Zappos (with Alfred Lin)

Former Zappos Chairman & COO (and current Partner at Sequoia Capital) Alfred Lin joins our heroes to kick off Season 2 with a classic: Amazon’s 2009 acquisition of the internet’s quirkiest online retailer for $1.2B in stock. How did three Harvard undergrads go from delivering pizza to their dorm to delivering happiness to the world — and become in the process one of the few companies ever to compete successfully head-to-head against Amazon in commerce? Tune in to find out! Note: Unfortunately the quality of David and Alfred’s audio tracks in this episode were significantly impacted by a processor issue on David’s computer, which we didn’t discover until after recording. We’ve worked hard to fix in post-production, but it’s still far from perfect. Still, the content from Alfred is so good, we felt we had to put this episode out there even though the audio quality isn’t up to par. We hope you’ll give it a listen regardless, and we’re working on getting a transcript made ASAP as well. -Ben & David Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Carve Outs: Ben: Andrew Mason on Recode Decode https://www.recode.net/2017/12/13/16770838/groupon-ceo-andrew-mason-descript-audio-startup-recording-word-processor-recode-decode David: Justin O’Beirne on Google Maps’ Moat https://www.justinobeirne.com/google-maps-moat/Alfred: Walter Isaacson’s biographies of Albert Einstein https://www.amazon.com/Einstein-Life-Universe-Walter-Isaacson-ebook/dp/B000PC0S0K/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=&sr= and Benjamin Franklin https://www.amazon.com/Benjamin-Franklin-American-Walter-Isaacson-ebook/dp/B000FBJG4U/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=&sr=

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Ben Gilbert?

  Hey Acquired listeners. Before this episode starts, David and I wanted to give you a heads up that the audio quality is pretty rough in the second half. We had a problem that we didn't catch until afterwards that makes it sound like a conference call with a poor connection. This stuff is important to us, and we even talked about not even releasing the episode. However, the interview content is just awesome, so we thought it'd be a shame not to share it with all of you. We apologize, and we hope you enjoy the interview.

• 0:24David Rosenthal?

  Okay, and is video good for you?

• 0:26Ben Gilbert?

  Yeah, video's great. Is this a good angle? You look great.

• 0:29David Rosenthal?

  This is a good angle. Are you getting my good sense?

• 0:33Ben Gilbert?

  Always, David.

• 0:44Ben Gilbert?

  Welcome to Season Two, Episode One of Acquired, the show about technology acquisitions and IPOs. I'm Ben Gilbert.

• 0:52David Rosenthal?

  I'm David Rosenbaum.

• 0:54Ben Gilbert?

  And we are your hosts. And I'm Alfred Lin. Hey, welcome, Alfred. We're very, very excited.

• 1:00David Rosenthal?

  He's supposed to surprise.

• 1:00Ben Gilbert?

  I know, I know. Too bad our titles really, really do those in.

• 1:07Ben Gilbert?

  Thank you for having me on the show. Yeah, we're super pumped to have you. Listeners, this episode is going to be about Zappos, and Alfred is one of the few people in the world who can actually do this episode justice and come on to do the show with us. We, in December, I mentioned that we're switching to season, so we can do themes and mini-series across several episodes. And for our first episode, we wanted to do a really classic Acquired format, reviewing an M&A transaction, and this is one of the ones that has been at the top of our list for a very long time. So, David, you want to introduce, who is Alfred Lin?

• 1:43David Rosenthal?

  Our mystery guest, not so mystery guest. So today, Alfred is a VC at Sequoia Capital, where he is the co-head of their US venture business and represents Sequoia on the boards of many great companies, such as Airbnb, How's, DoorDash, ZipLine, and many others. But today, we're going to talk about his time before Sequoia, when he was the chairman and COO of Zappos. And which was prior to Whole Foods, Amazon's largest acquisition ever. But my favorite part of Alfred's background, which we'll get into, was that long before Zappos, when he was an undergrad at Harvard with Tony Hsieh, he was known as the, and I'm quoting

• 2:25David Rosenthal?

  directly from Tony here, he was known as the human trash compactor of pizza, which also it turns out is pretty relevant to the Zappos story. So, welcome Alfred and thanks for coming on.

• 2:36Speaker 02

  Well, thank you for having me. I'm no longer the human trash compactor of pizza. I try not to use my, too much.

• 2:43David Rosenthal?

  I was gonna say.

• 2:44Speaker 02

  Given that I'm a lot older, I don't have the same metabolism as I used to.

• 2:48David Rosenthal?

  Yeah, it looks like a few things have changed since those days.

• 2:52Ben Gilbert?

  All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 3:11David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote-unquote "shadow AI" running with no security review at all.

• 3:32Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

• 3:54David Rosenthal?

  In half, which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 4:12Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of Acquired listeners have become Vanta customers at their companies over the years. So, you can get $1,000 off Vanta at vanta.com/acquired. That's V-A-N-T-A dot com slash acquired for $1,000 off, and just tell them that Ben and David sent you. So David, now, without further ado.

• 4:43David Rosenthal?

  So when most people think of Zappos, they probably imagine it was started by a guy named Tony Shay, who lived in Las Vegas, loved shoes, and he probably named it Zappos because he had some lifelong obsession with weird and quirky company culture, right?

• 4:59Ben Gilbert?

  Impressive, David. Every word of that sentence was wrong.

• 5:04Speaker 02

  Yeah, Ben's right. That's not quite accurate.

• 5:07David Rosenthal?

  Man, I really should have done my research here.

• 5:10Speaker 02

  The founder of Zappos was Nick Swimmer. He had started the company because he went to, he was looking for a particular pair of shoes, and he went to one store, couldn't find the right size, went to another store, couldn't find the right color, went to another store, couldn't find the right style, and went home empty-handed and decided to go Google on the internet, and he couldn't find a place where you could buy his shoes. And so, this was 1999, he thought it was a good idea to, and he was a webmaster, he thought it was a good idea to just quit his job and create a website and start Zappos.

• 5:43David Rosenthal?

  And here we are. Fortunately, he called you guys.

• 5:47Ben Gilbert?

  Alfred, I missed the term "webmaster." We gotta bring that back.

• 5:51Speaker 02

  Well, I guess nobody really is a webmaster anymore, because we've moved on from websites to mobile, mobile apps.

• 5:58David Rosenthal?

  No, there's, there's one webmaster, his name is Jeff Bezos.

• 6:02Speaker 02

  He is a webmaster.

• 6:03David Rosenthal?

  He is the webmaster. So, let's start way back, even before then. We go back to your undergrad days at Harvard in the early 90s, when you were still the human trash compactor. And so, you were, you were an undergrad, and you had two friends, Tony Shay and Sanjay Madan, and you guys decided you would develop a business together. And Tony and Sanjay were CS majors, and you were a math major, right? And so naturally, you guys were gonna do something very technical, very smart, but... The business actually turned into a pizza business. And so the story, as it is told in lore, is that Tony and Sanjay lived in Quincy House

• 6:47David Rosenthal?

  at Harvard and they managed the grill in the basement, which was sort of a late night dive bar, study spot. And you lived upstairs and you would come down, you would buy pizzas from them and then take them upstairs and resell them by the slice at a profit.

• 7:02Speaker 02

  Yeah, that's mostly true, but I think the interesting part about that story is, yes, Tony and Sanjay and I were friends, we had other friends, we didn't really hang out all that much together. What brought us together is the grill. And that is an interesting place. It was a place where lots of undergrads hung out late at night trying to get something to eat while they're working on their prom sets or write their term papers. Tony and Sanjay were actually very entrepreneurial even back then. Usually what happens is the graduating seniors would sell the grill, the rights of the grill to the upcoming seniors. So the graduating juniors who will be seniors, so they would hold the rights of the grill for one year.

• 7:45Speaker 02

  And because they can only operate the grill for one year, they mostly did very simple stuff like hamburgers and fries and milkshakes, which, you know, sounds great, but it actually doesn't have great margins. And Tony had this great idea of like, if I could just buy the rights of the grill for two years, I can amortize the cost of having a pizza oven in there. And pizza has great margin if you can overcome the cost of the oven. And so he decided that he was going to bid for the rights for two years and his bid was highest bid plus $1. I mean, that was a pretty courageous thing for him to do. And so that's what he did.

• 8:26Speaker 02

  I happen to have a pretty large grooming blocking group in Quincy and I did come downstairs, negotiate with Tony and say, hey, I'll just buy them by the pie instead of the slice. And then I did bring it upstairs. I didn't really sell it by the slice, I just wanted my money back. That's the part that is. You know, it sounded predatory, but what I was trying to do is just get my money back. And the slices were $2 a slice downstairs. I got a discount, so it was maybe $1.50, $1.25 when you buy it as a pie. And the thing that is most interesting about that story is I always got $2, even though I asked for $1.25, I have $1.50. And the reason is like today, maybe not as

• 9:09Speaker 02

  obvious, but back then you needed quarters for washing machines, drying machines, vending machines, arcade games. Today, you probably, you know, pay with that with a card or a phone. But that was important. It was a really interesting business lesson, which is sometimes even something like a commodity, like a quarter, a quarter is sometimes worth more than 25 cents. I just thought that was an interesting arbitrage opportunity, like story.

