Wilted
Garden.com was guilty of none of the typical dot-com excesses. So why did the Austin e-tailer die on the vine?
When Garden.com went public on September 16, 1999, its workers danced in the halls. They had been glued to their computer screens throughout the day, watching with a sort of dreamy, unalloyed happiness as the price of their shares floated upward. The online gardening retailer's stock had opened at $16.60, climbed briefly to $21.25, and then settled back to $19.06. When the market closed, the company's three founders—Cliff Sharples, his wife, Lisa, and Jamie O'Neill—were each worth $2 million and change; their employees had watched their personal wealth expand dramatically in a matter of hours. And now that they were all well on their way to being rich, the celebration began. A deejay blasted rock and roll from the back of the company's headquarters, a converted warehouse just off Mopac in North Austin. Kegs were broken out. Cases of champagne were brought in, and a massive, happy party raged on into the night. The whole thing seemed just short of miraculous—all the more so since the three-and-a-half-year-old Garden.com was known to be one of the best companies in town to work for, with a tolerant, loosey-goosey culture that allowed people to walk around barefoot and bring their dogs to work. Its symbol was a giant carrot suspended from the ceiling near the front door. To the company's 169 employees, the success of the IPO, which gathered $54 million in cash that day and created a number of paper millionaires, was nothing less than cosmic justice.Sixteen months later the carrot hung in an empty, echoing space where furniture and telephones were stacked in piles, and lawyers and other vultures were picking through the ruins. On November 15, 2000, Garden.com had announced that it had been unable to find more money to keep itself alive and therefore was going out of business. By December 31 it was just another piece of e-commerce roadkill on the information superhighway, an apparent example of capitalism's capacity for wretched excess.
What's interesting about Garden.com is not that it was a company that tried and failed to make money by selling things on the Internet. More than 130 Internet companies have gone out of business since January 2000, and many more will follow. What is compelling is that the founders seem not to have made any of the mistakes that so many other dot-coms have made. In fact, in all ways except the most important one—staying solvent—they succeeded brilliantly. They did not, like now-defunct clothing e-tailer Boo.com, pay out $100,000 allowances to the principals so that they could decorate their homes, or fly executives on the Concorde, or spend $42 million in eighteen months on largely useless advertising and promotion. They did not, like now-defunct pet product e-tailer Pets.com, foolishly sell goods for less than they cost in an effort to lock down market share. Their Web site technology did not fail them. They did not buy Porsches. Indeed, Garden.com met or beat every single economic performance target that had been set at the time of its public stock offering. Its managers did exactly what they said they'd do, exactly what investors had given them $105 million to do, and exactly what industry analysts had said they needed to do. And still they went down. As original investor John Thornton of Austin Ventures, a venture capital firm, puts it, "This was the nicest, most talented bunch of people I ever lost all my money with."
So why did Garden.com die on the vine? The answer lies in the nature of the company that the Sharpleses and O'Neill thought up in the garage of the Sharpleses' house five years ago. The three had gone to business school together at Northwestern University's Kellogg School and had all landed in Austin on the same day in May 1995, working for software maker Trilogy. Ten weeks later they quit their jobs to start a new company. The only problem was, they had no idea what sort of company. "Cliff and I had just gotten married," says Lisa. "We had moved here, bought a house, and hadn't even made our first mortgage payment yet. My parents thought we were nuts. My grandmother sent me a letter with cash in it because she was worried about us."
Though none of them were avid gardeners, they quickly zeroed in on gardening as the place to build their e-business. It was a $50 billion industry that had no dominant companies and no one at all selling gardening products over the Internet. This was in the earliest days of e-tailing; Amazon.com had gone into business only a few months before. Subsisting on O'Neill's Visa card and peanut-butter-and-jelly sandwiches, they came up with a breathtakingly ambitious plan to create a $75 million company that would hold almost no inventory but instead would use a network of suppliers to deliver thousands of gardening and related products to consumers. It would be a so-called pure-play e-tailer, meaning that, unlike a bricks-and-mortar store such as Home Depot or a catalog company such as Lands' End—both of which do business on the Web—the company's business would be built entirely on the Internet. "The most compelling thing was that there wasn't some big guy who could come and crush you like a bug," says Lisa. The goal: build the first national brand of gardening that people recognized. Cliff became the chief executive officer, Jamie the chief operating officer, and Lisa the head of marketing.
The company got its first $750,000 from Austin Ventures in December 1995 and opened its Web site for business in March 1996. Fueled by several more rounds of financing, Garden.com grew quickly. It raised $2 million more in 1996, $5.25 million in 1997, then major injections of $20 million in 1998 and $22.6 million in 1999. By then it had built what many considered one of the best commercial Web sites on the Internet. Business boomed. Garden.com now had some seventy suppliers across the country and was selling all sorts of things in addition to azaleas, tulips, hydrangeas, and roses, including furniture, candles, lamps, shoes, soap, tea, cookware, perfume, peppermint foot lotion, and Christmas tree ornaments.
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