How a start-up company survived the dotcom crash to become an $81 billion behemoth
In the mid 90’s at start of the Internet boom, a young man and his wife quit their prestigious Wall Street job to start an internet based mail order business. The young man felt the internet would be a more efficient platform for doing business and he could offer his customers more products without the limitations of inventory, the traditional brick and mortar business faced.
This type of business model was a pioneer one. However, after careful consideration, the founders modelled the systems of the traditional book publishers and located their company close to where they could hire talented software programmers to build the systems that will make the business succeed. They also recruited beta testers to use the system. This start-up company ran out of money quickly and had to raise money from family, investors and Wall Street.
The story of Jeff Bezos and the founding of Amazon.com is part of the defining history of the internet and business. Amazon.com is now the world’s largest online retailer and as at the end of 2010 had sales revenue of over $10 billion dollars and market capitalization of $81 billion.
The start up phase of Amazon.com was not always smooth sailing. In fact, Amazon.com would have become history during the dotcom crash in the stock market if not because they had this key element in their business.
In her book, Jeff Bezos: The Founder of Amazon.com (Rosen Publishing 2007), Ann Byers tells of the initial struggles of the start-up company. Amazon did not make profits in the first 2 years of its operation. Bezos spent all his personal saving, his parent’s saving and over $1 million of investors money. In addition Amazon.com lost $9 million. However Bezos was able to keep the company going and tap more money from Wall Street for several reasons:
It generated traffic. The daily website traffic was over eighty thousand people
Rising sales: In the first 3 months of 1997 Amazon had sales of $16 million, more than half for all twelve months of the year before
A growing customer list. Amazon had 340,000 customers on its database
Brand recognition: The name Amazon became a recognized brand in over one hundred countries