In this episode of Acquired, hosts Ben Gilbert and David Rosenthal, alongside special guest Tom Alberg, co-founder of Madrona Venture Group and early Amazon board member, delve into the history of Amazon's IPO and its evolution from a startup to a tech titan. They discuss Amazon's strategic focus on customer experience, its reliance on continuous iteration, and the importance of long-term vision in driving the company's growth. Highlighting the role of key figures like Jeff Bezos and Joy Covey, the episode underscores Amazon's successful leveraging of the burgeoning internet wave and the company's ability to innovate and scale rapidly by going public. Alberg shares insights on Amazon's early financing, the decision against joining forces with Barnes & Noble, and the company's culture of innovation, which later led to the creation of AWS. The episode emphasizes the significance of timing, market understanding, and the ability to maintain a long-term perspective post-IPO.
"Pilot is the one team for all of your company's accounting, tax and bookkeeping needs and in fact now is the largest startup focused accounting firm in the US."
This quote underlines Pilot's comprehensive service offerings and their status as a leading accounting firm for startups in the US.
"Startups should focus on what makes their beer taste better...and outsource everything else that you do as a company that doesn't fit that bill."
The quote reflects Bezos's advice for startups to prioritize activities that enhance their product and delegate secondary tasks to specialists.
"Pilot both sets up and operates your company's entire financial stack...Pilot takes care of all that."
This quote emphasizes Pilot's role in handling the full range of financial operations for companies, from basic bookkeeping to high-level financial management.
"Mr. Alberg has been a director of the company Amazon since June 1996...Mr. Alberg received his BA from Harvard University and his JD from Columbia Law School."
This quote provides a brief overview of Tom Alberg's professional history and his significant role in Amazon's development.
"When I'm 80, am I going to regret leaving Wall street? No. Will I regret missing a chance to be here at the beginning of the Internet? Yes."
This quote encapsulates Bezos's decision-making process, which was guided by the desire to minimize future regrets and seize opportunities in emerging markets.
"By the second or third week there was 6000 or $10,000 in sales...it was clear there was a trend here."
The quote by Tom Alberg reflects the early signs of success for Amazon, highlighting the company's quick uptake in sales.
"Venture capital firms from around the country were calling...it was becoming clear that it was growing fast, that it was going to take more money than the million dollars."
Tom Alberg's quote describes the increasing interest from venture capitalists as Amazon's growth trajectory became evident.
"I don't think he stood out as the only great entrepreneur I ever met, but certainly in the top 20 or 10%."
Alberg's quote acknowledges Bezos's exceptional entrepreneurial skills, placing him in the upper echelon of entrepreneurs he has encountered.
"General Atlantic proposed a complicated pricing, because we're starting to talk $80 million pre money. And although that era started to get hot, it was reasonably high pre money for a first venture round. But they proposed sort of a complicated thing. It would be $90 million pre money if it went public, but if it didn't go public within two years at a certain valuation, then it was $50 million. And Kleiner came in with sort of like a straight 60 million."
The quote explains the differing investment proposals from General Atlantic and Kleiner Perkins, highlighting the complexity of General Atlantic's offer versus the straightforward nature of Kleiner Perkins's proposal. It shows the decision-making considerations for Amazon regarding venture capital.
"So Jeff, of course, did, and John joined the board, which was good for Amazon. And good for Kleiner and John, obviously."
The quote indicates that Jeff Bezos played a role in ensuring John Doerr joined Amazon's board, reflecting on the strategic importance of having influential board members.
"Jeff also had one of his sort of thesis is sometimes in launching a new business, there's a land rush. You want to be first and get into the lead and stay there."
The quote captures Jeff Bezos's strategic philosophy of quickly securing a dominant market position, which was a driving force behind Amazon's rapid expansion.
"Jeff in those early years was very focused on books. I mean, he declined to even talk about other things for the first two or three years."
This quote emphasizes Jeff Bezos's initial strategy to concentrate on establishing Amazon as a leading online bookstore before branching out into other product offerings.
"I think one of Jeff's motivations, I think the idea that we could raise money at hopefully good valuations and then use that money to grow further was attractive."
The quote highlights the strategic thinking behind Amazon's IPO, focusing on raising capital to fuel growth and enhance the company's brand.
"You know, Jeff always had the view, and we had the view that big name companies aren't always the know. Goldman and Morgan Stanley have been the top two then and today. And there's a lot of merit in going with them, but it didn't mean that others weren't as good or potentially better."
This quote reveals the rationale behind Amazon's decision to work with Deutsche Bank for the IPO, highlighting a preference for individual expertise over institutional prestige.
