In August 1999, Tony Hsieh invests $500,000 in what is universally considered a bad idea: an online shoe store.
Zappos, having been rejected by numerous VCs, runs out of money in January 2000. As employees clean out their desks, Hsieh decides he will keep funding the company. Soon after, he becomes CEO.
Six months after the dotcom crash, Zappos is once again out of money. Hsieh lays off half the staff in October 2000. He sets his own salary at $24.
To pay for a new warehouse in Kentucky, Hsieh sells his San Francisco loft. By the end of 2002, sales hit $32 million, but there are still no profits.
In March 2004, Hsieh moves the Zappos headquarters from San Francisco to Las Vegas in order to hire more experienced call-center workers. Today, the company's warehouse and office there is a popular destination for entrepreneurs visiting Sin City, and employees perform cheers to entertain tour groups.
With sales up to $184 million, Zappos persuades Sequoia Capital to invest $20 million in October 2004. The firm, which has backed a roster of web all-stars including Google, PayPal, LinkedIn, and YouTube, would, Hsieh says, eventually pressure him to curtail Zappos' commitment to its idiosyncratic culture in order to improve the company's overall financial performance.
In August 2005, Amazon chairman and CEO Jeff Bezos flies to Las Vegas and offers to buy Zappos, which now has sales of $370 million. Hsieh says no. "I felt like we were just getting started," Hsieh says. "If we sold, we'd probably be folded into their operations, and our brand and culture would be at risk of disappearing."
Amid the annual holiday buying season, Zappos tops $100 million in monthly merchandise sales in December 2007, ending the year with revenue of $840 million and, for the first time, a profit.
In April 2009, Hsieh meets Bezos in Seattle. The Amazon founder says he is willing to let Zappos operate independently. Negotiations ensue. What changed over the intervening two years? "It seemed clear that Amazon had come to appreciate our company culture as well as our strong sales," Hsieh says.
Amazon buys Zappos for $1.2 billion in November 2009. Sequoia Capital made $248 million on its investment. Hsieh remains the company's CEO at his current salary of $36,000 per year. In the first quarter of 2010, net sales at Zappos were up almost 50 percent.
