivered! It was a GREAT idea, and I would have thought a big success in NY where everything is and has always been delivered — from dry cleaning to groceries and no one thinks anything of it or paying more for it. Geezeluize

  • Kozmo was a great idea that was POORLY implemented. Sure Joe Park won’t tell you so when he walked away with half a mil in his pocket, but he was the reason the company took off AND the reason why it crashed and burned. Make a bunch of 20-yr olds VPs, give them expense accounts and watch the money disappear. Kind of reminds me of college…

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