As a small business owner for over 15 years, I‘m fascinated by Amazon‘s rise from a fledgling online bookseller to a global ecommerce behemoth. Amazon‘s game-changing IPO in 1997 provided the capital and credibility needed to drive the company‘s ambitious expansion plans. In this article, I‘ll take a detailed look at Amazon‘s IPO and analyze how it enabled the company‘s incredible growth.
An Early Stage Amazon Raises Venture Capital Funding
Long before its IPO, Amazon raised critical early stage funding from venture capitalists to bankroll its launch and operations.
- In 1995, Amazon raised $8 million in Series A funding from Kleiner Perkins.
- In 1996, the company secured $8 million in Series B funding led by venture capital firm Benchmark.
This venture funding enabled Amazon to quickly scale up its operations beyond books into new product categories like music and video.
Steering Towards an IPO
As early as 1996, Amazon founder Jeff Bezos made it clear an IPO would be key to achieving his vision for the company. Here are some key stats:
- In 1996, Amazon generated revenue of $15.7 million but lost $5.7 million. Rapid growth was expensive.
- By early 1997, Amazon was selling books in all 50 states and over 40 countries. An IPO would bring in capital for further expansion.
- Amazon hired seasoned executives pre-IPO to add financial/operational expertise as it prepared to go public.
Table: Amazon Pre-IPO Financials
| Year | Revenue | Net Income |
|---|---|---|
| 1994 | $0.5 million | -$303,000 |
| 1995 | $5.1 million | -$303,000 |
| 1996 | $15.7 million | -$5.7 million |
Amazon Goes Public – May 15, 1997
Amazon conducted its initial public offering on May 15, 1997. Here are key facts about the IPO:
- IPO price was $18 per share on the NASDAQ under ticker AMZN.
- The offering raised $54 million by selling 3 million shares.
- Amazon had a market cap of $438 million after the IPO.
- Leading up to the IPO, Amazon hired the investment banks Morgan Stanley and Deutsche Bank.
- Amazon wasn‘t profitable at the time of its IPO, but investors saw major growth potential.
Post-IPO: Amazon Stock Takes Off
In the months after its IPO, Amazon‘s stock price skyrocketed:
- By October 1997, shares hit $23.
- In 1998, shares rose to $96 as Amazon expanded into CDs and videos.
- During the dot-com bubble in 1999, Amazon stock peaked at $106 per share.
Table: Amazon Key Stock Prices
| Date | Share Price | Market Cap |
|---|---|---|
| IPO (May 15, 1997) | $18 | $438 million |
| Oct. 1997 | $23 | $760 million |
| 1998 Peak | $96 | $4.2 billion |
| 1999 Peak | $106 | $36 billion |
Lessons for Entrepreneurs
As a small business owner, Amazon‘s journey inspires me. Here are key lessons entrepreneurs can learn:
- Take risks: Amazon wasn‘t profitable when it went public, but took a chance to access capital for growth.
- Lock up funding: Whether via venture capital or a public offering, funding is crucial for ambitious plans.
- Assemble experts: Amazon added financial/operational veterans pre-IPO to gain credibility.
- Focus on growth: Amazon prioritized rapid customer and revenue growth above short-term profits.
Twenty-five years after its modest IPO, Amazon is worth over $1 trillion. It all started with that small but pivotal early offering.
