Homegrown Amazon

Apr 16, 2000

Robert Spector

In five years, Amazon.com went from an idea to the top of the e-commerce world, all from its perch in Seattle. But how did it arrive in Seattle in the first place? In a new book, "Amazon.com: Get Big Fast," Seattle writer Robert Spector chronicles the company's rise on the Internet.

In the summer of 1994, Jeffrey Bezos abandoned a seven-figure annual income at D.E. Shaw, a New York hedge fund, to sell books on something called the Internet. A few months earlier, the 30-year-old vice president had been assigned to investigate online-business possibilities. He ultimately decided books would be the best product to sell online, where usage was growing at an annual rate of 2,300 percent.

Now that he knew what he wanted to do and how he wanted to do it, the question was: Where was he going to do it?

In his methodical, analytical way, Bezos came up with three criteria for the location of his new business. First of all, it had to be in an area with a large pool of technical talent. Second, it had to be in a state with a relatively small population because only the residents of that state would be charged state sales tax for the books they ordered. That eliminated California. Finally, the city had to be near a major book wholesaler in order to ensure timely delivery of books - first to Amazon.com and then to the consumer. Bezos quickly narrowed down the list down to Portland, Boulder, Colo., Lake Tahoe and Seattle - before ultimately settling on Seattle.

Why Seattle? As the home of the University of Washington and its top-flight, nationally ranked Computer Science & Engineering Department, it could be a handy source for programmers.

Plus, the city of Nordstrom, Starbucks, Costco and Eddie Bauer was on everybody's short list of top places in America to do business, and thanks to its reputation for coffee, grunge music and Mount Rainier, Seattle had a buzz the others didn't.

And Seattle was about a six-hour drive from Roseburg, Ore., where Ingram Book Group ran the largest book-distribution center in the United States. . . .

But above and beyond those quantifiable reasons, Seattle also had one other thing going for it. It was the home of a friend of Bezos's named Nicholas Hanauer.

The then-34-year-old Hanauer was the senior vice president of sales and marketing for his family business, Pacific Coast Feather, the nation's leading supplier of feathers for high-end down pillows, comforters and mattress pads.

In 1993, a mutual friend from Seattle brought Hanauer and Bezos together for lunch in New York, and "we became instant friends," said Hanauer. "We stayed in touch, although not closely. We had dinner once or twice again with other people from D.E. Shaw. Then I heard . . . Jeff was interested in starting an Internet business, and at that time, I was interested in participating in e-commerce."

In a telephone call, Hanauer told Bezos two things: One, that he wanted to invest in Bezos's idea; and two, Bezos had to set up the business in Seattle. "I told him that Seattle was - and I continue to believe is - the center of the universe. I told him that he would have a wonderful life here, that it was a place that was attracting fabulous, talented people, that it was easy to get good people to come to work for him. I sold him hard on being able to ski on one weekend and sail on the next. I sold him hard that I would help him." Even after all that, Hanauer conceded, "At the end of the day, I'm not sure what finally swayed him. I'm not even sure if he knows."

Heading to Seattle

In the summer of 1994, Jeff and his wife, Mackenzie, gave up their apartment on the Upper West Side of Manhattan, packed up their belongings and sent the movers to Seattle.

The Bezoses flew to Texas, where Jeff's father donated a 1988 Chevy Blazer for their trip west. Hanauer recalled: "When he ultimately decided to come, it was quite last minute. I got a call when he was on the road. He said, `We're coming. Can we store our stuff at your house?' A big bunch of stuff soon arrived, and a week later, Jeff and Mackenzie arrived."

Hanauer hooked up Bezos with a Seattle attorney named Todd Tarbert to take care of establishing bank accounts and other official business. When Bezos called Tarbert from the road about incorporating the company in the state of Washington, Tarbert naturally asked what the name of the new company was going to be. Bezos had already thought of the name.

"Cadabra Inc.," he said over the cell phone. "Like Abracadabra."

To which Tarbert replied "Did you say, Cadaver?"

