Amazon.com

1. DRDavid Rosenthal0:00

   Hey, Acquired listeners. In the time between when we recorded this episode and now when we're releasing it, longtime Amazon board member and Madrona Venture Group founder, Tom Alberg, sadly passed away, and we wanted to, instead of our usual funny cold opener here, take a moment and dedicate this episode to Tom.

2. BGBen Gilbert0:22

   Tom had such a huge impact on David and my careers. Tom also had such a huge impact on Seattle and really the whole technology ecosystem, helping to build the law firm Perkins Coie and the telecommunications firms, Western Wireless and McCaw Cellular, that really make up a large part of the infrastructure we all use for our phones today. We also were lucky enough to, uh, have Tom on Acquired, and it was really wonderful getting to spend the time in person with him, gosh, four or five years ago now, David.

3. DRDavid Rosenthal0:52

   Yeah. Tom was the longest serving Amazon board member other than Jeff himself. I believe twenty-three years, was the lead independent director and had a huge impact on the company, and of course, on us.

4. BGBen Gilbert1:05

   We'll all remember Tom. He gave back in so many wonderful ways, and this episode is dedicated to you, Tom Alberg. Thank you.

5. SPSpeaker1:13

   Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Is it you? Is it you? Is it you? Sit me down, say it straight, another story on the way. Who got the truth?

6. BGBen Gilbert1:30

   Welcome to season eleven, episode two of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I am the co-founder and managing director of Seattle-based Pioneer Square Labs, and our venture fund, PSL Ventures.

7. DRDavid Rosenthal1:45

   And I'm David Rosenthal, and I am an angel investor based in San Francisco.

8. BGBen Gilbert1:49

   And we are your hosts. Our story today is probably the single most interesting business of the past thirty years. For the longest time, David and I resisted doing an Amazon episode because it almost felt like a trope or that we needed to do something maybe more unexpected. We've tackled bits and pieces, like our interview with former board member Tom Alberg in the Amazon IPO episode-

9. DRDavid Rosenthal2:14

   Ah, so great

10. BGBen Gilbert2:14

    ... our episode with Alfred Lin on Zappos, and of course, by referencing Bezos's famous two thousand and nine speech about outsourcing anything that does not make your beer taste better over, and over, and over again. [chuckles]

11. DRDavid Rosenthal2:27

    And over! [chuckles]

12. BGBen Gilbert2:30

    But we decided that no self-respecting technology business historians like ourselves could skip over this incredible, tumultuous, death-defying, and, and ultimately, very, very successful story. Today, we'll be tackling Amazon.com, the website that sells books and now everything else on the World Wide Web. As you know, Amazon is also one of the rare companies that built a completely separate and dominant business in Amazon Web Services, and we'll save that for our next episode.

13. DRDavid Rosenthal3:00

    Woo-hoo.

14. BGBen Gilbert3:01

    This story is for longtime students of Amazon and newcomers alike. So while you may be familiar with Jeff's flywheel diagram, or the famed door desks, or the Barron's article from the dot-com bust headlined, "Amazon.bomb," I can tell you from staring at my mountain of notes that, uh, there are some details in here that I certainly didn't know, and you may not have known either.

15. DRDavid Rosenthal3:25

    Oh, it's just such a good story, too.

16. BGBen Gilbert3:28

    Yeah.

17. DRDavid Rosenthal3:29

    I'm so glad we did Walmart first. We almost didn't, because it just perfectly sets the stage for Amazon.

18. BGBen Gilbert3:36

    Oh, yeah. Yeah, the big thing that we're doing today is we're gonna try and answer the question: How did Amazon succeed to such an incredible degree that it has, where so many of their dot-com siblings burst into flames? So first, we have some big, big news here at Acquired world HQ. After seven years of beating back requests, we are finally launching a merch store. We've been holding onto this bit for a while 'cause we can think of no better episode to launch our internet storefront than here on the Amazon episode. So we're partnering with what I think is the single highest quality merchandise platform on the internet, Cotton Bureau. They make really nice stuff that I have tons of in my closet. We are launching with men's and women's T-shirts, sweatshirts, tanks, and even onesies, if you, like David, have a little one at home. And, uh, if you decide to be first in this first wave of people to sport the fashionable Acquired merch, you should tweet at us, @acquiredfm, and we will retweet some of our favorites. So the link is in the show notes, or you can go to acquired.fm/store. Well, for our presenting sponsor this episode, we have a company that we're very excited about, Fundrise. On the Walmart episode, they broke some news right here on Acquired about a fascinating new product called the Fundrise Innovation Fund. This enables their customers to not only invest in real estate on the platform, but also now private late-stage growth tech companies. This is obviously interesting because that's not an asset class that retail investors previously had access to. You had to wait until the IPO, and now they've democratized that and opened the asset class to lots and lots of people, just like they funded Fundrise itself.

