Don't build an empire overnight – lessons from FreshDirect and Webvan

The other day I received a direct mail piece from FreshDirect, the online delivery service based out of New York.  What struck me is that the service has been around for years in NYC, and it is now getting out to some of the suburbs in New Jersey.  In fact, after having done a little research, FreshDirect was started in 2002 and now 8 years later is delivering in New Jersey.  This is in stark contrast to WebVan which was the first online grocer.  What brought WebVan down is the fact that it tried to build an empire overnight.  And yes we should all know from our history books that empire building leads to empire destruction eventually. 

It is pretty evident that FreshDirect took its time to understand how to enter a market, serve it well, and make it profitable.  In other words, FreshDirect spent its time to build a repeatable sales and market entry model before moving on to other locations.  In addition, its expansion is still local based-close to its distribution point in Long Island City, NY.  You don't see the company going out to San Francisco - rather, it is slowly expanding outside of its first core market, NYC.

As an entrepreneur, you should take the same approach before expanding too quickly.  Whether you are hiring a sales force for the first time or expanding territory for your product or service, make sure you have a repeatable sales model before conquering the world.  More often than not, I meet entrepreneurs who raise too much money too fast and expand way too quickly before having a product that is fully baked and ready for primetime and before the company knows who it is selling to, how it is selling to them, and what the core value proposition is.  Get everything right in your first market like FreshDirect and you will build a great company and avoid monumental disasters like Webvan.

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This post was written by who has written 358 posts on BeyondVC.

2 Responses to “Don't build an empire overnight – lessons from FreshDirect and Webvan”

  1. steve chang Oct 12, 2010 at 6:10 pm #

    Sorry, not sure if my comment already got posted…confusing Typepad UI!

    Anyways, was just commenting to share a 2part article the NYT recently did on FreshDirect and their strategy:

    link to boss.blogs.nytimes.com

    Enjoy!

  2. Sam Pullara Nov 23, 2010 at 6:35 am #

    Webvan wasn’t even close to the first online grocer. I was using Peapod, over modem, in Chicago in 1994. They moved to the internet in 1996, well before Webvan was founded, and eventually contracted back to Chicago and other eastern cities after Webvan was shuttered and still runs today.

    link to en.wikipedia.org

    Your point is sound but the facts are wrong.

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