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Chapter 421 Amazon Raises Funds Again

Ernst and Jerry Brown were in secret talks, while Amazon in the north was also launching a new round of financing negotiations.

At either end of the conference room sat Amazon's core management team and representatives from Wall Street.

The room fell into an almost stagnant silence, with only the rustling sound of papers being turned slowly echoing in the air.

"Jeff," Goldman Sachs representative Mark Schwartz spoke first, his gaze sweeping across the Amazon team across the conference table. He then slowly placed the report with detailed financial data aside, adjusted his gold-rimmed glasses, and said, "We need to know clearly how Amazon intends to allocate and use the $4.5 million in funding it plans to raise."

"We just completed an $8000 million funding round last year, and now we're asking for funding again in just one year. We need to see a more feasible plan for how to use the funds. This is not only responsible to our investors, but also to Amazon's own development."

Bezos's blue eyes flashed with a sharp light as he looked directly at Mark. "Mark, you should know very well that the window of opportunity in the internet industry is only three years. Although our market share in the offline book category is still growing, it is already in a precarious situation."

"You've probably heard about the retail industry conference held recently. Before long, companies like Walmart, which hold an absolute advantage in traditional retail, will fully enter e-commerce and establish a presence in the online market. If Amazon cannot complete the diversification of its product categories and expand its business boundaries as soon as possible within this limited window of opportunity, then what awaits us is only annihilation."

"Therefore, we must enhance the variety of products on the Amazon platform, further expand the scale of our imaging products business, and add several popular categories such as electronics, textiles, and apparel, so as to expand Amazon's business from a single book sales to a broader range of consumer goods."

"If funding permits, I also plan to build more warehousing centers across the country to significantly improve Amazon's logistics and delivery speed by optimizing the warehouse layout, providing consumers with a more efficient and higher-quality shopping experience."

As soon as Bezos finished speaking, a murmur rippled through the conference room.

The capital representatives exchanged glances with their colleagues, discussing Bezos's proposed strategic plan in hushed tones.

After a moment, Mark Schwartz frowned, opened a detailed report on the table in front of him again, tapped the report with his finger, and said with obvious doubt, "Jeff, according to the data you provided, the construction cost of building a new warehouse center is at least $1000 million, and you have already planned eight warehouse centers in the early stage, which will cost $8000 million in construction costs alone."

"If we include the cost of land acquisition, increased labor costs, and the cost of purchasing machinery and equipment, the total investment will be at least over $1 million."

Mark then shifted the focus to expanding the electronics category, continuing to question, "While bill payments for electronics can be deferred, you're not giants like Walmart or Best Buy that have been deeply rooted in the retail industry for many years and possess strong bargaining power and fixed assets. How long can you possibly negotiate a deferred bill period? One or two months at most."

"Once this deadline is exceeded, the backlog of inventory will not only tie up valuable working capital, but also generate additional costs such as warehousing and management. These backlogs of inventory will eventually become a heavy burden for the company."

"Other product categories will face similar situations. Is $4.5 million in funding really enough to complete the layout you mentioned?" Mark completely doubted this.

If Amazon were a traditional brick-and-mortar marketplace, it would naturally be able to control the quantity of goods purchased based on factors such as the actual customer traffic of the store and the characteristics of the surrounding consumer groups, making the risks relatively controllable.

However, Amazon's core business model is online e-commerce, which targets a diverse user base from all over the world with vastly different consumption needs and habits.

In this situation, no one can accurately predict the sales of other types of products that Amazon has newly expanded into.

Purchasing too much can lead to unsold goods and inventory backlog, resulting in cash flow difficulties.

If the purchase quantity is too small, there may be a large-scale shortage, which will affect the consumer's shopping experience and make things even more awkward.

Furthermore, with the expansion of business scale, there are a series of additional costs such as equipment upgrades, increased manpower, and marketing, which Mark has not yet factored in.

From this perspective, the financial pressure and operational risks facing Amazon's expansion plan are far more severe than they appear on the surface.

John Doerr, a partner at Kleiner Perkins Caufield & Byers, slowly raised his head, calmly scanning everyone present before fixing his gaze on Bezos. He said earnestly, "Jeff, I must admit, I greatly admire your business ambitions. But as investors, we are more concerned with the returns on our investments."

"Although Amazon's revenue grew by more than 100% in the first half of this year, it is still operating at a loss. If this expansion cannot bring substantial profits, it will be very difficult to raise funds again."

Bezos's expression remained unchanged, but in his heart he was cursing these Wall Street capitalists.

Through Amazon, these Wall Street investors have already made enough money.

