6 ms·

Jeff Bezos raised $1M from 22 people to get Amazon started

85 points by thinkling 14y ago

leelin 14y ago
Wasn't Jeff Bezos a fairly senior and well-respected quant at D. E. Shaw just before founding Amazon? I would guess he would have had a fairly easy time raising money purely for capital purposes. Maybe he was strategically trying to get non-tech people in the book industry to invest and that was the root of the difficulty?
- mdonahoe 14y ago
  He was perhaps deliberately keeping each individual investment small so that no one investor would have a large controlling interest.
hythloday 14y ago
If like me the phrase "regret minimization framework" catches your eye, he goes into it here: http://bijansabet.com/post/147533511/jeff-bezos-regret-minimization-framework http://bijansabet.com/post/147533511/jeff-bezos-regret-minim... previous HN discussion: http://news.ycombinator.com/item?id=1717824 http://news.ycombinator.com/item?id=1717824
netcan 14y ago
Amazon is an interesting story with an interesting trajectory. I remember being explained about it as a teenager. The overfunded 90s dotcom that made it.
- podperson 14y ago
  It seems to me that Amazon is the last of the 90s dotcoms. It's barely viable, so it just keeps going, but there's a huge premium on its share price that seems to presume that one day it will get a monopoly on online sales and suddenly be able to generate huge profits. As if this wouldn't (a) immediately result in massive cannibalization by new entrants or failing that (b) anti-trust enforcement.
  - wmf 14y ago
    They may lose money on Kindles, Kindle books, and Prime, but don't forget the cloud.
    - seunosewa 14y ago
      Good point. Overpriced products that people think they can't live without are great for profits.
    - podperson 14y ago
      Yes, thanks to their vast operating profits from the cloud they have a P/E of ~3000. Let's be generous and assume Amazon could push a button and run the rest of its business at break even, and that its revenues from the cloud are pure profit -- its P/E would only be somewhere between 50-70.
      - wmf 14y ago
        It depends whether you assume that virtually all servers will go to the cloud and Amazon will have monopoly market share in the cloud.
        podperson 14y ago
        I think a business strategy that assumes "someday in the future we'll be a monopoly and charge rents" isn't a good one.
  - rtpg 14y ago
    Is amazon really "barely viable"? They seem to sell huge volumes in their main business. They might be losing money in the kindle business but that won't affect their main business (at least I wouldn't think so)
    - podperson 14y ago
      Before considering Kindles or "Prime" Amazon is barely profitable. It loses money on both of these new businesses, and it has the sword of Damocles (sales tax) ready to drop on it at any moment.
ry0ohki 14y ago
Getting an investor in 1 out of every 3 meetings doesn't seem so terrible
- hkmurakami 14y ago
  The ratio is probably a bit worse than this, since I expect that some of the meetings were with groups of investors.
rexreed 14y ago
I had to click into the article to understand the title of this post. Somehow the sentence structure of the post title didn't seem to make sense to me.
- pbreit 14y ago
  Was the use of "ask" as a noun the problem?
  - rexreed 14y ago
    That was part of it - to my mind, the title was this agglomerated collection of words that needed decoding: "what's the noun / verb / etc.... ack, to heck with it, I'll click on the article and figure it out from there" I know there's a limit on title length. If I may suggest a good eyeball catching title for this would be: "It took Bezos 60 tries for him to get $1M for Amazon from 22 investors"
  - sixothree 14y ago
    I needed 3 googles to understand the etymology. But seriously, why is ask being nounified where other verbs are not. I think it has something to do with the culture, but I cannot place my finger on it.
    - SatvikBeri 14y ago
      In the business world, ask has been used as a noun at least since 1985 ("I understand it's a big ask...")[1] http://itre.cis.upenn.edu/~myl/languagelog/archives/001331.html http://itre.cis.upenn.edu/~myl/languagelog/archives/001331.h...
      - podperson 14y ago
        Goes back at least as far as 1781: http://english.stackexchange.com/questions/4246/can-or-should-ask-ever-be-used-as-a-noun http://english.stackexchange.com/questions/4246/can-or-shoul... Nouning verbs (like verbing nouns) is very common in English, to the extent it's often unclear which came first.
hntldr_com 14y ago
Original title is a bit clearer: "Jeff Bezos attended 60 investor meetings to raise $1m from 22 people, just to get Amazon started"
- jlgreco 14y ago
  It seems like the moderators have been putting in some overtime lately with the headline rewriting. I appreciate the effort, most of the time the rewrite is better, but it does make it harder to visually scan the site for interesting articles (considering it is not rare for many articles about the same topic to be on the front page at once).
- rexreed 14y ago
  Agreed, or as I suggested above: "It took Jeff Bezos 60 tries to raise $1M from 22 investors to start Amazon"
mvc 14y ago
I like the bit about how nobody in the book business was interested. Puts their current whining into perspective.
monochromatic 14y ago
"Ask" is a verb, not a noun.
- Evbn 14y ago
  Other verbs that are not nouns: Color quest set put call option stream demand prey cut feast run love verb noun troll flame hack...
- debacle 14y ago
  Actually, in investing and finance, "ask" is both a verb and a noun.
  - pbreit 14y ago
    In all of business (and probably elsewhere, too), "ask" is frequently used as a noun.
- danilocampos 14y ago
  I sure wish I got more than one downvote sometimes.
  - monochromatic 14y ago
    Ok.
- mturmon 14y ago
  It's a common noun in fundraising too: http://www.thefundraisingauthority.com/fundraising-basics/fundraising-ask/ http://www.thefundraisingauthority.com/fundraising-basics/fu... It has specificity -- it's not just any question, it's particularly about asking for a contribution from a donor. So the usage in the title is on target.
jsemrau 14y ago
Thank you for posting this. I am currently at half that but step by step progressing further.
- bbaker 14y ago
  Even a hit rate of half that is pretty solid. 30% close rate on pitches is ridiculously high. Keep rocking.
haberman 14y ago
I wonder how much each one of those original $50,000 investments is worth now.
- adventured 14y ago
  I think it's safe to guess that Bezos didn't give up much more than 10% to get started for that. From what I recall his family also holds shares and invested, whether they were part of that group I don't know. Bezos now owns roughly 20% (Forbes and Bloomberg peg his wealth around $20b to $25b usually depending on Amazon's market cap at the time), and he hasn't been an active buyer or seller for the most part over the years (he has sold a very small portion). So if Bezos retained 80% to 90% at the time of this deal, and assuming his shares weren't specially protected (and I'm not aware they were).... If that group held 10%: each $50k is worth $125 million If that group held 20%: each $50k is worth $250 million That's assuming no sales occurred over time of course. That's a decent ballpark either way, and even if you skew the numbers either direction it's a massive return.
- deleted 14y ago
  [deleted]

