Jeff Bezos convinced 22 investors to back his new company Amazon in 1994 (2018)
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There are some inaccuracies in this article, too. Most of the investment window described here actually took place in 1995 - Jeff had enough cash to see things through the end of 1994. He and Mackenzie did not live in a 1 bedroom apartment that they "rented when they moved to the city" - they rented a house in Bellevue and the already-converted garage was the first Amazon office. They may well have moved to 1 room apartment later, as it became clear that the company would definitely be in Seattle itself.
Thanks for some insights.
If yiu have time, any more?
My favorite, very fuzzy memory of "early investors in amzn" concerns someone who appears to have successfully dropped off the map. We had hired a guy called who had graduated from a college in OR known for being a bit "wooly" but nevertheless generated high quality grads. Jeff wanted to hire some more people from the school, and asked the guy for suggestions. We ended up hiring (among others) a philosophy grad who was also a carpenter and cycling fiend. This guy designed and built the first specialized packing tables for the company. He was a gentle, reflective soul, not really into computers or tech or startups or any of what amazon was about, as I recall.
When he heard that Jeff was looking for "angel" investors (as opposed to VC money, which he wanted to avoid as much as possible), the carpenter went to see Jeff about putting his life savings into the company. My recollection is that he might have had about $35k saved up (he was a deeply frugal person, too). Jeff told him twice that it was a terrible idea, that the company was still incredibly risky, and it was insane for someone so young. The third time, Jeff relented, and allowed him to buy a bunch of stock.
Based on the article, if he had held onto his stock, it would have been worth about $5BN. More likely, he sold it along the way, and probably netted somewhere in the 10s to 100s of millions.
I have no idea what happened to the carpenter, but I hope that he's happy somewhere with some beautiful handtools in a woodshop he built himself, riding one of many custom made bicycles across a lovely landscape. Based on what I knew of him back then, definitely the most deserving and philosophically appropriate winner at the amazon stock roulette game.
In the really early days of Amazon, did the company and/or the group of people feel like something really special, or did it feel like a totally regular bunch of people just working on some idea that was half decent? Was there any sense at all of the type of company it could become?
For most of the time that I worked at amzn, it was really just Jeff, Shel (Kaphan) and myself, with Mackenzie apparently do the accounting somewhere else. The three of us were a tight threesome back then, and we knew that we were building something very new and quite possibly momentous (in particular, the idea of what we called "almost in time" retail, aka "we don't have it in stock but we can it for you really quickly"; of course, that idea has largely gone away these days).
Jeff had much bigger dreams from day zero than most people acknowledge (basically, to be the Sears of the 21st century), and Shel and I both knew that.
On the other hand, day to day work involved mostly the same old problems, there were the same conflicts (i excused myself from all discussions about website design because it was clear that Jeff and I were never going to agree about almost any of it), and the whole thing felt as if it could have folded up at any moment before about (say) October of 1995. After that, there were more people on board, sales were skyrocketing, and it was clear that it was a thing.
I left amzn for many reasons, but in part because it was obvious to me by the fall of 1995 what kind of company it was going to become, and I wanted nothing to do with that. I still don't, which is why I've spoken out a bit more publically about the company over the last year or two.
But ... his greatest strength is understanding that he's not smart enough, and the important thing is to hire people who are better than you to do the things that need to be done, so that you have time for thinking about what needs to be done.
It was nice to work for a guy with a BS in CS, someone who understood aspects of the sorts of problems that myself and the other founding programmer faced in the early days. We could talk about scaling issues, or database design issues, and Jeff had more than your typical "boss" understanding of what we meant.
But we were both much better programmers than Jeff would ever be. On the other hand, he's demonstrably much better at building and running a massive corporation, and much more willing to make decisions that many of us (I hope) would stumble over.
