Kozmo.com is set to shut down and liquidate its assets, the latest in a long line of online casualties battered by falling funds, slumping markets and unwilling investors. Founded in 1998, the privately owned company was forced to cut its losses and close while it could still afford severance pay packages for the majority its 1,100 employees, 475 of which are situated at its head offices in Manhattan.

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The New York based e-tailer that operated in nine city markets, including Washington, San Francisco and Boston, was one of the first dot coms to promise the delivery of goods within one hour. Its innovation and enthusiasm was not enough to guard against the stubborn unwillingness of investors to plough money into the dotcom world however. Furthermore, the general slump in the public investment market for online ventures left Kozmo with few fundraising options; it withdrew its own IPO last August and scaled down on plans to roll out in as many as 30 cities.


CEO Gerry Burdo released a statement yesterday to this effect: “Given more time and more hospitable market conditions, Kozmo would have succeeded in rounding the corner and would have continued to grow.”


He also hinted however that the company’s founders must accept their blame in the closure, which he said was affected by “some decisions made early in the company’s development.” He is likely talking here about levels of spending, which peaked at around US$30m a month before serious restructuring changes were introduced last year, including job cuts and the addition of delivery fees. These changes stabilised monthly spending at around US$2m. Kozmo founder Joseph Park resign as CEO last year and stepped down from the chairman post in January.


Many employees at Kozmo have expressed their surprise at yesterday’s announcement. Last year’s restructuring did secure an investment of US$25m this January, when it had become apparent that the company’s operations in New York, Boston and San Francisco had finally become profitable in December 2000.

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This money was intended to last until the company could earn more funds on the market or merge with another operation. Last October, Kozmo put the nail in rival Urbanfetch.com‘s coffin by refusing to merge with it. Earlier this week, it seems that PDQuick.com would offer Kozmo the same fate. Negotiations to merge with the online delivery company in Los Angeles broke down because, as PDQuick executives explained, Kozmo could not come up with enough cash.


By Clare Harman, just-food.com editorial team