• 9:34David Rosenthal?

  That's awesome. You guys were delivering happiness, even back at Harvard. You get you get your slice of pizza and your quarter for laundry.

• 9:41Speaker 02

  Yeah, yeah. And it was, it started out with lots of conversations on how to make the grill better. Tony started recording movies and playing them downstairs so they would get people to hang out more, to make the experience better, or talking about customer experience and not just like serving people food, which yes, made them happy. But how do you get people to congregate downstairs and hang out? So there was a lot of conversations about that one day. The reason Tony tells this story is because he was, one day we're calculating how much we made. And he was like, he made the calculation and said, Alfred, you actually make more per hour than I do. I'm like, come on, I like order, I call down, order, come downstairs, pick it up and take it upstairs. Yeah, sorry,

• 10:23Speaker 02

  fine. I make more per hour, but you still make more in aggregate because you spent more time on grill. But those are the type of like geeky things that we talked about when we were in college.

• 10:35David Rosenthal?

  And the legend is, of course, that's why you became CFO of your first company together, which was Link Exchange. So after you guys all graduated, you all moved out west and Tony and Sanjay started working at Oracle as developers. And you started a PhD program in statistics at Stanford. And then supposedly, right, I have to ask you about this, you tried to convince them to come and run the same pizza game at Stanford, right?

• 11:02Speaker 02

  No, actually, Tony was looking into starting a similar business that he was trying to get a Subway's franchise.

• 11:11Speaker 02

  On campus.

• 11:12David Rosenthal?

  Ah, cool.

• 11:13Speaker 02

  Or pizza business on campus. And I told him, well, there are plenty of pizza stores and there is a subways on University Avenue, so it may be a little difficult to make the economics work. But he, you know, he's always a little bit ahead of everybody else because he said, well, that's too far away. Why not on campus? And at the time, campus didn't allow third-party operators to like be there. Of course, that's changed. Those rules have changed on Stanford's campus. But he was always a little bit ahead. The thing that was interesting is like, like, the internet was happening. So it was like, why don't we like, think about some internet business? And Link Exchange came about as a fluke, because when they started, Tony and

• 11:58Speaker 02

  Sanjay were bored at Oracle. They would go to their weekly meetings, they'd be told what to do, and they would figure out how to do that work within half a day to a day or an afternoon. And then they work on their side business, which was building websites for companies that would pay them. And this is back when HTML seemed like something really hard to learn. It turns out not to be that hard to learn, but people didn't want to learn it. So they were more than happy to code up sites for, in HTML for others. And they would be paid a very handsome fee for creating these sites. And the sad part for them was these sites would just stand alone and they would

• 12:38David Rosenthal?

  Yeah.

• 12:38Speaker 02

  be, there'd be no traffic. Nobody would go to them. So then they sort of figured out how to link all these sites together and try to drive traffic to each other. And that was the creation of Link Exchange.

• 12:48David Rosenthal?

  Yeah. And I mean, it basically, in a lot of ways, invented, you know, the display advertising network business that eventually becomes, you know, DoubleClick and Equantive just become massive acquisitions from Google and Microsoft. But you guys were, were first in a lot of ways.

• 13:08Speaker 02

  We're early. There were a bunch of copycats along the way. Some were like Hyperbanner and other banner exchanges. And then obviously DoubleClick and Akquanta, we sold a little too early before that. And then there was a next wave of these companies on the mobile. So history does repeat itself. And so Sequoia not only invested in Lake Exchange and made 17X in 17 months, but they also invested in AdMob. And AdMob's acquisition by Apple was much bigger than Lake Exchange's acquisition.

• 13:39David Rosenthal?

  Well, if you adjust for inflation, you know.

• 13:43Speaker 02

  Yeah.

• 13:44Ben Gilbert?

  Alfred, it feels like you've said that 17X in 17 months before. I don't know, it rolled right off the tongue.

• 13:49Speaker 02

  Yeah, I thought, you know, that was the first time I was like, I said to Michael Moritz, who was on the board, it seemed, wow, this is a great business. Does this happen all the time? And he's like, yeah, that doesn't always happen. But what I got to do is I learned a lot from Michael. He was a great mentor for me. I developed a great relationship with Sequoia and the Sequoia Partners. I know how they operate. There's a lot of work that goes into venture capital that I did not appreciate at the time because it seemed like it was easy money.

• 14:22David Rosenthal?

  Yeah.

• 14:22Speaker 02

  But going back, if you had to rewind, you know, Michael was interim CEO for a period of time when we were looking for a CEO.

• 14:31David Rosenthal?

  Oh, wow.

• 14:32Speaker 02

  He spent a day a week at the company. And so today, when I'm sitting in this seat at Sequoia, I just remember back the success of Sequoia has a lot to do with partnering with the founders and the management teams of their companies and picking up and doing whatever to help the company succeed.

• 14:49David Rosenthal?

  Yeah.

• 14:50Speaker 02

  And so that's why this is, for me, a very rewarding job.

• 14:54David Rosenthal?

  That's really cool. I didn't realize that Michael had actually stepped in as temporary CEO. But as you say, so you sold the company after 17 months to Microsoft. And you and Tony decided.

• 15:08David Rosenthal?

  Yeah, maybe as you said, you thought the venture business was easy.

• 15:11Speaker 02

  Yeah.

• 15:12David Rosenthal?

  It's not. We've talked about that a bunch on this show. You leave and you decide to raise a fund on your own. And this is essentially like today, this would be a pre-seed venture fund.

• 15:21Speaker 02

  Yeah, back then, we raised $27 million from friends and family of Link Exchange after the liquidity event. But 27 million back then was a fairly sizable fund for seed and pre-seed. Today, it's like not that. It's like average, I would say.

• 15:38David Rosenthal?

  Yeah.

• 15:38Speaker 02

  And the idea was not to write 100,000 or 200,000 dollar checks, but to have like a million in on average for a concentrated portfolio. We had decided that we were going to figure out how to invest in 27 ish or to really 30 companies over three years. We ended up making 27 investments, but it was over one year.

• 16:04David Rosenthal?

  Wow. And you didn't reserve anything for?

• 16:06Speaker 02

  We didn't reserve anything for Prada. So that was a learn, that was a big learning experience of like time diversification is actually important in the, in the venture business. Because it was a 1999 was not a great time to, to be an investor.

• 16:21Ben Gilbert?

  How do you even have the deal flow to be doing two deals a month? I mean, with that small of a fund and that few of a number of GPs, like how, how does that work?

• 16:30Speaker 02

  Uh, I, I think we were just, you know, we, we had a good network. We knew lots of people in the internet space. And so we were primarily investing in just the internet. And so it wasn't hard to find companies to invest in. And keep in mind, you know, deal flow, the, the level of sophistication people have today, thinking about companies was not the same back then. Right? Like the company, any company that had a product that was working and had eyeballs, people were funding. And so we did some of that too. We also made some good investments. We're pretty proud of our track record at Venture Frogs. It ended up being a seven and a half to eight X fund after, after fees.

• 17:14David Rosenthal?

  Wow.

• 17:15Speaker 02

  For a 1999 fund, I'm pretty sure that's in the top. Death style, if not the toughest.

• 17:19David Rosenthal?

  I mean, it's, it's a, it's very hard. Only the top, top, you know, venture funds these days are seven or eight X after fees, period. But to do that in 99, but it was the result of a lot of work that you ended up doing in the portfolio.

• 17:31Speaker 02

  It was a result of, we, we, in 2000 or 2001, we did, we looked at the portfolio and there were basically three sets of companies. There are like companies that we, you know, regardless of whether we help or not, they were going to go under.

• 17:49Speaker 02

  And then their company is like, regardless of whether we help or not, they were going to do just fine.

• 17:53David Rosenthal?

  So that was, you guys had invested in OpenTable, right?

• 17:55Speaker 02

  We invested in OpenTable, they were going to do just fine. Mago Music got sold to Microsoft, they were going to do just fine. We didn't have to do much work for it. There was a company that was in the web, the web space. It was called Myable. They were trying to create my pages for, for web phones. Imagine like, can't even imagine looking at these small screens. Why you would put a my page on that. But anyway, they, they were billing that. That got sold to phone.com, which got merged with software.com to create OpenWave Systems. So that defined, there, there are a bunch of companies that defined regardless of whether we helped them or not. And then, then, you know, like I said, the first class was like, most of these companies were just going to go under regardless of whether we helped them or not. And then there were two companies we felt like if we helped, we could make a lot of impact in those companies.

• 18:40Speaker 02

  And those two companies were Tomy Networks and Zappos.

• 18:43David Rosenthal?

  So did you and Tony sit down and say like, okay, let's draw straws?

• 18:47Ben Gilbert?

  Yeah. And also on this, how do you determine if a company is at a place where if you apply high leverage, it makes an impact or not? Like, how do they, are there certain types of business models or certain places where you have domain expertise? Where you're like, yep, if we apply here, it can, it can go the distance? Or how do you figure that out?