What Amazon became was a massive corporation that didn't care much about employee burnout, didn't care much about its treatment of employees at all, and relentlessly focused people on their lives as consumers, when most of us spend more of our lives as employees and citizens. Amazon has been amazing for us all as consumers, but it's almost certainly a net negative when viewed through the lens of employees (within and outside the company) and citizens.
These folks (who are "smarter than") usually have offers from everywhere in the valley, and without prestige or big salary, I'm curious to know if the conversion is primarily a vision or a 'reality distortion field' like story? Or was there any burden of proof for Jeff on progress towards the vision?
Edit: just saw you said Jeff knew the vision at the start, how did he prove he was the one to do it early on (founder-startup fit)?
Also, keep in mind, Jeff came from a hedge fund, having worked/analyzed the (then) internet and consumer market - so it seems he had more than a hunch of its potential.
And the fact that he was a tech guy (before banking), probably meant he could easily talk their language - in technical terms.
I remember that not long after we "opened the doors" to the public, we had a visit from some reps from either Ingram or Baker & Taylor, the US's two biggest book distributors (I forget which). Part of the reason Jeff had picked Seattle was that it was within the 1 day delivery radius for both companies. These guys came over to see what we were doing and they were completely flabbergasted. They could not believe that a few people in a small commercial building in Seattle had built what we had already done by that point. They had no idea of the technologies involved, they had no grasp of the vision. But we never had to convince companies like this - we just ordered books from them, as their customers, and then sold them to ours.
In the early days, there were just two of us programmers, and we began to sense that there was a backlog of programming tasks that we just didn't have the time to get to. We proposed the Jeff that we hire a third programmer. He wanted someone with a PhD in CS from one of the top 5 CS schools. We said "Jeff, we're a tiny startup in Seattle (remember, this is 1994, Seattle was different), we're never going to hire people like that". He insisted. We interviewed several of those people - they weren't interested (as we predicted). We bugged him and bugged him and eventually he relented and let us hire a less qualified, less stellar guy, just to get some tasks done.
In retrospect, Jeff had been exactly right. We should have held out for another A+ programmer, with the skills and vision to drive forward whatever tasks they were given (or self-identified). Instead we hired a capable, skilled person who needed a lot of hand-holding and encouragement (not to worry, I think he did pretty well for himself).
Jeff knew we had made a mistake (albeit not a very big one), and asserted very affirmatively that the company would not do that again. When we started hiring editors, he wanted people with "multiple years experience at a major national publication". The two of us founding programmers didn't try to talk him down from that, and eventually he was able to recruit such people. I don't know how he convinced them to join Amazon, even to this day.
Also, recall that in 1994, "the valley" wasn't what it later became. The people amazon was hiring in the 1995-1998 period weren't looking to the valley for alternative employment, for the most part.
I encourage you to write down everything you remember of your experience there. You don't have to publish it, but future historians will surely find it very interesting.
People are always eager for anecdotes about the early days of Apple and Microsoft, but surprisingly there's very little about Amazon.
One of the problems with properly documenting the first year or so is that the people involved mostly don't want to talk about it, or want to turn it into the stuff of legend.
The one person who was there for the full first 5 years besides Jeff (and Mackenzie, to whatever extent she was deeply involved, which I never sensed was a lot, but I may be wrong about that) doesn't like talking about Amazon publicly (though he did a little for a recent PBS documentary). Lots of other people came and went during that time (including me), and we're all a bit like the blind folk feeling out the elephant: we know part of the story, but not the full picture.
Jeff himself doesn't seem very interested in talking about the early period, or if he does, it seems important to him that the story describes a trajectory that obviously connects with what was to come (which is not entirely unfair).
The people who stayed for the long haul generally don't want to talk, it seems; the people who left mostly have not-so-positive stories to tell at this point (partly because of the behemoth that the company has become).
Personally, I think that Amazon's complete failure to take the high road in creating the model of retail in the 21st century is the more important story than details from the early days. The appalling treatment of employees, the conflicts between operating a marketplace and being a seller within that marketplace, and the general emphasis on our lives as consumers instead of the more important roles of citizen and employee .... this is what's really important about the Amazon story in my opinion.