19. DRDavid Rosenthal5:19

    It is also great news for founders as well, because retail capital is a great source of capital if you are a late-stage private company.

20. BGBen Gilbert5:28

    So we're back here today with Ben Miller, the CEO and co-founder of Fundrise. So Ben, can you share some more info for listeners on the Innovation Fund?

21. SPSpeaker5:36

    Thanks for having me, guys. It's no wonder you guys, uh, like our story, because in building Fundrise, we unintentionally created an alternative to venture capital, which, uh, you know, everybody has a love-hate relationship with. [chuckles] In two thousand and twelve, we invented the idea of raising money for real estate on the internet, and within a few years, we had a hundred and fifty copycats, a hundred and fifty different companies trying to do what we were doing with a billion dollars of venture funding. So then roll forward eight years to now-... and all of those companies basically gone out of business. So what happened? Did we have, like, a lot better strategy? Do we have better execution? Like, I'm saying that the main reason is that they were venture-funded, and we weren't.

22. BGBen Gilbert6:20

    Hmm.

23. SPSpeaker6:21

    And the venture funds ran their sort of standard playbook, and basically ran those companies out of business. So [chuckles] a little provocative here. So we took a, like, totally different path. We didn't think we wanted to raise traditional venture money. We spent, like, years trying to figure out how we could do something that's different. One of our innovations is regulatory innovation, and we work with the SEC on a lot of new ideas. So we figured out a way to raise money from the public, but stay private. And since then, Fundrise has raised $155 million from the public, but stayed as a private company. So we figured out a way to do it, and we did it at scale. The innovation's like a hybrid of being public and private. It's more passive, it's more aligned, and it's lower cost because we don't have the 20% carried interest that we have to pay to venture funds.

24. BGBen Gilbert7:08

    Ben, what are the terms for investors on this fund?

25. SPSpeaker7:12

    Fundrise doesn't take a carried interest. It's just 1.85% asset management fee a year, which is much less than the two and 20 of a typical venture fund. We basically became one of the biggest real estate investors in the world. We're, today, by deployment, probably top 20 in the world. So we wondered, basically, "Okay, we're doing real estate. What's next? Could we do it for other tech companies, like other private tech companies?" And so we went back to the SEC, spent a couple years with them, and figured out how to do it, and are launching the Fundrise Innovation Fund, which is a registered fund that raises money from the public, but invests in private tech companies. It's gonna be available to all US investors. Anybody in the US can invest in it, a $10 minimum, right? So totally democratizing access. The hope is, basically, we get to disrupt venture capital the way we're disrupted real estate, private equity. We're launching the Fundrise Innovation Fund at the bottom of the economic cycle, and my experience is you can't disrupt a financial sector except for in a downturn.

26. BGBen Gilbert8:19

    Fascinating.

27. SPSpeaker8:21

    It's a crossover fund, so we'll own public and private tech. So if you go public, we're not gonna sell all your shares. So we basically are a much more long-term investor because of the structure of the fund. I think it's the future of venture capital. So we're the first direct-to-consumer VC that allows the public to invest into private tech companies, but we won't be the last. This is a mega trend, and I'm gonna bet you that within five years, the likes of Andreessen Horowitz, Sequoia, also launch funds just like this.

28. BGBen Gilbert8:56

    Fascinating. Well, listeners, if you are considering a growth round of capital, if you're an entrepreneur thinking, "In the next year, I'm gonna raise a, a round," you should definitely, definitely explore raising some of it with the Fundrise Innovation Fund. Just shoot an email to notvc@fundrise.com. That's notvc@fundrise.com. And if you're an individual looking for exposure to growth stage tech companies, especially in this new climate we are in, you can go to fundrise.com/innovation, and our huge thanks to Fundrise. Well, after you finish this episode, go check out The LP Show by searching Acquired LP Show in the podcast player of your choice. Our next episode will be an interview with Austin Federa, who many, many of you know from the Acquired Slack, where he's been a member since, like, 2016. Austin is at the Solana Foundation, very deep in the world of Web3 and crypto, and gave us a great, great primer on the world of Web3 today, so check that out. And if you want early access, it's already live for paid Acquired LPs at acquired.fm/lp. All right, now, without any further ado, David, onto our story. And listeners, this show is not investment advice. David and I may have investments, uh, certainly have investments-

29. DRDavid Rosenthal10:11

    [chuckles] Certainly

30. BGBen Gilbert10:12

    ... in the companies-

Episode duration: 4:24:19