Flooz.com

Flooz.com was a notable dot-com venture that provides a clear case study in the opportunities and perils of early e-commerce. Founded in August 1998 by Robert Levitan, co-founder of iVillage, and Spencer Waxman, the New York-based company went live in February 1999. The concept originated when Waxman heard the Arabic slang for money, “flooz,” and envisioned it as a brand for a new online currency.

The business operated as an alternative payment method for online gift-giving. Consumers would purchase "Flooz credits" directly from the company, which could then be emailed as gifts. Recipients could redeem these credits for merchandise at participating online retailers, which included prominent names like Barnes & Noble, Tower Records, and Godiva Chocolates. This model was designed to appeal to consumers wary of sharing credit card information online and to drive traffic to partner merchants. Flooz.com's revenue was generated by taking a 15% to 20% cut of transactions on its partner sites.

The company launched with significant backing and a high-profile marketing strategy. It secured a total of $35 million in venture capital from investors such as Oak Investment Partners, Maveron, Brentwood Venture Capital, NBC, and NextCard. A major promotional push was an $8 million advertising campaign featuring actress Whoopi Goldberg, who was compensated in cash and company stock. This campaign contributed to rapid initial growth, with the company reaching 125,000 accounts and processing $25 million in transactions by early 2000.

Despite its early traction, the company's trajectory was short-lived. A critical vulnerability in its security system was exploited by an organized crime syndicate, which used stolen credit cards to purchase approximately $300,000 worth of Flooz as a method of laundering money. This fraudulent activity created a severe cash flow problem, as the company's credit card processor withheld funds while Flooz was still liable for the redeemed currency. Compounded by the broader dot-com market crash, these challenges became insurmountable. Flooz.com ceased operations and filed for Chapter 7 bankruptcy on August 26, 2001, rendering all outstanding credits worthless and leaving behind 325,000 creditors.

Keywords: Flooz.com, Robert Levitan, Spencer Waxman, dot-com bubble, e-commerce history, online currency, virtual gift certificate, digital currency, Whoopi Goldberg, venture capital, online payments, payment systems, dot-com failure, internet history, e-gifts, iVillage, Oak Investment Partners, financial fraud