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Boo.com, the online sportswear retailer, on Wednesday night became Europes first big internet casualty when the refusal of its backers to continue funding its heavy losses forced it into liquidation.

The company which had become one of the highest profile internet retailers in Europe appointed KMPG as liquidator, having spent all but $500,000 of the $135m it had raised since early last year.

The share holders include Bernard Arnault, the French entrepreneur; the Benetton family; and JP Morgan, the US investment bank. Boos founders, including former model Kajsa Leander and Ernst Malmsten, chief executive, own about 40 per cent of the equity.

The collapse is likely to put further pressure on business-to-consumer internet companies, which have seen their valuations plunge in recent weeks.

Ernst Malmsten said on Wednesday: "It could be a big blow for the internet in Europe and frighten investors from investing in start-ups because they could lose their reputations as well as their funding. Big retailers could take advantage of this."

"We have been too visionary. We wanted everything to be perfect, and we have not had control of costs. My mistake has been not to have a counterpart who was a strong financial controller."

After a high profile launch, the company was dogged by technical problems which delayed the site going live by five months to November. Since then, it has been forced to axe 90 staff and cut prices on some lines by 40 per cent.

It has also suffered a number of high-profile employee defections, including Dean Hawkins, finance director, who left to join Chello, the internet service provider.

Boo needed $30m (#20m) to implement an emergency restructuring plan that would have seen redundancies among the 300-strong workforce and the closure of a number of its overseas offices. But investors were not prepared to back the plan with more money.

Michael Whitaker, chief executive of internet incubator NewMedia Spark, said: "This helps destroy the mystique that business to consumer companies can operate outside normal business principles. Online flair is not enough. What is also crucial to success is conventional offline business skills in areas such as distribution."

"More than 70 per cent of current internet-related companies will go out of business within two years."

Boo.com is understood to still be burning about $1m a week, in spite of a recent upturn in sales. In February, the company announced net revenues of $657,000, compared with $680,000 for the three months to January 31. A big element of the cash burn was from marketing, which is understood to have totalled about $30m since launch.

Mr Malmsten said the company had held discussions with a number of potential trade buyers including Kingfisher, the UK retailer and Chello but final talks on a sale were abandoned on Tuesday.

-- Jim McAteer (jim_mcateer@hotmail.com), May 18, 2000