85 points by thinkling 14y ago

Wasn't Jeff Bezos a fairly senior and well-respected quant at D. E. Shaw just before founding Amazon? I would guess he would have had a fairly easy time raising money purely for capital purposes. Maybe he was strategically trying to get non-tech people in the book industry to invest and that was the root of the difficulty?

mdonahoe 14y ago
He was perhaps deliberately keeping each individual investment small so that no one investor would have a large controlling interest.

hythloday 14y ago

If like me the phrase "regret minimization framework" catches your eye, he goes into it here: http://bijansabet.com/post/147533511/jeff-bezos-regret-minimization-framework http://bijansabet.com/post/147533511/jeff-bezos-regret-minim... previous HN discussion: http://news.ycombinator.com/item?id=1717824 http://news.ycombinator.com/item?id=1717824

netcan 14y ago

Amazon is an interesting story with an interesting trajectory. I remember being explained about it as a teenager. The overfunded 90s dotcom that made it.

podperson 14y ago
It seems to me that Amazon is the last of the 90s dotcoms. It's barely viable, so it just keeps going, but there's a huge premium on its share price that seems to presume that one day it will get a monopoly on online sales and suddenly be able to generate huge profits. As if this wouldn't (a) immediately result in massive cannibalization by new entrants or failing that (b) anti-trust enforcement.
- wmf 14y ago
  They may lose money on Kindles, Kindle books, and Prime, but don't forget the cloud.
  - seunosewa 14y ago
    Good point. Overpriced products that people think they can't live without are great for profits.
  - podperson 14y ago
    Yes, thanks to their vast operating profits from the cloud they have a P/E of ~3000. Let's be generous and assume Amazon could push a button and run the rest of its business at break even, and that its revenues from the cloud are pure profit -- its P/E would only be somewhere between 50-70.
    - wmf 14y ago
      It depends whether you assume that virtually all servers will go to the cloud and Amazon will have monopoly market share in the cloud.
      - podperson 14y ago
        I think a business strategy that assumes "someday in the future we'll be a monopoly and charge rents" isn't a good one.
- rtpg 14y ago
  Is amazon really "barely viable"? They seem to sell huge volumes in their main business. They might be losing money in the kindle business but that won't affect their main business (at least I wouldn't think so)
  - podperson 14y ago
    Before considering Kindles or "Prime" Amazon is barely profitable. It loses money on both of these new businesses, and it has the sword of Damocles (sales tax) ready to drop on it at any moment.

