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Where were you 20 years ago today? If you were Jeff Bezos or a shareholder with enough foresight and confidence to invest in his startup, you were probably celebrating Amazon’s IPO, which raised $54 million — which in turn helped build a $465 billion company.

Let’s not dwell on the buzzkilling numbers of how much money everyone missed out on by not buying Amazon at $18 a share on May 15, 1997. (If you must know, here’s the IPO’s investment banker doing the math). There are two other notable things about this anniversary: how absurd the debate that occurred around Amazon’s IPO valuation looks now, and how similar it is to the debate that is still taking place today.

Amazon initially planned to sell its shares for $13 apiece. Some analysts balked at that price because it valued the company at 20 times sales — Amazon had made less than $16 million in 1996 and had 180,000 customers. There weren’t a lot of internet startups to compare valuations to, so Wall Street opted for brick-and-mortar retailers, which traded around 1 times revenue.

At such a high valuation, some predicted Amazon would have trouble selling its shares to investors. After all, its prospectus warned that “the rate at which such losses will be incurred will increase significantly from current levels, and its recent revenue growth rates are not sustainable and will decrease in the future.”


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Instead of bowing to skeptics, Bezos is said to have spent hours on the phone talking the offering price up to $17 a share. When investment bankers argued the IPO could fail if priced too high, Bezos shot back, “Can you guarantee for me that it will fail at $17?” When the answer was no, he asked the same question about $18 a share.

Amazon shares priced at $18 a share and rose 30 percent on their first day of trading. (Factoring in three stock splits in the late 1990s, Amazon’s offering price was $1.50 in today’s terms. The stock closed today at $957.57.) By the end of 1997, the company had 1.5 million customers and revenue of $148 million.

There were still plenty of skeptics. “Some people smoke internet inhalant and their judgment gets bizarre,” said an analyst at Forrester Research about Amazon’s IPO. The debate raged, growing louder during the wake of the dot-com bust, but quieting in more recent years as Amazon dominated first ecommerce and eventually cloud computing.

In that time, Wall Street has come to accept that Bezos’ plan — shovel today’s potential profits into future revenue growth — could work for Amazon, even if multiple startups since then have tried that same trick and largely failed. Bezos spelled that plan out clearly in his 1997 letter to shareholders, a letter he reprints every single year to underscore Amazon’s early and long-term vision.

We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital.

Our decisions have consistently reflected this focus. We first measure ourselves in terms of the metrics most indicative of our market leadership: customer and revenue growth, the degree to which our customers continue to purchase from us on a repeat basis, and the strength of our brand. We have invested and will continue to invest aggressively to expand and leverage our customer base, brand, and infrastructure as we move to establish an enduring franchise.

What read in 1997 like boilerplate language for an internet startup’s annual report looks, with the hindsight of 20 years, more like a bold business plan. It’s one that Amazon has fiercely and faithfully executed. The success of the plan can be seen in the growth of its revenue and valuation. Even now, Amazon’s stock is trading at 196 times its 2016 earnings. That may still raise some eyebrows, but it’s harder to find skeptics who would be willing to bet a lot of money against the company’s growth.

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