• 19:06Speaker 02

  I think when you, like, you sort of step back, you kind of think about whether the investment thesis was right or wrong. And then you, you kind of know that, you know, you got this wrong. It's not going to work. Here are the reasons why it's not going to work. This, this might be an interesting problem. Well, we, you know, at Sequoia, we've over the years, like, created these buckets, like, sometimes. You have a feature, it's not a product, or you have a product, but it's not a, it's not a company. And I didn't have those like sort of frameworks back then, but it was pretty clear like, yeah, this is a nice tool and people will use it, but you can't really build any meaningful business or user base on top of it. And so then you're like, okay, well, maybe they'll pivot to something different, but we're not

• 19:49Speaker 02

  in the business of helping them think about pivoting to another business that they're not passionate about. You know, that's one set of like, well, we can't really help companies where they're, they're not really a company or a product. They're really a feature. And there are a set of like, I think founders who are resistant to change. And so if they don't really want our advice, that's difficult to sort of influence. And then there are just a set of things you just got wrong about the business or the business model and the underlying assumptions has proven to be the opposite of what you assumed.

• 20:27David Rosenthal?

  Yeah.

• 20:27Speaker 02

  And so the, those are the conclusions. And then unfortunately, there is also a class of things where maybe the product is great and the underlying, underlying assumptions are right and the founders will listen and work hard. But it can't raise money for whatever reason, whether the story is not good, you can work on the story. But for whatever reason, it can't get the capital that it needs to get.

• 20:53David Rosenthal?

  And what's interesting, Zappos kind of fit into that bucket, right? Like the business was good, it was growing. So you guys invested in 99, Nick had founded the business, just had a business plan. It was, it was initially called shoe site.com, right?

• 21:07Speaker 02

  Yep.

• 21:07David Rosenthal?

  Which still redirects to Zappos if you go there. And, and so you guys invest and, and then it grows pretty nicely. I think year 2000, first full year, it does about 1.6 million in revenue. In 2001, you do over eight million in revenue, but everybody was, you know, it was nuclear winter. There've been pets.com and eat toys. Nobody wanted to fund it, right? But the business was growing.

• 21:28Speaker 02

  The business was growing and it was actually, one thing that was different about Zappos even back then was it was break even. Most e-commerce companies were not break even, even today, we accept they won't be break even for the first few years. Back then, too, a lot of companies like pets.com didn't, weren't breaking even.

• 21:48Speaker 02

  And I think the whole e-commerce category was just dead to all investors in 2000, 2001, 2002. And, you know, so even for Sequoia investing, Sequoia invested, I think, in 2005.

• 22:00David Rosenthal?

  Yep.

• 22:01Speaker 02

  And so it took some time for a very toxic space to turn around, even when you have a good business. And so I attribute some of Zappos' success, there's a lot of like feel-good stuff in Tony's book, but there are two things that I think I attribute to that is not told about very much in the founder lore, because it's not a happy story. But the lack of money is actually one of the things that sort of made Zappos successful. Very early on, it had to figure out how to acquire customers in a way that is unit positive on the first order.

• 22:36David Rosenthal?

  Yeah. See, and you guys were, were unit positive on the first order. I mean, that's not an easy thing to do, ever, particularly at that moment.

• 22:42Speaker 02

  The company only raised $10 million of primary capital. Yes, it raised more money for Sequoia for secondaries, and yes, it had debt, and yes, it had, it sort of leveraged relationships to get vendor credit. All of those things that are written in Tony's books, those are all true. But primary capital was about $10 million. And I don't think you can imagine today, a e-commerce company raising $10 million and becoming a billion-dollar company over time. You'd probably think it's in the hundreds of millions of dollars, maybe 100 million or 200 million. And Zappos did burn 100 million dollars of free cash flow. It was just smart about how it did it. It did it from, from vendor relationships, extending

• 23:23Speaker 02

  the terms from net 30 to net 90 over time. We didn't do it immediately. We got a line of credit that we did need to use for a short period of time to get inventory before we sold it. So we had to understand our cash conversion cycle very, very well.

• 23:38Ben Gilbert?

  Was it easier to acquire at scale those days? Like, when you think about today, it's in many ways expensive to acquire from Facebook and Google. But then you were educating people about the whole category of, of e-commerce, particularly in these new niches they had never seen before. So, I mean, can you talk about acquisition costs then versus acquisition costs now?

• 23:56Speaker 02

  Yeah. I think that's a great question about acquisition. You know, everybody seems to think, well, yeah, you had it easy because Google was a lot cheaper back then. Well, the, it wasn't obvious that Google was the place to

• 24:08David Rosenthal?

  Yeah, right.

• 24:09Speaker 02

  to actually acquire.

• 24:10David Rosenthal?

  Probably wasn't sending you that much traffic.

• 24:12Speaker 02

  Well, no, but it so like back then, there is a lot of acquisition channels that just didn't work. It's not like, and we tried all of them. There was, um, there was Yahoo banner ads, there was MSM banner ads, there's like, so there's a whole banner advertising category. Then there was like trying to buy placement at home plate at Pac Bell. You know, we got all of like three customers from that.

• 24:34David Rosenthal?

  Did you guys do a, an AOL sponsored channel?

• 24:37Speaker 02

  Probably did an AOL sponsored channel for a short period of time. I don't particularly remember, but yes, we spent money on AOL. So, you know, when you say, oh yeah, you know, you had it easy because you had Google and it was cheap and it was converting well. Yeah, that was true, but we discovered that. And then when we, as soon as we discovered it, it wasn't like there was no competition out there. As soon as we discovered, oh yeah, it's really cool. You can bid on shoes and it actually sends us traffic and it converts pretty well. Other people started bidding on shoes. So we had to keep going further and further and further and further down the long tail of keywords. This is all like things that you now think about. And, uh, but like we had to do that, we had to do SEO, we had to figure out SEO optimization.

• 25:20Speaker 02

  Those were not things that, you know, there was a book about, you know, you were A B testing this stuff all the time. I would say back then, Google was not obvious. We did that. There was doing print ads and print ads were actually pretty good. And when you did print ads with, that were co-branded with Stuart Weitzman or with Clarks, depending on the shoes that you're selling. It actually were pretty effective. And then we got, we figured out a way for Stuart Weitzman to pay for that because it was co-branded. It's like, well, you put up Stuart Weitzman ads and they don't know what to buy. And so why don't you put WWW dot DAP plus F com at the bottom for your, for your ads. And so a bit of negotiation. So those are clever things that you, you had to sort of do as soon as we started doing that, competitors started doing that.

• 26:03Speaker 02

  They were called co-op dollars or the money that were available.

• 26:07David Rosenthal?

  And this is something preparing for this, you, you've talked a lot about this. All this stuff was really hard and you get like, nobody, if you had slid a business plan across the table as Sequoia Capital that you were going to do this, they'd probably be like, you're going to do print ads, right? But like, because you had to do it, you had this muscle that nobody else had. And then when Amazon came and tried to compete with you, they didn't know how to do this stuff, right?

• 26:28Speaker 02

  Yeah, I think that nothing, nothing in the consumer business is completely proprietary. You try to create these modes along the way, but consumer business modes are like little by little. You know, you add, you make things a little bit more, you know, user friendly. You make it a little bit cheaper for you to acquire customers. These are all like getting up every single day and figuring out how to do something 1% better than the day before. And you try to make that additive. And if, if you're really good, you try to make those 1% compound. And that's the way you sort of get ahead. And when Amazon tried, there were other competitors before Amazon, but I, I would say one of the other things, back to, you know, the one sort of thing that people don't talk about is not having too much money was actually the thing for Zappos.

• 27:13Speaker 02

  Not having too many competitors at the beginning was also a great thing for Zappos.

• 27:17David Rosenthal?

  Yeah, that's culling of the herd, right?

• 27:18Speaker 02

  Yeah, so like in 1999, there were competitors. By 2000, 2001, most of the competitors like died down. And some of the competitors that did exist were pretty weak. And, you know, the competitor, they got a lot of money, was Nordstrom Shoes.com. They got 20 million, Zappos got funded with 2 million. They soon, you know, didn't go anywhere because they had too much money. And five years in, that's when the competition started heating up.

• 27:43David Rosenthal?

  Yeah.

• 27:44Speaker 02

  But I, I do think that it is important for founders to know that nothing destroys value faster than irrational competitors.

• 27:52David Rosenthal?

  Yeah.

• 27:52Speaker 02

  And so if we had irrational competitors very, very early on for a long sustained period of time, I'm not sure Zappos would have been around. But being able to learn a lot of these lessons over some period of time, and there's room to make mistakes and to experiment and to figure out the security bin and putting the ads in the security bin.

• 28:12David Rosenthal?

  Yeah, right.

• 28:13Speaker 02

  Actually pretty effective and actually pretty cheap because it was never done before.

• 28:17David Rosenthal?

  Yep. This is, Brett Stone writes about this in the Everything Store, that you guys put ads on, and when you're going through security to check in at the, at the airport, you put Zappos ads where you had to put your shoes. It's brilliant, apparently. Which is now like an ad unit, like that's a thing now.

