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How Entrepreneurial Disasters Are Created

Written By Michael Ferrara

Created on 2023-04-06 14:02

Published on 2023-04-12 15:07

Two ambitious entrepreneurs once embarked on a journey to create the world's first global online fashion retailer in London. Their dream was big, they raised millions of dollars, and they set out to change the world. Their dream would soon become a nightmare, ultimately becoming one of the most notorious entrepreneurial disasters in history.

The Birth of


Swedish entrepreneurs Ernst Malmsten and Kasja Leander envisioned a groundbreaking e-commerce platform selling the latest fashions after selling their online bookstore Along with financier Patrik Henderson, they set up their headquarters in Carnaby Street, London, and began raising funds for their new venture,

This cautionary tale serves as a reminder that online operations are not immune to the pitfalls of traditional business. Success depends on understanding consumer demand, managing operating costs, and executing a solid business strategy.

When Money Flows Freely

Fundraising and Financial Mismanagement raised almost $130 million in less than a year from investors including JP Morgan, which took a 5% stake for $12 million. However, no one seemed to scrutinize the financial implications of such massive investments. A simple calculation would reveal that to break even, needed to generate annual sales of around $1 billion.

A Tangled Web of Technology

Technology and Execution Challenges

Managing a global operation required software capable of managing Malmsten and Leander's vision. They decided to integrate cutting-edge software from various suppliers, despite the associated risks. Lacking in-house expertise, they hired Ericsson, a company inexperienced in this field, to manage the integration. This decision led to delays and setbacks, pushing the launch of further into the future.

The Race to Build a Global Brand

Marketing and Branding Efforts

Despite the ongoing technical challenges, Leander began spending her $42 million marketing budget. She booked billboard and magazine advertising space and launched television ads in America and Europe. Unfortunately, these marketing efforts were premature and ill-timed, given the platform was not yet functional.

The Great Divide: Technology vs. Accessibility

Technical Issues and Accessibility

When finally went live, it became clear that the site was designed for high-speed computers and the latest web browsers. The majority of consumers, lacking such technology, struggled to access the platform. This miscalculation significantly limited the company's reach and potential sales.

A Sinking Ship

Financial Struggles and Downsizing's mounting troubles led to JP Morgan insisting on stringent lending terms and staff reductions. With a burn rate of over $1 million per week and disappointing sales, the company's future appeared bleak. JP Morgan eventually resigned as their advisor, leaving in dire straits.

The Final Curtain

Liquidation and Aftermath

Unable to secure additional funding, went into liquidation on 17 May 2000. This marked the end of a once-promising venture that had succumbed to a series of missteps and miscalculations.

Recent Startup Failures

Often, success stories are celebrated in the world of entrepreneurship while failures are ignored. However, it is important to analyze and learn from these entrepreneurial disasters to prevent history from repeating itself. From the ill-fated blood-testing giant Theranos to the rapid demise of Quibi, a mobile streaming platform, these cautionary tales offer valuable insights into the pitfalls of overconfidence, financial mismanagement, and a lack of market understanding.

Lessons Learned from Entrepreneurial Disasters


The story of, along with other notable startup failures like Theranos, WeWork, Quibi, Juicero, and Yik Yak, serves as a stark reminder of the potential consequences of poor decision-making, financial mismanagement, and technological overreach. The key to success lies in balancing innovation with solid business practices, prudent financial planning, and a deep understanding of consumer needs and market trends, as learned from these cautionary tales. In the rapidly evolving world of technology and e-commerce, adaptability, foresight, and resilience are paramount for turning ambitious visions into sustainable realities.

Boo Hoo: A's Not-So-Comic Tragedy by Ernst Malmsten, Kasja Leander, and Erik Portanger, is available in paperback form.