In particular, Kleiner Perkins Caufield & Byers (Kleiner Perkins Caufield & Byers) was the sole investor in Amazon's Series A funding round, while Benchmark Capital was the investor in Amazon's Series B funding round. As an investor in Amazon's Series A funding round, Kleiner Perkins Caufield & Byers acquired 20% of Amazon's shares for only $800 million.

Benchmark Capital also invested $800 million, acquiring a 10% stake.

Amazon's market capitalization peaked at $61 billion in June this year. Even though it recently dropped to $43 billion due to the Microsoft trial, the returns on investment for both companies are still more than several dozen times higher than they are now.

Having made so much money, they still don't want to take any risks at all.

Bezos thought to himself, "What do you mean the next round of financing will be difficult? To put it bluntly, it's just that they're worried that Amazon's expansion plans won't be profitable as scheduled, causing the company's stock price to fall and affecting their investment returns."

This is the inherent weakness of capital: it flocks to companies when they are thriving and generating substantial returns, but retreats as soon as the company faces challenges and needs financial support.

Goldman Sachs, which joined later, has not yet explicitly expressed its opposition, yet Kleiner Perkins Caufield & Byers, an early investor that has already made huge profits, has the audacity to be the first to stand up and offer advice.

Despite his deep dissatisfaction with these capitalists, Bezos did not show it on his face.

He slowly stood up, walked to the whiteboard at the front of the conference room, picked up a marker, and quickly began drawing a mind map on the whiteboard. "John, I think you understand better than anyone that risk and return are always directly proportional. I probably don't need to explain this in detail to you professional investment firms, do I?"

"When Amazon was first founded in 1995, everyone thought selling books online was a pipe dream and that this business model simply wouldn't work. But as it turns out, we not only did it, but we also achieved remarkable success in the online bookstore sector and captured a considerable market share."

"This fully demonstrates that e-commerce is an inevitable trend in the future development of commerce, and whether it is books or any other category, they will all have to follow this trend."

"Now is the critical time to seize market share and build industry barriers. If we miss this opportunity, it will be extremely difficult to enter the market after other competitors have completed their layout, and we may even lose the opportunity to establish ourselves in this field forever."

"I know everyone is worried about losses, and as the founder, I care even more about it." Bezos's tone gradually softened as he tried to resonate with the investors.

"But the development pattern of internet companies is to burn money first, then seize the market, and then achieve profitability through economies of scale. You can't use the analysis of traditional industries to look at the internet industry; there's simply no comparison."

"According to your logic, half of the internet companies listed on Nasdaq should be in the trash. But the reality is that your institutions are increasing their investment in internet companies. Compared to those internet startups that haven't even found a profit model yet, shouldn't Amazon be more worthy of your trust?"

Bezos continued to support his point with data: "It's true that Amazon is not profitable yet, but our current user repurchase rate has reached 65%, which shows that users accept the online shopping model. We just need to get more consumers to accept this way of consumption."

"The success of the book category has proven the viability of the online shopping model, and I firmly believe that the same logic applies to other categories. Furthermore, through years of operation, Amazon has accumulated rich experience in online e-commerce operations, user data analysis capabilities, and supply chain management capabilities—these are our core competitive advantages."

"Based on our internal data analysis and model calculations, if this expansion plan proceeds smoothly, Amazon should have no problem achieving profitability before 2001, given the current development trend."

"2001? More than two years?" John Doerr's thoughts, which had already begun to consider whether to agree to Amazon's financing plan, were instantly disrupted when he heard this profit target.

In his view, more than two years is too long and is full of too much uncertainty.

Bezos turned and sat back down. "But you should know that Kleiner Perkins Caufield & Byers has acquired a company whose sales revenue is several times, even ten times, that of Amazon today, and it's profitable."

Seeing that the representatives from the various institutions remained silent, Bezos resorted to coercion and enticement: "I'm not afraid to tell you that I've already spoken with several investment institutions, and they are very willing to participate in Amazon's financing."

Goldman Sachs' Mark Schwartz's expression instantly turned serious. He stared at Bezos, his tone clearly showing displeasure, "Jeff, you're breaking industry rules."

"It is against the rules and shows a lack of respect for us to contact other investment institutions privately before reaching an agreement with institutions like us that have priority in financing."

In response to Mark's accusations, Bezos gently shook his head. "No, I don't think it's breaking the rules. We only had initial contact, and no substantive agreement was reached."

He realized that one shouldn't be too lenient with these kinds of capital.

Ernst treated them like dogs, and they all wagged their tails and fawned over him.

"Don't forget Bill, Amazon is of strategic value to Goldman Sachs, and I believe Mr. Paulson will support me unconditionally."

Mark's face darkened immediately. As a representative of Goldman Sachs, when had he ever been threatened like this by a company he had funded?

But soon, a young and handsome face appeared in his mind.

But Mark comforted himself: Ernst doesn't count, he's God's favorite.