Between 1995 and 2000, hundreds of companies raised millions of dollars on the premise that being online was itself a business model. Pets.com, Webvan, and Kozmo.com were not outliers. They were the norm. The collapse in 2001 erased roughly 1.7 trillion dollars in market value in under 18 months.
What the survivors actually had in common
Amazon, eBay, and a handful of others survived not because they were digital, but because they solved specific distribution or pricing inefficiencies that existed before the internet. The technology was incidental. The underlying problem they addressed was not.
Why this history gets misread
Survivorship bias is aggressive in startup culture. The companies that failed are rarely studied in business schools. Founders who raise funding today often cite the 1990s as validation that big bets pay off, without accounting for the nine out of ten that quietly disappeared.
The honest read of that era is that capital abundance masked bad unit economics. When funding dried up, most of those businesses had no path to covering their own costs. That pattern has repeated in 2008, 2015, and 2022 with different company names attached.
A useful question for any skeptic
Before accepting the narrative that internet entrepreneurship democratized business creation, it is worth asking who actually accumulated wealth during each cycle, and whether that wealth came from customers or from investors.