• 28:32Speaker 02

  Yeah, and now it's very competitive. So when you say like, oh yeah, you could acquire users for cheap, sure, but you have to go discover these things. This company had developed this business plan in 1999. They were all ready to go. And then September 11th happened and for, they were still like working with the TSA for a long period of time to get it done. And so by the time they were. Ready and they're capable of doing this, they were soon going to be out of money. So they were willing to sell those.

• 29:01David Rosenthal?

  You guys are the only buyers.

• 29:02Speaker 02

  Very, very cheap.

• 29:03David Rosenthal?

  Yeah. So it actually was a third party who did those ad units. Interesting.

• 29:09Ben Gilbert?

  All right, listeners, now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

• 29:23David Rosenthal?

  Yeah, the hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 29:37Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 29:47David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent, visible and secure in one place.

• 30:05Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise, the workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 30:21David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 30:38Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 30:47David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you.

• 30:58Ben Gilbert?

  Well, let's rewind a little bit here. So we talked about Venture Frogs. So at some point, Alfred, you went to TellMe and Tony went, it sounds like not as CEO, but it's to sort of join the leadership team at Zappos. Can you, can you take us from there a little bit on how Tony became CEO and how you found your way to Zappos?

• 31:16Speaker 02

  Sure. So I think we were both trying to just help the companies that we thought we could help. And back to, you know, Tony thought that he could help Zappos and he was wanting to incubate the company in, you know, in, in the loft in Venture Frogs incubator. And then I had longstanding relationship with Hadi Partovi and Ali Partovi. And so Hadi was one of the founders of TellMe and he was telling me how much he was, they were spending. And I'm like, wait, you raised $265 million and you're burning $60 million a year? That sounds crazy for a zero revenue company. Meanwhile, like Zappos can't raise any money. It was like night and day. I'm like, well, Zappos can't, whatever. Tony, just grow the business. Don't spend it, don't spend any money, just like it is today. Just

• 32:00Speaker 02

  grow it at break even. You're fine. You can't raise any money anyway. Here, this other company raises $265 million and is losing $60 million a year. I'm like, holy shit.

• 32:08Ben Gilbert?

  So you actually-

• 32:09Speaker 02

  No, I was pretty sure with a $60 million loss, you could find, you can narrow that to something lower than that. You can add value that way. And so Tony, and Tony really liked the notion of trying to figure out to take a business from commodity business and layer on service. He had this whole thesis that most commodity businesses are commodity businesses because they don't layer on service.

• 32:33David Rosenthal?

  Yep.

• 32:34Speaker 02

  And, and so he went to Zappos first. And for TellMe, I just thought my financial skills were, were going to be valued. TellMe turned out to be one of, one of the first SaaS computing, cloud computing companies. It just wasn't, we had to build our own cloud.

• 32:46David Rosenthal?

  Yeah.

• 32:47Speaker 02

  And, you know, we turned that company from not having any revenue, having too many people, having, going through two, two and a half rounds of layoffs. The notion of the consumer business was that you can sell advertising as well. Like advertising units on Google are 90% risk margin on this because of the infrastructure was going to be at best 15% risk margin. So that made it very hard to work. So we pivoted to the enterprise business, had to sort of change the mindset of the company. Mike McHugh did a great job sort of shifting that. And we built an enterprise business through a lot of pivoting.

• 33:23David Rosenthal?

  I didn't realize Mike, so Mike's the founder and CEO of Flipboard, right?

• 33:27Speaker 02

  Yes.

• 33:27David Rosenthal?

  Wow, I didn't realize he was at the, at Tell Me.

• 33:31Speaker 02

  And so after Tell Me was in good shape, I, I joined Zappos.

• 33:37David Rosenthal?

  So 2005, you, you came over to Zappos, you just raised the round from Sequoia. And shortly after you joined, right, Tony gets an email from Jeff Bezos saying he, that Jeff is going to be in Las Vegas and wants to meet you guys. What, what were you guys thinking when you got that?

• 33:58Speaker 02

  Uh, I don't know, I just thought it was like, probably should take the meeting, it'd be cool to see if there's some partnership that we could do together. We weren't thinking that he was coming down to buy the company at all.

• 34:08David Rosenthal?

  So you brought, back to pizza, you brought two pizzas to the meeting, right?

• 34:12Speaker 02

  Well, he's famously known for his two pizza team, so we thought we'd bring two pizzas. Funny enough, nobody, I don't think anybody ate the pizza.

• 34:19David Rosenthal?

  It wasn't that kind of meal.

• 34:21Speaker 02

  It wasn't a, it wasn't a, yeah, it wasn't a eat the pizza.

• 34:25Ben Gilbert?

  Was Amazon in the shoe market at this point? Like, were they a competitor?

• 34:29Speaker 02

  I don't, I, I think they were like in the market to some, not in a big degree, but in a small way.

• 34:36David Rosenthal?

  And the suppliers, the, the shoe manufacturers were pretty scared of Amazon, right? Cause they were worried that Amazon would discount their merchandise below MSRP.

• 34:45Speaker 02

  The, the, just go back, like back then, they were scared of anybody in the internet. They, not, not scared in the way that you're thinking about, like, these people are going to be dominant, they're going to take our business. They were scared because the, they thought all internet businesses were fly by night businesses. And that consumers were never going to. Yeah, they're like, consumers would never buy shoes on the internet. You got, you need, we need a shoe salesman.

• 35:05Ben Gilbert?

  It's like the Silk Road, you can't.

• 35:07Speaker 02

  Need a shoe salesman to come and talk to the customer, measure her feet or his feet and bring out like three pairs and try to upsell them another pair that they don't really want. I'm like, okay, whatever. So, so as you know, like originally, the idea for Zappos was to be completely drop ship. And over time, just to get even some of these brands to sell to us, we had to like get more, get inventory, we had to buy the inventory.

• 35:30David Rosenthal?

  So part of, I was gonna ask about that. See, when you started, it was drop ship. So the manufacturers would send the shoes directly to the customers. You wouldn't have to take inventory. You convert to a retailer model. Part of that I imagined was to provide better customer service.

• 35:44Speaker 02

  Yeah, because I think the brands are not set up to be direct to consumer businesses. So they don't take the time to think about what a direct to consumer business needs. And so the packaging wasn't perfect. They were sending packaging slips like they would send to a store as opposed to a consumer. The boxes were not branded. They didn't have exact inventory because that's not actually as important to when you're selling, you're sort of distributing to a store. So they were, they were providing a subpar experience and we took over the experience because we felt like we wanted to provide 99.9% accuracy on inventory, as an example. And we want to provide a nice and happy and joyful packing slip as opposed to a grid with numbers.

• 36:30David Rosenthal?

  But part of it, it sounds like also was just getting their, like you had to buy the inventory or else they weren't gonna trust you to sell it.

• 36:37Speaker 02

  Yeah, and that's where most of the use of capital went, was just buying inventory.

• 36:42Ben Gilbert?

  So when you go into this meeting with, with Amazon, what's the result of that? Do you guys walk away feeling like, well, they're, they're about to come after us?

• 36:50Speaker 02

  Uh, I mean, I, I think it was a very happy meeting. From what I remember, it was a long time ago, so maybe I'm not remembering correctly. But I think we didn't really, it was hinted at, maybe we should join forces. And we hinted back, we're not quite ready to sell. And the meeting kind of wrapped up pretty quickly. We, we suggested we do a partnership. And I think the response back was rightful, which is like partnerships don't tend to work when you have disparate, like hugely disparate sizes of companies. And so we went on our way and I don't think we were thinking that they would. We always thought they were going to come after us. We wasn't thinking that they would immediately, well, in a few years, launch Endless Outcom.

• 37:32David Rosenthal?

  Yeah, I think so. It was the next year. They launched Endless Outcom, which is basically a clone of Tapos. They spent $30 million developing it. And when they launch, it has free overnight shipping, which is super clear. I mean, I'm sure it was obvious to you guys. They were losing money on every order. You guys worked so hard to be profitable. And they're just, as you say, you know, it's like lots of capital coming into the space and killing your economics. How did you react to that?

• 38:01Speaker 02

  Well, the only way you can react is like figure out what you want to match that and how you differentiate against that. So those are the two conversations. We had fortunately figured out how we had been upgrading shipping along the way. So over the years, we had sort of gotten people from, on average, five day delivery. We'd always say five to seven days and deliver it in five days, and then four, and then three, and then two. We hadn't gone to overnight yet. And so it wasn't that big of a leap to go from two to one. It was a big, you know, for that time, it was a big dollar difference shift, where go from profitable to just break even again. And so it was a big, like, decision to do that. And we were still focused on making sure we had the largest selection.

• 38:44Speaker 02

  We had the best vendor relationships and things like that, that we thought were still differentiated against Endless. So we went to free shipping both ways. We went to free overnight shipping. They went from free overnight shipping to, because discounting on the shoes in season is not thought of as positive by the industry, and they didn't want to hurt their own sort of ability to get inventory. They said-

• 39:07Ben Gilbert?

  And by not thought up as positive, you mean like the brands would stop retailing through them if they were selling below MSRP, right?

• 39:14Speaker 02

  Yeah, they can't change, they can't ask you to change the price, but they can stop selling to you. They're like, okay, well, if you're going to discount before the season ends, we're gonna not let you access to more inventory.

