An Amazon war story helps provide executives with hints as to how best to navigate today’s economic environment.
The dot-com bubble burst of 2000, and Amazon’s strategy to stock and hoard cash, is indicative of what today’s eCommerce businesses should be doing.
Bezos and Amazon not only survived but flourished in the wake of the tech disaster. How?
Amazon established a cash cushion, and raised money at just the right time—only a month before the crash—which helped insulate the company from further financial exposure.
Former Amazon CFO Warren Jenson decided the company needed a stronger cash position as a hedge against the possibility that suppliers might request more favourable payment terms.
Tapping into overseas markets, Amazon sold $672 million in convertible bonds to investors, even as the global economy teetered on the brink of recession.
Sure, Amazon was already changing e-commerce while converting traffic to dollars. Moreover, its revenue growth and cash conversion cycle indicated it had a working business model—a delight compared with the basket of other dot-coms whose CEO’s were, according to many accounts, spending VC money on lavish parties, sex workers, and private jets (not kidding).
But most of what made Amazon into the behemoth we know today—namely, Marketplace, Prime, and Amazon Web Services—was invented after the bubble.
Suffice it to say, without Jenson’s bond issue, Amazon might not be here today.