Oh wait, it's HN. You want to hear about how I pushed and pulled C++ objects to and from Oracle in 1994, and how integrated that into NSAPI, amirite? :)
I have served as a fact witness for Amazon in a couple of patent cases, saving the company very large amounts of money. I'd like to think he's aware of this, although I have no basis for that.
I wonder what Bezos thinks of himself. Does he envision himself as a self-made man, or does he see his success as the result of the hard work of many thousands or millions of people?
I'm inclined to say the former, especially given his treatment of the Amazon workforce, as you laid out in your public statements. I would love to hear more of your story, and I'll look for any documentaries with you. Thanks for your answer :).
Even if you just want to say no, just say hello in any case :)
In addition, we had to invent a whole new way of doing what was essentially mail order - there were several mail order packages available in 1994, but all of them were predicated on the notion that you either had stuff in stock, or were going to order a bunch more so that you had it in stock. Amazon was different: in the early days, we had essentially nothing in stock, so we had to invent an entirely new way of managing order flow and stock management.
No. In fact, everything you shared is really interesting.
By the way, I was at AWS from 2008 to 2014, I started when the team was about 150 people or so. It's now in the ballpark of 50k I think, or even north of that.
It's interesting how the "beginnings" of a business that eventually gets big are always "adapted" to current times.
Sure. Collecting all the pieces and building a full picture is the job of a historian.
Release to your estate posthumously
It's only a surprise because so many people got suckered into thinking that Amazon was a bookstore.
Whenever I heard these kinds of stories, I remind myself that loss aversion is a cognitive bias that we all share.
Sure, maybe some people passed on an opportunity to invest in 1994, but the general public had the opportunity to invest in Amazon any time after Amazon's IPO in May 1997. Someone who invested $50k then would be holding shares worth $95 million today. It's not quite billionaire territory, but it's still a very successful investment by anyone's standard.
One of Amazon's important achievements was to attract and retain investors willing to go along for the "their margin is our opportunity" inexorable slow-boat ride to dominance.
I still remember John C. Dvorak saying how awful amazon is and that it will never make money just ~10 years ago.
Another way of looking at this is, no one is going to be able to redeem all the Amazon stock there is for cash at this price, that only mark-to-market is wrong.
Another way of looking at this is, Jeff Bezos was happy doing what he was doing for peanuts throughout Amazon's early lifetime, so would wealth taxes or CEO compensation caps or whatever boogeyman really have dissuaded him from taking other people's money?
Maybe, maybe not. Amazon’s daily trading volume is about 3 million shares, and there are around 500 million shares outstanding. In 150 days the entire market value of the company trades.
It would be weird if the whole thing was sold at once, but there would be people interested in buying. The company has real value.
https://512pixels.net/2009/01/early-macintosh-reviews-show-d...
Apple makes the arrogant assumption of thinking that it knows what you want and need. It, unfortunately, leaves the “why” out of the equation — as in “why would I want this?” The Macintosh uses an experimental pointing device called a ‘mouse’. There is no evidence that people want to use these things. I dont want one of these new fangled devices.
This seems like a real stretch. Amazon IPOed in 1997 for $0.5B, and grew to $30B by 1999. It crashed to $3B in the dot com bust, but that was the case for the entire tech industry. Between 2001 and 2007, it grew 10x from $3B to $30B.
Even including the dot-com crash, Amazon had grown ~60x in its first decade as a public company. I don't think anyone would be laughing at those growth rates.
I guess in some cases it feels more tangible like if you specificly had the chance to invest but it really isn't much different than all those other things you could have done.
It's quite hard emotionally I guess. To see some of them who just by pure chance got rich and others who are poor. You can't give it afterwards. Money at times is just a gift from the devil in disguise.
But yeah, there was still plenty of time for anyone to make a spectacular investment in Amazon.
I'm sure there's a million and one other amazing investments right now that I'm not aware of, but they're not obvious.