• 39:25David Rosenthal?

  They want to cheapen-

• 39:26Speaker 02

  So, so Amazon's very clever. I thought this was very clever. It's like, instead of discounting their shoes, they said minus $5 for, or $5 back for overnight shipping. It's like-

• 39:36David Rosenthal?

  We'll pay you to send it to you overnight.

• 39:38Speaker 02

  To you overnight. I'm like, wow, that's really clever.

• 39:41David Rosenthal?

  Coming to Prime subscriptions next year. Wow. So despite all this, I'm wondering, you guys continued to grow. In 2007, you did 840 million in revenue. Wasn't there an element of like, I'm thinking of, you know, when, when Facebook cloned Snapchat and released Poke and it was like the best thing that ever happened to Snapchat. Like, did Amazon do category development from you? Like, did you see, I'm sure they were spending a lot of marketing. Did you see any bleed over of that into Zappos?

• 40:07Speaker 02

  I think when you're in a, one of the advantages of being in a growing market where the consumer trends are in your advantage is that for a period of time, it's, it's, it's a win-win situation for the consumer and those involved. Meaning, we were growing, Amazon was definitely growing, and we didn't really see like mass competition. Like, we weren't losing, we didn't feel like we were losing our loyal customers to Zappos. We weren't, we didn't need to acquire Amazon shoe customers to make our business work. There were enough customers out there to go acquire. You get to a large enough size, that will at some point not be true.

• 40:42David Rosenthal?

  Yeah.

• 40:43Speaker 02

  And so if you end up being in a great situation where you're one of, you're one of the only kind of company in your category class and you have a natural monopoly, that's great. But if you don't, and you're able to sort of still have a large business and you're one of many, you can still be a valuable business.

• 41:00David Rosenthal?

  So that happens, you guys are both growing through kind of '05 to OE, then financial crash happens.

• 41:06Ben Gilbert?

  Yeah. Zappos endures one financial crisis, so may as well stick around for the next one.

• 41:12Speaker 02

  Well, if you want to build a long enduring company, you're gonna endure a lot more than just one or two financial crises. So, yeah, the financial crisis was interesting because I think we saw glimpses of the slowdown happening the year before the financial crisis. And looking back, it's easier to say that. Back then, obviously, we didn't realize it.

• 41:31Ben Gilbert?

  Do you mean in raising capital or in, in people buying shoes and, you know, getting somehow more expensive to get people to do that?

• 41:38Speaker 02

  Consumer spend was, was more tepid.

• 41:41Ben Gilbert?

  Hmm.

• 41:42Speaker 02

  And we would see consumer confidence coming down faster than the Fed or whatever, you know, could see it, I think. Anyway, so. Uh, financial crisis was interesting because the, our business is still growing. I think the we had a hundred million dollar line of credit of which we're only using thirty or forty million of it. It wasn't like

• 42:01David Rosenthal?

  Oh wow.

• 42:01Speaker 02

  we're overextended.

• 42:03David Rosenthal?

  So it wasn't, you didn't bust your covenants on the, on the credit line?

• 42:06Speaker 02

  No, but the banks couldn't post

• 42:08David Rosenthal?

  Ah, interesting.

• 42:10Speaker 02

  the money. And they're like, wait.

• 42:11David Rosenthal?

  The problem's on their end.

• 42:12Speaker 02

  We have this contract. It was like, well, we're gonna, we've been told to like, we, we have a liquidity crunch. We need to like crawl black some of the liquidity. And that was a little disappointing.

• 42:23David Rosenthal?

  Huh. Wow.

• 42:24Ben Gilbert?

  Yeah, I mean, that's not how lines of credit work.

• 42:27Speaker 02

  Well, you should read all the terms.

• 42:28David Rosenthal?

  Yeah, right. Come on, it's not your money. It's, it's not your money.

• 42:32Speaker 02

  We had some technical issues where they, we had verbal agreements that we would extend from shoes to all, they would lend against shoes to handbags to apparel. And they had, it had been agreed upon verbally, but the extension went from shoes to handbags, but not all the way to apparel. So they, they started saying, well, we're not gonna lend against apparel. There are ways for them to sort of get out of the contract.

• 42:56Speaker 02

  It was also, what was more

• 43:01Speaker 02

  painful was conversations with employees. Some of them had, you know, lost their home and

• 43:08David Rosenthal?

  Vegas was particularly hard hit by the housing crisis.

• 43:11Speaker 02

  Housing prices fell fifty percent.

• 43:13David Rosenthal?

  Wow.

• 43:14Speaker 02

  Or more, some, some estimates, but, um, so some people lost their homes. They, um, they said, well, the only thing that's of value in my portfolio is my, my stock options. It was like, whoa. Like I thought I had a big weight running a business. So, I mean, the conversations were obviously like, we love running the company and we thought we could continue to keep running the company. And there was no reason to sell except for the fact that company had existed for almost ten years. Some people needed liquidity. I had a senior member of the team needing to

• 43:52Speaker 02

  Sell his Zappos stock at a fairly large discount during that time, just to be able to post uh his, his mortgage payment.

• 44:02David Rosenthal?

  Wow.

• 44:03Speaker 02

  And, and part, and I was like, what, what do you mean? Like he, I didn't, I thought you were renting. He's like, well, I am renting, but the land, the sort of landlord is going to lose this house. So I don't want to move. I don't just want my family. So I'm going to come up with the money to like buy the house. And it's going to be at a discount. So yes, I'm selling my stock at a discount, but I'm buying the house at a discount too. So he felt a little good about that, but I was like, you know, you're selling this at like probably, you know, 25% of the value that you

• 44:30David Rosenthal?

  Oh my goodness.

• 44:31Speaker 02

  You would get um if you just wait this out. And he's like, well, I need the cash now. And so those kind of, those types of conversations are much harder.

• 44:43Speaker 02

  And so we were thinking about what's the right thing for all shareholders. And look, I mean, we can always like think about like, if Zappos had been public, you know, gone public because it could build a big enough business, would it be valued today? And it's probably not, no one, when I left, the business was doing 1.6 billion in gross sales. I don't know what the numbers are today. I'm sure it's well north of that.

• 45:04David Rosenthal?

  Yeah.

• 45:04Speaker 02

  Uh, and when I left, it was profitable. And so I'm sure it could be a public company, but Tony couldn't, wouldn't be working on the downtown project and doing what he loves to do.

• 45:15David Rosenthal?

  Doing the learning happiness.

• 45:16Speaker 02

  I wouldn't be here doing what I love to do. So.

• 45:19David Rosenthal?

  Well, now, so, so when the deal happens, uh, it's announced summer of 2009. Amazon's going to acquire Zappos for $1.2 billion uh in stock. How did the conversation go about stock? And um, I mean, that was the best thing that you guys probably ever did financially, right?

• 45:34Speaker 02

  Yeah. So, so that was the line, success as many fathers.

• 45:37David Rosenthal?

  Yeah.

• 45:37Speaker 02

  Many people claim to have been the person who

• 45:39David Rosenthal?

  But you were negotiating the deal, right?

• 45:41Speaker 02

  Negotiated the stock, where like Tony, Tony was like pushed, says he pushed for stock. Mike Moore says he pushed for stock. You know what? Actually, everybody pushed for stock because we knew that coming out of a financial crisis, everybody's stock was depreci, uh, undervalued, right? So like

• 45:56David Rosenthal?

  I think Amazon was trading at like 50 or 60 bucks a share at this point.

• 45:58Speaker 02

  It was trading at, at, now you're, uh, the day it closed, it was trading at 118.

• 46:03David Rosenthal?

  Okay.

• 46:04Speaker 02

  So the, the stock price today is more than 10 times what

• 46:06Ben Gilbert?

  But, but who could remember, you know?

• 46:09David Rosenthal?

  Who could remember exactly what it was?

• 46:12Speaker 02

  I did. It was 118 and 23 cents, I think. So it's something to that effect.

• 46:15David Rosenthal?

  Oh, my goodness.

• 46:16Speaker 02

  Um, and so it started out with all cash because Amazon had not done many

• 46:21David Rosenthal?

  Yeah.

• 46:21Speaker 02

  transactions with stock. Uh, and we said, we won't do this. We're happy with the price. We just won't do this deal on this stock.

• 46:29Speaker 02

  It shouldn't like in corporate finance, it shouldn't matter.

• 46:32David Rosenthal?

  Right.

• 46:32Speaker 02

  Right. Because you can, the acquirer can decide to give stock and buy back the stock, the acquirer, you know, so it it shouldn't matter to the acquirer. It does acquire, it does matter to the company because all stock transactions are tax deferred because you don't pay taxes until you sell the stock. Whereas if you get cash, all cash, you need to pay the taxes as soon as you get the cash. And I think there, there are some people with different views about Amazon stock. And some people sold, some people held, some people didn't, half and half.

• 47:05David Rosenthal?

  Yeah.

• 47:06Speaker 02

  So in my view, in mergers, I think acquirer should be more lenient about doing stock transactions because it shouldn't, it shouldn't be any different for them.

• 47:18David Rosenthal?

  Unless you have a view of the value of your own stock, which differs from the market.