The company was indeed incorporated in July 1994 as Cadabra Inc., but three months later, after perusing the entire A section of the dictionary, Bezos changed it to Amazon.com. Although "Amazon" obviously suggested something large, even more important was that it started with the letter A, because online Web sites were listed in alphabetical order - rather like a company listing itself in the telephone book under AAA Auto Repair.

"He started with a brand name that was an empty vessel - that was very smart," said Hanauer. "Amazon.com could be anything we decided to make it.

Five days after showing up on Hanauer's doorstep in July 1994, Mackenzie and Jeff rented a three-bedroom, ranch house on Northeast 28th Street in Bellevue. The house was nothing to write home about, but it contain one thing that Jeff had to have: a garage. This had symbolic importance because Bezos wanted to be able to say that he started his business in a garage, just like Messrs. Hewlett and Packard, and all the entrepreneurs who came after them. But the room in the Bellevue house wasn't a garage anymore - it had been converted into a family recreation room with a linoleum floor. Although, Jeff quipped, the converted garage "wasn't fully legitimate," he did consider it "somewhat legitimate because it wasn't insulated."

Bezos didn't waste any time getting to know people in the Seattle technology community. Before he left D.E. Shaw, a colleague, Brian Marsh, gave Bezos the name of a college friend named Brian Bershad, who was a professor at the University of Washington Computer Science & Engineering Department. In August 1994, Bershad had dinner with Bezos, who said "he was looking for connections to the university," said Bershad. "We generate 200 potential employees a year at the undergraduate level and a hundred potential employees a year at the graduate level in computer science. The availability of that kind of farm team was just one of the things that Jeff was looking at." (As it turned out, many of the early engineers at Amazon.com did come from the UW program. Part of the reason is that most of the early resumes Amazon.com was receiving were from the locals.)

Soon after that meeting, Bershad spent a day sightseeing in Seattle with Jeff and Mackenzie to show them some of his favorite parts of the city. The Bezoses quickly discovered what a lot of people have found: It's hard not to fall in love with Seattle on a beautiful summer day.

After his meeting with Bezos, Bershad circulated an e-mail around the UW computer-science department with a brief description of what Bezos was looking for in a programmer. One of the people who responded was Paul Barton-Davis, who was a Ph.D. candidate and one of Bershad's squash partners. The 30-year-old British citizen had graduated from Portsmouth Polytechnic in the United Kingdom, with a bachelor's degree in biomolecular science. In 1993, he became the Webmaster of the first open World Wide Web site in the Pacific Northwest at the UW's computer-science department.

Bezos wins over Webmaster

When he read Bershad's message about Jeff Bezos, "My initial response was `Why would I want to go do this?' " Barton-Davis recalled. But that attitude quickly changed after a meeting with Bezos, who struck Barton-Davis as "somebody who had a vision of what he wanted to do."

"He clearly had enough understanding of the software side of it to understand what was going to be easy and what was going to be difficult. He had a clear idea of what he was getting into. He's also a very friendly, high energy kind of guy. I thought he would be interesting to work for."

Barton-Davis decided to cast his lot with Bezos in October 1994, and joined Shel Kaphan, the first programmer hired by Bezos, in the converted Bellevue garage.

Thinking back on his first visit to the fledgling Amazon.com operation, Barton-Davis sensed "things being very exploratory; there was nothing in the way of anything actually being set up to do anything. I think there was maybe one computer server, a desk made out of a door, a bunch of books about business. I wasn't expecting very much, but it was a little bit of a shock. I was thinking, `Boy, this really is Ground Zero.' "

As a going-away present, his colleagues in the computer-science department gave Barton-Davis a coffee mug with three dollar bills stuffed in it.

"I don't know how cynical a gesture that was," he recalled. "To be honest, that was a fairly realistic assessment. There were a lot of Internet start-ups at that point and they were all going bust in a couple of months. It was a realistic assessment of the risks, but it might not have been a realistic assessment of the potential upside."

But then again, in November 1994, maybe only Jeff Bezos could imagine the potential upside for a company no one had yet heard of: Amazon.com, a company that could only have started in Seattle.

Robert Spector is a Seattle-based writer who has reported on business for national publications. He is author of the book "The Nordstrom Way."