You have to know when to hold 'em, know when to fold 'em, know when to walk away, know when to run.
I didn't redeem the (very low-value) shares because I didn't want a tiny slice of Oracle or a few dollars; I'd rather have an actual chunk of Sun.
Looks like it became very difficult to get physical certificates beginning in the late 2000s (see right sidebar): https://www.giveashare.com/stockcertificates.shtml
For publicly traded shares, yes. In private equity, we still get to play “who tore the stock certificate.”
This allows transfer by “book entry” rather than mailing the physical documents - much like an electronic bank transfer.
At least in Canada, once you get a physical share, you can then buy shares directly from many companies by writing them a cheque without any commissions. Less important as trades here now average around $10, but that's fairly recent for many.
I still have a share of a Canadian bank that spiked in value by the time I got my certificate sorted out. They still mail me a cheque every 3 months for <$1 in dividends.
Not that I gave it much thought. We dismissed a lot of companies back then, because most of them were obvious nonsense by people who didn't know what they were doing (technically and service/product-wise, not investment-scam-wise) and they didn't have to care, and I grouped Amazon in with the silly companies.
Now the Web browser is not much your interface to a hypertext, but a massively bloated GUI toolkit (albeit with zero-install, a really rich layout widget, and unprecedented spying on intimate reading/interaction behavior and communications)... and that silly we'll-use-the-hypertext-to-sell-paper-books company now sells me most of the things I buy now, and even operates the servers for my company and the majority of companies I use. :)
https://www.polygon.com/2018/10/2/17927916/the-witcher-autho...
Do you think he would have returned the lump sum if the game failed and they went broke?
You give up risk when you ask for a lump sum
https://en.wikipedia.org/wiki/List_of_best-selling_video_gam...
"In the early 1990s, Wayne sold the original Apple partnership contract paper, signed in 1976 by Jobs, Wozniak, and himself, for US$500. In 2011, the contract was sold at auction for $1.6 million.[15] Wayne has stated that he regrets that sale.[5][6][16]"
One trait successful investors share is that they don’t cry over missed opportunities.
Lots of people on HN could quality as accredited investors just from having being a part of a double income couple, getting paid tech worker salaries.
https://www.investopedia.com/terms/a/accreditedinvestor.asp
To be an accredited investor, a person must have an annual income exceeding $200,000, or $300,000 for joint income, for the last two years with expectation of earning the same or higher income in the current year. An individual must have earned income above the thresholds either alone or with a spouse over the last two years. The income test cannot be satisfied by showing one year of an individual's income and the next two years of joint income with a spouse. The exception to this rule is when a person is married within the period of conducting a test.
A person is also considered an accredited investor if they have net worth exceeding $1 million, either individually or jointly with his spouse. The SEC also considers a person to be an accredited investor if they are a general partner, executive officer, director or a related combination thereof for the issuer of unregistered securities.
A friend invested much of his savings equally in ~5 promising Seattle-area businesses in the early 2000s. Four went to zero, one was AMZN. Had he chosen only slightly differently, five might have gone to zero.
Crap, maybe Kodak does have a future.
Occasionally I wonder what I'd have done with all that money, but very rarely. I don't miss the billions. The $1M (plus or minus) that I got out of it was more than enough to count myself deeply fortunate. Nobody "earns" that much money - I just got lucky.
I prefer the path I took - a great life, much happiness, low stress, and for the last 20 years, the fun and games of building one of the most successful libre software projects around.
OTOH, I did tell Jeff that I was having a daughter in several months and planned to go to a 3 day week after that happened. He agreed to that ("I knew when I met you that you'd think about work 24/7 anyway"), so there was a tradeoff there.
I'm not really complaining, but when I did find out what some other early hires had negotiated, it stuck in my throat for a bit.
Every one of 1,000 young startup-y aspiring entrepreneurs thinks he/she is the next one. If you could bet right, you should become a VC.