Episode 28: The Amazon IPO with original Amazon Board Member Tom Alberg

Ben & David welcome very special guest Tom Alberg, board
member and first lead investor in Amazon.com, to cover the IPO of
"earth’s most customer-centric company". From longterm thinking
to flywheels to riding big waves, this episode is chock full of
lessons and stories from the journey of building one of tech’s
most iconic franchises. We hope you enjoy listening as much as we
did recording it! 


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Topics covered include: 

Tom’s “prolific” bio from the Amazon S-1

Jeff Bezos’s journey from a Vice President at the New York
hedge fund D. E. Shaw to founding Amazon in a Bellevue, WA garage
in the summer of 1994

Jeff’s longterm thinking as evident in the early days of
Amazon, and his approach that "failure is ok, but not trying
things is not ok” 

Raising the seed money for Amazon before product launch, how
Tom met Jeff and decided to invest despite the “high” valuation

Tom's (and Jeff’s) focus on the power of targeting large and
growing markets 

Amazon’s actual overnight success after launching the
website: according to Tom at the time, "By the second or third
week… It was clear there was a trend here.”

How Amazon’s venture round, led by John Doerr of Kleiner
Perkins, came together in the spring of 1996 

Amazon’s torrid growth through 1996, Jeff’s mantra of “get
big fast” to win the land grab of online book selling, and the
board’s decision to prepare for a public offering in the spring
of 1997 

How Frank Quattrone and Bill Gurley, then of Deutsche Bank,
won the lead position for the Amazon IPO, beating out more
storied firms such as Goldman Sachs and Morgan Stanley 

Development of the flywheel concept within Amazon, as an
outgrowth of maniacal focus on creating superior customer
experience

Amazon's public offering on May 15, 1997 at $18 per share
(effectively $1.50 relative to today’s stock price after splits),
raising $54M at a market capitalization of $438M — and
subsequently trading down during the first few months following
the IPO  

Amazon and Jeff’s management of investor perceptions of the
company, and ability to sell the longterm vision over short term
profits — “you get the investors you ask for” 

The creation of the first annual letter to Amazon
shareholders included in the company’s 1997 annual report (and
republished every year since), and then-CFO Joy Covey’s role and
contributions to it 

Raising convertible debt just before the peak of the dotcom
bubble and subsequent ability to survive the burst, and the
impact of the downturn on Amazon culture



  The Carve Out: 


Ben: the band The Album Leaf

David: Cormac McCarthy (author of All the Pretty Horses, No
Country for Old Men, etc)’s contribution to W. Brian Arthur’s
landmark paper about the economics of the internet, “Increasing
Returns and the New World of Business”

Tom: Michael Lewis’s latest book The Undoing Project,
chronicling the Nobel Prize winning partnership between Daniel
Kahneman & Amos Tversky in developing the field of behavioral
economics