"Yeah, you're right. It didn't have this enormous pop at the beginning. And, yeah, I think by, I vividly remember some of this, that it was pretty flat until those earning release came out."
The quote reflects on the initial market reaction to Amazon's IPO and the subsequent increase in stock value following strong revenue reports.
"Jeff has had a unique ability to think long term and make it clear he's thinking long term. So the investors understand that this is a long term investment."
The quote underscores Jeff Bezos's emphasis on long-term thinking and how it shaped investor perceptions and the company's ability to pursue sustained growth.
"You know, I didn't help him write it, unfortunately. I wish I was a. But I think, you know, one of the key people in those early days was this Joy Covey, who had been recruited as the CFO."
While the quote does not directly address the content of the shareholder letter, it acknowledges the contributions of key individuals like Joy Covey in shaping Amazon's financial strategy during its formative years.
"Rischer was recruited from Microsoft, who was a very important, strong senior executive in those days." "And Jeff started trying to recruit him in January of 97 before the IPO, and didn't get him until after the IPO."
The quotes highlight the strategic recruitment of key executives from major companies like Microsoft and Walmart to strengthen the company's leadership team, particularly in preparation for going public.
"Joy was unusual. She was very smart. She hadn't graduated from high school. She ended up graduating from Harvard Business School. She came in second in the nation on the national accounting exam." "And she's very smart, nicely aggressive, personable. And so she really drove the IPO in a lot of ways."
The quotes describe Joy's exceptional capabilities and how her unique background and intellect contributed significantly to the success of the IPO process.
"Amazon's always felt that that's proprietary. They don't want to let their competitors know."
This quote explains Amazon's strategic decision to withhold certain information that they considered proprietary, which was a point of contention with analysts and investors.
"I do think sometimes it also comes up, well, another one for some of our companies that have gone public has been backlog and backlog."
The quote discusses the reluctance of some companies to disclose specific information, such as backlog, which can be proprietary or potentially misleading.
"So it was part of the money was available. We're growing rapidly. Let's take advantage of the fact that, and the interest rates were, I believe."
The quote reflects the strategic financial decision to raise capital through debt offerings, taking advantage of available funds and favorable interest rates to fuel growth.
"So really in 2001 or so the decision, Jeff and the board felt we need to cut costs and expenses. And so I think we barely did it in time."
This quote highlights the critical decision-making and timely cost-cutting measures that were necessary for Amazon to survive the economic downturn.
"Yeah, I think it would have been slower growth because you couldn't have afforded if you didn't have access to capital."
The quote emphasizes the importance of capital access for Amazon's growth and suggests that without it, the company's expansion would have been limited.
"It almost feels like Jeff and the company taking that lesson to heart, that when there are good businesses targeting large markets and for whatever reason are out of favor or in the midst of a recession, that's the time to go shopping."
This quote reflects on Amazon's approach to acquisitions, particularly during times when potential targets are undervalued due to market conditions.
"Without being riding a massive wave. And I think for me, the flip side of that coin that I think really shines through in reading about and reading this history of Amazon at that time is the long term thinking that Jeff and the company and the board had."
The quote emphasizes the importance of identifying and capitalizing on significant trends or "waves" of innovation, coupled with a commitment to long-term thinking, as key factors in Amazon's early success.
"And so you've got to make, after you go public, it's equally important to one, continue to innovate. Don't stop innovating just because you feel like you're at the top of the mountain."
This quote highlights the necessity of continued innovation for a public company to remain competitive and successful in the long term.
"So the thing that's amazing to observe in Amazon is an incredible dna for experimentation and small teams and doing things in a lean way."
The quote describes Amazon's approach to innovation, which involves experimentation, small teams, and lean methodologies, contributing to the company's ability to launch successful new ventures like AWS.
"But the constant iteration of AWS, it's like revising your Internet site. They had 600 new features this year or something."
The quote explains how AWS's strategy of constant iteration and feature updates is a departure from traditional platform models and is a key factor in its success.
"But I really do prefer founders who have a long term vision and at least in the beginning say they're going to stick with it."
This quote underscores the preference for investing in founders who demonstrate a commitment to long-term goals and vision, which is seen as a positive indicator of potential success.
"And it feels inevitable that the company would have went public when it did, especially just hearing the story now, it was completely rational."
The quote reflects on the rationality and inevitability of Amazon's IPO, given the company's clear vision and the opportunities presented by the internet.
"So you should not neglect that for inevitability."
This quote stresses that while Amazon's success may seem inevitable in hindsight, it was the result of a strong commitment to innovation and hiring the right people.
"So my carve out is a band called the album Leaf."
The quote is a personal recommendation from one of the speakers, sharing their interest in a music band, which serves as a lighter, personal touch to the conversation.