• 47:22Speaker 02

  Right. But you can always, you can always buy back, you can always sell it.

• 47:25David Rosenthal?

  That's true. Um, that's true. What, one thing and then we'll move on to acquisition category, but, but I'm really curious. I mean, you did this and it was announced from day one. There's this amazing video.

• 47:35Ben Gilbert?

  Oh, my God. It is the best.

• 47:37David Rosenthal?

  This is so incredible. Bezos records a video to all Zappos employees. It's about a 10 minute video. It's on YouTube. About everything that he's learned, knowledge that he wants to impart to Zappos. It's, it's just wonderful.

• 47:51Ben Gilbert?

  It's, it's in this like classic, for listeners who haven't seen it, you gotta go watch this video. It's in the classic Jeff Bezos style of like way oversimplifying everything, being like salt of the earth, like I'm just Jeff in my jeans and, you know.

• 48:04David Rosenthal?

  He has, he has a, what, not even a whiteboard, like, you know, the paper easels that you flip and he writes in marker, the four main lessons he learned at Amazon. Anyway, though, but the point is the, when it's announced from day one, Zappos is going to remain fully independent, be a wholly owned subsidiary. That was pretty novel for the time. I mean, now like this is the playbook that Facebook runs and others with acquisitions. How did those discussions go?

• 48:30Speaker 02

  Yeah, I think Amazon has always been pressing on this front. It wasn't the first acquisition that they've done that was like this. I think Alexa was left independent. So was I2B and Audible. And so we weren't the first acquisition.

• 48:44Speaker 02

  There are obviously situations where you acquire the company and you want it integrated. I think it makes sense when it's an aqua hire. It makes sense when it's a feature as part of a overall product somewhere. When you have a whole business, I think it really does make sense to run it independently unless you can find a good reason why you shouldn't integrate. Decentralization has its costs. And so I think decentralization has its costs too, but you're more likely to, in my opinion, decentralized organizations are more innovative because they don't have to like bubble everything up. There's not a central decision maker. So decentralized ecosystems are more innovative. And you see, if you want to have a comparison, it'd be like a large company versus a startup ecosystem.

• 49:28Speaker 02

  That's why we have a job here at Sequoia. Like, we believe the decentralized ecosystem and the innovation of entrepreneurs when they don't have to. And I think the companies that are larger have a harder time innovating because they're centralized. And so the conversations were pretty natural. The questions were about what kind of, what's the management structure? And so there was, the management structure was basically our board at Zappos would be replaced by a board that was now full.

• 49:54David Rosenthal?

  An Amazon board?

• 49:55Speaker 02

  Yeah, an Amazon board.

• 49:56David Rosenthal?

  Cool.

• 49:57Speaker 02

  And I think it still exists that way today.

• 50:01Ben Gilbert?

  I'm curious, you know, when they approached you about buying the company, what were sort of the main cited reasons? Like, was it, we just think you have a good business and we want to pour additional capital into it for this business line to grow? Was it, we want to learn from this and figure out how to spread the Amazon DNA or the Zappos DNA around Amazon? And why'd they do it?

• 50:23Speaker 02

  I think the, you know, you should ask them, but in the line, there's a line in the video that you were referencing where Jeff Bezos said, I get I get tingly. knee weak when I see customer obsessed companies. And he really understood that like Zappos was really customer obsessed. And I do think that for all those sort of bizarre differences between Amazon and Zappos, that is one thing that both companies share a lot in common. And maybe we do customer obsession differently. We have a different style of doing customer obsession at Zappos versus Amazon. Both companies, I think, learned a lot from each other, even during the due diligence process of how we think about things. And so they were surprised that we didn't, we like, we said, we don't measure, for example, call times.

• 51:07Speaker 02

  Well, it's not that we don't measure call times for an individual agent. You can't hold an individual agent to a particular call because you don't know what that call situation is like, but you could look at the efficiency of the team. And when you talk about the efficiency of the team, it's not you like stayed on the phone two seconds longer than you should have. It's more of a let's collaborate. Like our team is not efficient compared to all these other teams. Yeah. And that's how we did it. We weren't measuring every single. And, and so they were like, okay, well, you're not actually like, you say these things like you don't measure this stuff. We measure it just slightly in different ways. And the way we were trying to measure it was to try to get collective intelligence of the team and trying to make better decisions.

• 51:49Ben Gilbert?

  All right, listeners, now is a great time to talk about a new partner of ours here on acquired Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 52:02David Rosenthal?

  Yep, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 52:18Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 52:33David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 52:57Ben Gilbert?

  And they recently launched Legora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 53:16David Rosenthal?

  And Legora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Legora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 53:46Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at legora.com/acquired and just tell them that Ben and David sent you.

• 54:11David Rosenthal?

  So the next segment we do on the show is acquisition category, and we assign a category to the acquisition. And to me, it's pretty obvious. This is a business line that Amazon acquired. Keep it as a separate company. It's not just a product that's being integrated into Amazon. But I think this is really interesting. Like, this was the point I wanted to make. And the cultures, even though it's, as Brad Stone said, and you quoted it, like, it's, Zappos was Bizarro World version of Amazon, but the core values were basically the same. Be frugal, be customer obsessed.

• 54:44David Rosenthal?

  Decentralized decision making, it's like such a good fit when it comes to culture, even though it seems on the surface that it wouldn't be.

• 54:51Speaker 02

  Yeah, I think that's why the acquisition was considered a success. And I don't think it was an easy acquisition at the time because it was the largest acquisition at the time. Now, it's in comparison today, it's a whole food, but hey, it's 10 years later, just for inflation.

• 55:06Speaker 02

  Numbers only, acquisitions and numbers only get larger, right? So, yeah, it was a business line that they acquired. I think they also were very interested to learn about some of the things that we built related to merchandising, but how did we get so good at getting the right product in the right quantities at the right times with less than stellar technology? It wasn't, we weren't using AI.

• 55:29David Rosenthal?

  Yeah, were you guys using Kiva or?

• 55:31Speaker 02

  We were also using Kiva.

• 55:32David Rosenthal?

  Okay. And that was how Kiva got on the radar screening of Amazon, right?

• 55:36Speaker 02

  Kiva was, it was funny, so I'll tie this all the way back to Sequoia. Rulaf Boy to send me the business plan of Kiva, asked me for my opinion.

• 55:45David Rosenthal?

  And Kiva came from Webvan, which Michael Moritz was on the board of.

• 55:49Speaker 02

  Michael Moritz was on the board of Webvan. Webvan did not work well, worked out well. They had been using, they had been using, if you wanted to go all the way back, they had been using a carousel system, I won't name the vendor. We ended up using that carousel system and the same exact vendor. It was my first board meeting and I got ripped into shreds because we were saying that this was going to work, et cetera.

• 56:15David Rosenthal?

  By Michael?

• 56:16Speaker 02

  By Michael and then also by Michael Moritz, who, you know, obviously founder and CEO of electronics. And so he knew a little bit about operations. I was like, okay, all right, well, we need something different. Anyway, so that happened. And so Mick, who was at Webvan, noticed how inefficient most of the systems were. So he went on to create Kiva Systems. I had, I didn't know that connection, so thanks for reminding me, but at the time. So I got the business plan from, for Kiva from Rulaf, asking me what I thought about it. It's like, oh, interesting idea, but probably too hard to rip out a whole setup distribution center, maybe for a new distribution center, we might use it, but not for one already set up, we're going to rip out a racking, et cetera, et cetera.

• 56:57Speaker 02

  So as a startup, you kind of move pretty quickly to your next distribution center. So we did try Kiva and it worked well. And then eventually it took over all of our distribution centers.

• 57:08David Rosenthal?

  Wow.

• 57:09Speaker 02

  When Amazon was doing diligence on us, they really thought they were going to rip out Kiva from our distribution centers because they thought it was not going to work. And I said, why? And they said, well, you know, your spike in December or our spike in December is order, is an order of magnitude higher than the rest of the year. So you're paying for idle robots that are going to sit around for most of the year. So that can't be efficient. It turned out it's still efficient because you can get into much larger distribution centers. You can zip things around, have people work on one end and have machines move certain things around in another. So a few years later, after they observed this, they bought the company.

• 57:50David Rosenthal?

  Acquired Kiva, yeah. And now, I don't think it's in all Amazon warehouses yet, but certainly all new ones. And I think they've been retrofitting old ones.

• 57:59Speaker 02

  I think there was some public statement. They have like hundreds, maybe on the order of 200,000 or 300,000 Kiva robots.

• 58:06David Rosenthal?

  Wow, that's awesome. All thanks to Zappos.

• 58:10Speaker 02

  Well, that's just Zappos. I mean, diapers also use them. And so they acquired diapers.com. So it was, it was more and more evidence that this was going to work. So there was technology that, there was technology that they, they bought as well.

• 58:24Ben Gilbert?

  So we've decided it's a business line. Amazon's got a competing business line that's doing really well. Like Amazon's in-house shoe business is, according to all these external research reports, you know, really crushing it. So why not pour all the investment that they're putting into their own in-house thing into Zappos? And, and, you know, were they for a time? And have, have, does it feel like they've shifted away to you?

