In 1979, Microsoft had 13 employees, most of whom appear in that famous picture that provides indisputable proof that your average computer geek from the late 1970s was not exactly on the cutting edge of fashion. We started the year by moving from Albuquerque back to Bellevue, just across the lake from Seattle. By the end of the year we’d doubled in size to 28 employees. Even though we were doing pretty well, I was still kind of terrified by the rapid pace of hiring and worried that the bottom could fall out at any time.

I met up with a few entrepreneurs and investors while I was in town but missed the opportunity to meet with a bunch more that I wanted to see. It’s hard combining work and family vacations. I don’t recommend it.

Fred Wilson – Stockholm

oh man, so true. I keep trying to pull this one off but it’s too hard.

Did Sequoia force Zappos to sell?

There is a rumor swirling around that Sequoia forced Zappos to sell to Amazon.

I’ve received a bunch of emails on the subject from entrepreneurs. Can a VC force a sale?

Here’s my thoughts on this rumor and the idea of whether a VC can force a company sale.

Few scenarios to consider (I’m talking about forcing a sale, not blocking a sale):

1. Company raises a relatively small amount of capital and is making some modest or exceptional progress. In this case the VC doesn’t have a the ability to sell the company. They don’t control the board. Also, in a small company like this the founders are the franchise and the acquiring company isn’t going to want to buy a company if the founders aren’t happy.

Company raises a relatively small amount of capital and is making zero/negative progress. I dunno about this one either. I haven’t seen this one personally. But I can’t imagine the VCs and founders not agreeing. In any event, small amount of capital = founder control over the board and shares so its’ moot

3. Company raises a significant amount of capital and making little/zero/negative progress. Okay here’s is where it gets tricky. In this case the company is going to need more money. The VCs may be tapped out and there might be little/no interest in the market to funding the company. In this case there could be a way for the VCs to force a sale since a lot of money combined with little/zero progress means giving up control. But this isn’t the Zappos scenario. Zappos is growing fast and making/growing real profits ($40M/year in profits).

4. Company raises significant amount of capital and financially successfull. Okay, we’ve finally arrived. This is the Zappos scenario. Can a VC force a sale? I don’t know the board make up at Zappos so that’s not worth speculating upon.

Conceptually, Sequoia could have had a redemption right that they wanted to trigger – perhaps if this was from a 1999 fund and they needed liquidity (10 year fund life cycle). But first, I don’t know which fund this came from. Second, they probably could have gotten a waiver from their LPs if that was true and third, they could have gotten a buyout from a private equity firm. Again, I’m not sure this was even an issue but given all of those I don’t think a redemption right caused this.

But here’s the real clencher in my mind: watch the Bezos video about Zappos. He is sincerely and completely head over heels for the management team and with good reason. If they didn’t want to sell they would have made that clear to Bezos and the deal would have soured.

Zappos is successful financially and they didn’t need additional capital. The brand is amazing, the service is fantastic and the founders & management are critical to the business.

Obviously I’m not a Zappos insider and there could have been other things on. But I really can’t see how the VCs could forced a Zappos sale at this time.

And I agree with Howard’s tweet

“Congrats zappos on just being awesome and getting paid for it.”


Well said.

Jeff Bezos: Regret Minimization Framework

This is fantastic.

via Jeff Bezos, 2001

I went to my boss and said to him, “You know, I’m going to go do this crazy thing and I’m going to start this company selling books online.” This was something that I had already been talking to him about in a sort of more general context, but then he said, “Let’s go on a walk.” And, we went on a two hour walk in Central Park in New York City and the conclusion of that was this. He said, “You know, this actually sounds like a really good idea to me, but it sounds like it would be a better idea for somebody who didn’t already have a good job.” He convinced me to think about it for 48 hours before making a final decision.

So, I went away and was trying to find the right framework in which to make that kind of big decision. I had already talked to my wife about this, and she was very supportive and said, “Look, you know you can count me in 100 percent, whatever you want to do.” It’s true she had married this fairly stable guy in a stable career path, and now he wanted to go do this crazy thing, but she was 100 percent supportive. So, it really was a decision that I had to make for myself, and the framework I found which made the decision incredibly easy was what I called – which only a nerd would call – a “regret minimization framework.”

So, I wanted to project myself forward to age 80 and say, “Okay, now I’m looking back on my life. I want to have minimized the number of regrets I have.” I knew that when I was 80 I was not going to regret having tried this. I was not going to regret trying to participate in this thing called the Internet that I thought was going to be a really big deal. I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not ever having tried. I knew that that would haunt me every day, and so, when I thought about it that way it was an incredibly easy decision. And, I think that’s very good. If you can project yourself out to age 80 and sort of think, “What will I think at that time?” it gets you away from some of the daily pieces of confusion. You know, I left this Wall Street firm in the middle of the year. When you do that, you walk away from your annual bonus. That’s the kind of thing that in the short-term can confuse you, but if you think about the long-term then you can really make good life decisions that you won’t regret later.