ry0ohki 14y ago

Getting an investor in 1 out of every 3 meetings doesn't seem so terrible

hkmurakami 14y ago
The ratio is probably a bit worse than this, since I expect that some of the meetings were with groups of investors.

rexreed 14y ago

I had to click into the article to understand the title of this post. Somehow the sentence structure of the post title didn't seem to make sense to me.

pbreit 14y ago
Was the use of "ask" as a noun the problem?
- rexreed 14y ago
  That was part of it - to my mind, the title was this agglomerated collection of words that needed decoding: "what's the noun / verb / etc.... ack, to heck with it, I'll click on the article and figure it out from there" I know there's a limit on title length. If I may suggest a good eyeball catching title for this would be: "It took Bezos 60 tries for him to get $1M for Amazon from 22 investors"
- sixothree 14y ago
  I needed 3 googles to understand the etymology. But seriously, why is ask being nounified where other verbs are not. I think it has something to do with the culture, but I cannot place my finger on it.
  - SatvikBeri 14y ago
    In the business world, ask has been used as a noun at least since 1985 ("I understand it's a big ask...")[1] http://itre.cis.upenn.edu/~myl/languagelog/archives/001331.html http://itre.cis.upenn.edu/~myl/languagelog/archives/001331.h...
    - podperson 14y ago
      Goes back at least as far as 1781: http://english.stackexchange.com/questions/4246/can-or-should-ask-ever-be-used-as-a-noun http://english.stackexchange.com/questions/4246/can-or-shoul... Nouning verbs (like verbing nouns) is very common in English, to the extent it's often unclear which came first.

hntldr_com 14y ago

Original title is a bit clearer: "Jeff Bezos attended 60 investor meetings to raise $1m from 22 people, just to get Amazon started"

jlgreco 14y ago
It seems like the moderators have been putting in some overtime lately with the headline rewriting. I appreciate the effort, most of the time the rewrite is better, but it does make it harder to visually scan the site for interesting articles (considering it is not rare for many articles about the same topic to be on the front page at once).
rexreed 14y ago
Agreed, or as I suggested above: "It took Jeff Bezos 60 tries to raise $1M from 22 investors to start Amazon"

mvc 14y ago

I like the bit about how nobody in the book business was interested. Puts their current whining into perspective.

monochromatic 14y ago

"Ask" is a verb, not a noun.

Evbn 14y ago
Other verbs that are not nouns: Color quest set put call option stream demand prey cut feast run love verb noun troll flame hack...
debacle 14y ago
Actually, in investing and finance, "ask" is both a verb and a noun.
- pbreit 14y ago
  In all of business (and probably elsewhere, too), "ask" is frequently used as a noun.
danilocampos 14y ago
I sure wish I got more than one downvote sometimes.
- monochromatic 14y ago
  Ok.
mturmon 14y ago
It's a common noun in fundraising too: http://www.thefundraisingauthority.com/fundraising-basics/fundraising-ask/ http://www.thefundraisingauthority.com/fundraising-basics/fu... It has specificity -- it's not just any question, it's particularly about asking for a contribution from a donor. So the usage in the title is on target.

jsemrau 14y ago

Thank you for posting this. I am currently at half that but step by step progressing further.

bbaker 14y ago
Even a hit rate of half that is pretty solid. 30% close rate on pitches is ridiculously high. Keep rocking.

haberman 14y ago

I wonder how much each one of those original $50,000 investments is worth now.

adventured 14y ago
I think it's safe to guess that Bezos didn't give up much more than 10% to get started for that. From what I recall his family also holds shares and invested, whether they were part of that group I don't know. Bezos now owns roughly 20% (Forbes and Bloomberg peg his wealth around $20b to $25b usually depending on Amazon's market cap at the time), and he hasn't been an active buyer or seller for the most part over the years (he has sold a very small portion). So if Bezos retained 80% to 90% at the time of this deal, and assuming his shares weren't specially protected (and I'm not aware they were).... If that group held 10%: each $50k is worth $125 million If that group held 20%: each $50k is worth $250 million That's assuming no sales occurred over time of course. That's a decent ballpark either way, and even if you skew the numbers either direction it's a massive return.
deleted 14y ago
[deleted]