• 58:49Speaker 02

  No, I think the, the shoe business as a whole, whether it's on Amazon's site or on Zappos' site, has been growing really well for both. And so it's not an either or. I think if, if you sort of used our way of like, we, we talk about the power of and, not, not about trade-offs. And I think Amazon also likes and versus or. And so why not have, why not grow your own business and own your, your biggest competitor at the same time if you can pull that off and dig it?

• 59:17David Rosenthal?

  Hmm. Yeah. I'm curious, kind of on that front, did anybody else ever seriously attempt to buy the company besides Amazon? Would you guys have sold to anyone else?

• 59:27Speaker 02

  I don't think anybody was, anything, anybody else was serious. I don't think we would have sold to anyone else.

• 59:34David Rosenthal?

  And it's hard to imagine anyone else would have like let you guys keep doing this stuff.

• 59:38Speaker 02

  Well, I think Walmart has shown that they'd be willing to buy companies and keep them independent.

• 59:43David Rosenthal?

  Well, now, but

• 59:44Speaker 02

  Yeah.

• 59:45David Rosenthal?

  2008, 2009.

• 59:46Speaker 02

  Harder to sort of conceive, but I think, I think today there are plenty of competitors. So like, you know, could Zappos have remained independent, gone public and then bought by someone else? It's all possible. I try not to think about like all the possibilities because you only have one life to live. You don't get to rewind.

• 1:00:04David Rosenthal?

  You're a little busy on other stuff these days.

• 1:00:06Speaker 02

  You don't get to A B test your life. So you have to move on.

• 1:00:11Ben Gilbert?

  That's okay. We'll, we'll speculate wildly about it on this show instead.

• 1:00:16Ben Gilbert?

  Tech themes. Yeah. So we've talked about a bunch of them. There's one that we didn't, it was part of the sort of story in Venture Frogs and this great tidbit about the initial phone call from Nick to Tony, sort of pitching about shoesite.com and Tony almost deleted it, but decided not to, even though he sort of thought it was a bad idea, like, you know, who's going to try on, who's going to order shoes before they can't try them on. But, you know, Nick had this tidbit in there that it's a $40 billion market and 5% of that is already being sold by paper mail order catalogs. And it reminded me so much of a, of a Sequoia investment thesis that, you know, we invest in, in markets, not ideas. And we invest in, you know, markets over founders in, in many ways.

• 1:01:00Ben Gilbert?

  And I think that there's something really powerful to, big companies get created in big markets. And if, it doesn't matter how incredible of a widget you make in, in a small market, it's just not going to become a behemoth.

• 1:01:12Speaker 02

  Yeah, I would, I think you're, you're right that markets are, large markets are very, very important. I would just say that we have learned over time that founders and markets go hand in hand. It's not like you can't, you can't like invest in a Big market and have the wrong founder in place or the wrong management team. The people around the company has it has to all work. And so in some ways, I would say we invest in companies and not ideas. We invest in companies and not products. We invest in companies, not features. And the company consists of the team and the problem you're solving, the innovation you're bringing, and also the market that you're attacking and and and also the go to market and all those things. And now on day one, do you have all those things? No, you don't.

• 1:01:54Speaker 02

  But you have to sort of envision all of this. And why will this be an interesting company in five, 10, 15 years? And you can't envision that or you can't you don't feel like the pieces come together or you don't know where the other pieces that you need can come from. It makes it very, very hard to build a company.

• 1:02:14David Rosenthal?

  Yeah, yeah. My my thing that I was gonna put out there that I thought we were gonna cover along the way, but I actually don't think we did is, well, Ben, you mentioned a little bit, but just how much this story reminds me of the Stitch Fix story as well. And you know, even down to you guys hired, was the first hire at Zappos Fred Mosler? And reminds me of, you know, one of the first hires at Stitch Fix was Mike Smith from Walmart. You're bringing that DNA from the industry into understanding, you know, to this new paradigm of the industry, but from the old world too, where you can bridge that gap. But one of the things we talked about on the Stitch Fix episode was this idea in founding a company or investing that like it's not enough to be right about something. You need to be right and have it be non consensus that you're right. And like, you know, Tony almost deleted voicemail, right?

• 1:02:59David Rosenthal?

  Because who's gonna buy shoes online? Like, it seems like a dumb idea, just like Stitch Fix, you know, on the surface, back in the day, probably seemed like a dumb idea. But when you dig into the market, it actually isn't. I'm curious like how much you guys thought about that along the way.

• 1:03:11Speaker 02

  Yeah, so Katrina has done an extraordinary job at Stitch Fix. So I think kudos to her. I think going back to the comment you made about right and be non consensus. I think that's. Part of what we're talking about where if it's non-consensus, you will not attract a ton of attention. And you will not attract a ton of competitors and it allows you time to

• 1:03:37Speaker 02

  to get things right. And yes, Tony almost deleted the voicemail. And at the same time, the reason he almost deleted, didn't delete it was, Alfred, this does something like we had a conversation. This sounds like a dumb idea. But nobody else is gonna do this if they get money and they

• 1:03:56David Rosenthal?

  At least we're gonna be the only ones doing this dumb idea.

• 1:03:58Speaker 02

  Yeah, we're gonna be the only ones doing this dumb idea. And then, you know, then you ask like, is it that dumb, right? So the facts were that, you know, he had no, he knew that Nick could build a website. He was a webmaster. He designed websites. Okay, check. We knew that there was a problem here. We didn't know about the market. He listed the market size, 40 billion, 5% or 2 billion or even on a mail order. So what is that? What is the conclusion from those facts? Okay, well, it's not that hard to extend that conclusion to be the internet should be bigger than mail order.

• 1:04:31David Rosenthal?

  At least it's big.

• 1:04:32Speaker 02

  Yeah, at least it's big or bigger or many of orders are magnitude bigger. So if you believe that, then back to like, you need to build a company. We have a founder with an innovative idea. You need, you're missing a few pieces. So as you said, we went out and hired Nick Swimmer because we're missing shoe experience. Like Tony and I could, like, you had a sort of, because of link exchange, drive traffic to a site.

• 1:04:55David Rosenthal?

  Right.

• 1:04:55Speaker 02

  Okay, got that checked. Like, we have a bunch of things checked, but we didn't have the shoe experience. And originally, the original idea, we didn't need customer service experience or

• 1:05:03David Rosenthal?

  Because you were dropshipping.

• 1:05:03Speaker 02

  Because we were dropshipping. That evolved. So we needed more pieces to be filled in. But the company coming together has a lot to do with like, making sure you have all those right pieces.

• 1:05:12David Rosenthal?

  I think that's what's so, you know, for me at least, super fun about early stage investing is like, you can't think about, you can't look at it and say like, judge it as if the pieces were together. Because if the pieces were together, it would either be a public company or like, you know, it's never gonna work.

• 1:05:25Speaker 02

  Yeah, you need to, you need to, well, you also, you just need to have imagination.

• 1:05:29David Rosenthal?

  Yeah.

• 1:05:30Speaker 02

  You need to have imagination and you also need to make sure that

• 1:05:36Speaker 02

  You can dream with the entrepreneur. Like, we often sort of talk about like, okay, can you see a world like this? This, should the future be this way? The founders we like backing, like, um, you know, a D at Houzz, or Brian Chesky at Airbnb, or Dropbox. They also just like, they see the world slightly differently than everyone else. And they view a problem, they, they feel that problem from a personal standpoint. And they just feel like the world has solved that problem incorrectly. They've just gotten that wrong.

• 1:06:02David Rosenthal?

  Hmm.

• 1:06:02Speaker 02

  And they're on a mission to go change that. And Nick was on a mission to change that. Tony was on a mission to change that.

• 1:06:07David Rosenthal?

  Yeah. Even though, and I think this is what's also super cool about Zappos and the story, like, um, actually another one I had in here was mission, you know, focused founders versus mercenary founders. Even though Tony and, uh, I don't know, I'm guessing you probably weren't that passionate about shoes, but you were passionate about seeing this way that the market wasn't working and could work. And that nobody else in the space was so focused on customer service that could really deliver, you know, well, happiness. Tony, that's it. Uh, you know, to customers.

• 1:06:40Speaker 02

  Yeah, I think that the, before getting on to, um, mission versus mercenary founders, I think that one thing that was like clear was that e-commerce was going to have, was going to compete on price and was going to compete on, um, selection. And those two things are hard for a startup to just compete on those two things. Because you don't have the bankroll to, to compete on price. And on day one, you're not going to have the widest selection. And so we needed another pillar. You could compete on those two, those two things later.

• 1:07:12David Rosenthal?

  Hmm.

• 1:07:13Speaker 02

  But that's why we're so focused on sort of putting on another layer. And it was customer obsession and customer service. And well, Tony and I were pretty passionate about customer service from a mission standpoint. You know, people ask this all the time, whether we back, you know, mission focused or mercenary founders. I think best founders are kind of both. You know, it's like, they're not, they're not doing this as a charity. Because otherwise they would start a nonprofit. Um, so they are in the, they are in the, in the entrepreneur space because they want to build a company. They want to build a business.

• 1:07:46David Rosenthal?

  There's also like, I mean, back to your days with pizza at Harvard, Quincy House. Like, there's an element of you gotta be a hustler to get this done, right?

