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Years before they built Zappos into an organizational case study, Tony and Alfred were young college grads at work on a different, lesser-known Sequoia-backed company: LinkExchange.

Their story starts there.

Alfred Lin
Former CFO, LinkExchange and Former COO, Zappos

So here’s this little company started by Tony Hsieh and Sanjay Madan, two friends from Harvard, who came out here and were so efficient at their Oracle jobs that they built a web design business on the side. That pivoted to become LinkExchange, in 1996.

Michael Moritz
Sequoia

This was how we came to know Tony Hsieh. He was one of three founders there — an engineer, silent, but clearly very smart.

Alfred Lin

Mike was so effective throughout that experience. He had an even hand in making sure to mentor the employees, including Tony and me. When disagreements between the founding team escalated, he suggested we hire a CEO, and when we had a hard time recruiting someone he actually came in and was interim CEO for a time.

Michael Moritz

The company needed help. They were up on 2nd Street and Howard in San Francisco, in a third-story walk-up, and I must’ve spent half my time up there before they got a management team in place.

Alfred Lin

That wasn’t his job, but he came in and worked hard to replace himself, and eventually we recruited a CEO who got us from a small business to being bought by Microsoft for $265 million.

Michael Moritz

LinkExchange had its challenges, but it showed that we were committed to helping founders and their companies. And presumably that was the backdrop that led Tony to come to us with Zappos later on.

Alfred Lin

And it’s why the Zappos story, in some sense, starts with this little company called LinkExchange that few people ever heard about. You can make an argument that Google was always going to be Google, that Facebook was going to be Facebook — but there are cases where a VC really steps up and reconstitutes a company, and allows it to thrive. LinkExchange was an example like that, and it made an impression on us.

Michael Moritz

So then Tony came back to us with this shoe company circa 2000, 2001. We actually passed several times.

Alfred Lin

There were partners at Sequoia who — for valid reasons — didn’t believe in e-commerce as a great venture investment. But Tony kept coming back, and it was because of the relationship he had developed with Michael at LinkExchange. He could have raised money for Zappos from other places, but he was basically waiting on a Sequoia round.

Michael Moritz

At the time we were licking our wounds from previous encounters with some of the dot-com companies — eToys, PlanetRx, Webvan — and the notion of being in the online shoe business did not strike a chord at that point. It was the high rate of product returns, the enormous cost of holding inventory, questions about cash flow, and the Nevada location.

Alfred Lin

But Michael really believed in Tony, and stayed in touch, and he kept pushing for the investment.

Michael Moritz

It was in 2004 that we finally became involved with Zappos. The business had started to grow, and we could see that they’d clearly hit the mark with users, who knew for the first time — and with a very high degree of certainty — that the precise model and size of shoe they desired would be in stock, and they could get it very quickly. It was a very different experience from walking into a physical store.

Alfred Lin

Mike helped us recruit two great board members. At every turn he reassured the banks about our financial stability, so our line of credit tripled over the time Sequoia invested. We got the learnings from Webvan and others, and Roelof taught us about cohort analysis and made the first introduction to Kiva Systems.

Michael Moritz

The ultimate mark is that — years on, after Amazon bought the company — Alfred chose to come and work at Sequoia. That’s about the largest endorsement any founder can give a firm like Sequoia. When we’ve built these close relationships with founders, who’ve so enjoyed the experience that they choose to come and pass it on to others — it speaks volumes.

Zappos grew to over $1 billion in revenue before it was acquired by Amazon for $1.2 billion in November, 2009. Today, the company has expanded beyond shoes and clothing with the goal of providing the best service online in any product category. Alfred Lin joined Sequoia as a partner in 2010.

Zappos
Online retailer driven by customer service.
Milestones
  • Founded 1999
  • Partnered 2004
  • Acquired 2009
Team
  • Tony Hsieh
  • Nick Swinmurn