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# Context
* I’m heavily invested in tech. My #1 holding is Alphabet, and I’ve been considering adding more (Microsoft, etc.)
* I’ve been burned before. In 2022 I went way too hard into SPACs that are down 70-99% (Latch, Opendoor), and I lost money in speculative shitcoins too.
* Recently I was talking to my mum’s friend. One of the pivotal moments in her life was investing life savings (about 2/3 of an average house in the suburb she willing living at the time) into internet stocks in the lead-up to 2000. She lost basically everything.
The conversation prompted these questions:
* How can I be so bullish on AI now when I've been burnt recently?
* Should I just stick to stable companies / the S&P500?
So I decided to explore past market manias and the parallels to AI. I've done some research on [Pets.com](http://Pets.com) \- timeline, a few management/media quotes, and the unit economics/financials.
# [Pets.com](http://Pets.com) Timeline
* Nov '98 Website launched
* Mar '99 Hummer Winblad, Bowman Capital, and Amazon invest $10.5M. Amazon owns 50% of the company.
Jeff Bezos
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* Late '99 [Pets.com](http://Pets.com) goes on a marketing spree
* Feb '00 IPOs at $11/share, raises $82.M
[Pets.com](http://Pets.com) spends $1.2M on a **Super Bowl ad**, and the sock puppet becomes a pop-culture thing
* [Pets.com](http://Pets.com) acquires their closest competitor
Julie Wainwright (pets.com CEO) on expected CAC improvements from acquiring Petstore’s database:
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* Nov 9 '00 [Pets.com](http://Pets.com) stops taking orders lays off most staff, begins liquidation
CEO quote...
>I am deeply saddened by this event. It is well known that this is a very, very difficult environment for business-to-consumer Internet companies.
# Financials
They IPOed at $300M market capitalisation, peaked at $400M. Annual sales at IPO is less than $1M, however they did scale to revenues to \~$35M annual run-rate. Sales/Price ratio was 300X-10X. Their operating losses were ridiculous (see below).
* At IPO filing period (9mth period in '99): $619K revenue and $20M loss.
* One year later (9mth period in '00): $26M revenue and $87M loss.
* They spent $60M on marketing + sales in the first 9mths of 2000. They bought a Super Bowl ad...
* Unit economics: sold merchandise \~27% below cost...Wild. There's argument that driving adoption and decreasing logistics costs will eventually lead to a positive gross profit...but still..
* Customers by shutdown: **570,000**
* Eyeballs looked great on paper: most visited online pet store, 1.8M annual visitors
# Potential Lessons For Investing In AI
* Even the greats got it very wrong. Jeff Bezos / Amazon lost significant amounts investing in [Pets.com](http://Pets.com)
* [Pets.com](http://Pets.com) didn't look ridiculous at that time - growing industry, massive obvious markets, ridiculous top-line growth, ridiculous traffic metrics
* Profit matters. And if you can't profit early-on, then having enough cash to burn matters