• 1:07:53Speaker 02

  You're a hustler. You, you want to solve the problem. You want to do it in a different way. You have to differentiate. And most of the founders that are successful, they want to, they want to build an enterprise that. Exists much longer than themselves and that requires making sure that the company has longevity, which means it has to have a sustainable business model.

• 1:08:11David Rosenthal?

  Yep.

• 1:08:12Speaker 02

  And then I do think one of the themes that you have to do hard things that yield some protection, some modes and things that are hard that are just people don't want to do and you know, kudos to Amazon for building a network of warehouses. Nobody wanted to build that. Like, oh, let's do that.

• 1:08:28David Rosenthal?

  Or a network of server farms.

• 1:08:30Speaker 02

  If you were, if you, if you asked in 1999, whether you put $10,000 of your life savings in eBay or Amazon, I bet you most people in 1999 would say eBay. There's this elegant, no capital, like capital light, no distribution centers, no inventory model. It was just connecting to, you know, to people and the marketplace would take care of itself.

• 1:08:51David Rosenthal?

  They acquired Skype. People could chat with each other.

• 1:08:54Speaker 02

  And I'm not making fun of eBay. They had lots of, they have lots of issues that they need with trust and safety. They had to solve that. They had to solve payments, micro payments, right? Like, these are small payments. That's why they had to go buy, you know, sort of develop their own. They tried developing their own. They acquired Billpoint and PayPal.

• 1:09:09David Rosenthal?

  Yeah.

• 1:09:09Speaker 02

  It was not an easy thing, but from an investor standpoint, investors seem to like these like high margin, like really like easy to explain business models. And at the same time, some of them, the hardest things to replicate are the hard things that people do to build a real mode around the business. And Amazon built real modes.

• 1:09:29David Rosenthal?

  Yep.

• 1:09:30Ben Gilbert?

  Well, that's a great, great way to close out, uh, close out the regular section of the show. We're on to grading. Um, Alfred, first, I want to ask, do you want to participate in this?

• 1:09:44David Rosenthal?

  You don't have to.

• 1:09:45Speaker 02

  What is this grading thing?

• 1:09:46Ben Gilbert?

  All right. So we basically, you know, when we started the show, the whole notion that we had in mind was we want to figure out. What are, have been the most successful acquisitions in history and try and take them apart and reverse engineer and figure out how to start companies like that. And so we thought, well, there's got to be some access on which we evaluate whether it was actually a good deal for the acquirer or not. And so we basically, you know, go through this whole process to try and figure out, was that the best use of the acquirer's capital? And our, you know, A+ scenarios are like Apple, you know, spending money on Next and basically getting, you know, having a reverse acquisition happen where the company is reborn because of it. Or Instagram's another great example.

• 1:10:26David Rosenthal?

  Are there A+es?

• 1:10:28Ben Gilbert?

  Right, right. And then there's other ones where we're like, actually, that was a terrible use of capital. And then they're, it kind of gives us a way to understand, basically, you know, given all the options on the table, should they have done this? And usually they land in the B to C range. So that's the process. Well, I'm going to take a first stab. So I think that on its own, Zappos was a great business. So it's not like they were, were, you know, buying something that they'd have to integrate and, you know, have really high costs of, of creating those synergies. That's not what it was about.

• 1:11:07Ben Gilbert?

  It was about acquiring a very unique business and one of the few large customer-centric businesses that were not Amazon on the internet. And, and continuing to grow that. In some ways, a takeout, because Zappos was a very real threat, you know, expanding category by category the same way that, that Amazon had. And, you know, we didn't talk on the, on the show at all about how big it could have gotten from a category's perspective, but, you know, if I'm Amazon, that's, that's one of the main fears, is that someone becomes the everything store before I do. I think it's been a good business inside of Amazon. From what I can tell, which is extremely difficult, because Amazon never breaks anything

• 1:11:51Ben Gilbert?

  out, it seems to be growing a little bit more slowly than Amazon's own shoe business, and definitely not as quickly as, as AWS or even the Amazon marketplace with, with third-party sellers. So, you know, I think it's good. I'd go with B+.

• 1:12:09Ben Gilbert?

  But you know, it's a tough bar to get an A on the show.

• 1:12:12David Rosenthal?

  Tough bar to get an A from Ben.

• 1:12:15Ben Gilbert?

  David? Well.

• 1:12:18David Rosenthal?

  It's hard to, it's hard to see this not being a good use of capital for Amazon. Like, both for the reasons you were saying, but also like, you know, preparing for the show. I think a bunch of people have made analogies to this almost being like a Berkshire Hathaway type acquisition of, you know, allowing Dapos to keep doing what it was doing, free of all the financial constraints that had hampered you guys along the way. And for Amazon, this was obviously a hugely important category to the company and to Jeff Bezos, to be able to enter that, stop losing, the estimates are, estimates are Amazon lost $150 million on endless.com, stop the bleeding there and be able to cross pollinate the knowledge to grow their own category.

• 1:13:02David Rosenthal?

  So, you know, sorry Alfred, I don't think this is as transformative as Instagram, but, but this is a minus in my book. No comment from Alfred.

• 1:13:11Ben Gilbert?

  I think I knew too much information.

• 1:13:13David Rosenthal?

  We can move on.

• 1:13:15David Rosenthal?

  How about, how about car events? What you got Ben?

• 1:13:18Ben Gilbert?

  Last week, I listened to Andrew Mason as a guest on Recode Decode with Kara Swisher. And it is always refreshing to hear that guy on any form of media, especially in an interview format, so, so straightforward, so honest. For listeners who don't know, Andrew Mason is the founder of Groupon and has since started a couple of other companies and he was on talking about his new company, which is in the audio editing space. So it obviously was interesting to us here at Acquired. But there's so much revisionist history in our industry and legend and lore that gets started and you just never hear that sort of thing out of Andrew's mouth.

• 1:14:02Ben Gilbert?

  It's mostly like, no, we didn't know what we were doing. Yes, we figured it out. Yes, it was really hard. No, maybe I shouldn't have been the person to do it. Yes, that's why I was fired. I mean, there's just a very, it's just a refreshing take. So really enjoyed it and really enjoyed hearing about some of the new stuff he's up to.

• 1:14:18David Rosenthal?

  Nice. Mine is, actually, I didn't think there was any way it was going to be related to the episode, but as so often happens, carve-outs end up, we find some way to relate them. Justin O'Burn published this great, long piece on his blog called "Google Maps Mote," the "Google Maps Mote," and he's a, I think, designer in the map space. I believe he worked for Apple Maps for a while. And it's just a piece of like, all of the culmination of all of the hard things that Google has done in maps for the last 10 years, and the lead that they have because of it over Apple and Nokia and everyone else in the space. And it really detailed breaks out like, product changes month by month over years, across

• 1:15:03David Rosenthal?

  all the products in the space. Really just a brilliant analysis, and very worth reading on what makes the Mote in the consumer business.

• 1:15:11Ben Gilbert?

  I'll second that. That piece was incredible. That was, and it's got these like, great side-by-side comparisons and animated GIFs where you can see like, he's been taking the same screenshot year after year for like, seven years or something, and you can see the, the complexity on each of these maps grow over time, and he annotates what they did to do that. It's just, it's so cool. Even to just scroll through.

• 1:15:32Speaker 02

  I agree as well. That was a great piece. For me, I'm trying to, I'm trying to do some hard things and, and read thick books. So, I'm reading through two books by Walter Isaacson. One is about Ben Franklin, the other about Albert Einstein. I just think both of those men were fascinating people, and have contributed lots to our society. And they're just, they were, they were prolific in the work that they did. They're also interested in many, many different things. Kind of think about Albert Einstein as a, you know, physics genius, but he also loved playing, playing music and the violin. And Franklin was, you know, was a publisher. He obviously was one of the founding fathers and, and published

• 1:16:14Speaker 02

  a lot of papers, but he was also into music and other things. And I think both, both people sort of... Demonstrate that having a fertile curiosity about many different areas actually allows you to do whatever you believe your day job to be better. Another fascinating person, I hope Walter writes a book about Madame Curry, because I think she's also a fascinating character.

• 1:16:37David Rosenthal?

  Definitely. He's a great writer. Well, thank you, Alfred, for joining us. Putting up with us, reliving your trash compactor days.

• 1:16:46Speaker 02

  Yeah, Alfred.

• 1:16:47Ben Gilbert?

  Where can our guests find you on the Internet?

• 1:16:49Speaker 02

  Oh, they can find me. I'm just my email is Lynn at sequoia cap.com. You can find me on the Sequoia website, sequoia cap.com. So it's where I hang out.

• 1:16:59Ben Gilbert?

  Awesome.

• 1:17:00David Rosenthal?

  All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 1:17:07Ben Gilbert?

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• 1:17:17David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:17:38Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:17:50David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:18:01Ben Gilbert?

  Listeners, thank you for listening. As always, if you are new to the show, you can subscribe from your favorite podcast client. We're now in SoundCloud and Spotify as well. And at acquired.fm, you can come join us and 1,100 other people in the Acquired Slack. So have a great day, everyone.