Sequoia’s bet on Zappos

We were surprised at this announcement (Download file) that Sequoia Capital is investing $20 million into Zappos.com, the online seller of shoes. We’ve been following the company’s progress since we first met CEO Tony Hsieh two years ago at his small shop in San Francisco. Anyone who meets Hsieh knows he is ambitious. We thought he’d go it alone — without venture capital — since it looked like he was growing fine just reinvesting proceeds. He’s been doubling revenue year after year since 1999, and expects to surpass $175 million in gross merchandise sales this year.
Our surprise is that Sequoia’s investment comes so late;

Zappos is well underway, and hardly presents a big investment risk anymore. So we’re assuming this means a step toward even more rapid expansion. Michael Moritz will be the active partner from Sequoia Capital and has joined the Zappos.com Board of Directors. Moritz, in a statement, said: “They may sell just shoes and handbags today, but in the long term, the brand will be about the service, not about the shoes. We think there is an opportunity here to create a long-lasting, compelling consumer brand focused on service.”

There’s no great technology story here. This will be about execution. Hsieh recently moved the bulk of the company to Las Vegas.