In Our Thoughts

Lessons from the Early Days at Zip2 and Amazon

Venture Partner at LaunchCapital, Stefan Pepe is one the country’s go-to leaders for high-growth technology and consumer-facing digital companies.  

But before serving as CEO and senior leader at many of our favorite technology companies, Stefan grew up early in his career with experiences working for Zip2 (Elon Musk’s first company), then for Amazon as an early employee and then an executive.

I asked Stefan to reflect on what he’s learned about building and leading great teams from these experiences, and how it influences what he looks for in investments today.

Hint: it’s all about people holding the highest bar.

Zip2 – The Vision to Attract Great Talent

“I had the very good fortune early in my career to have worked at Elon Musk’s first company Zip2. We were helping media companies such as the Boston Globe, The New York Times and Knight Ridder newspapers develop local digital guides for arts & entertainment, real estate listings, yellow page listings, etc., enabling them to connect with their customers who were moving online and to leverage the newspapers strong local sales forces to grow their digital offering.

Zip2 wouldn’t have been successful without the strength of the team. Even early on, it was clear that Elon was a driven, visionary leader and he really helped the company to attract and to build a world-class team.

While a key part of any company’s success is to build great teams by identifying  and onboarding talent, in my experience, the ability to do that effectively is the result of of having a strong leader who has a clear, articulated vision for the company. (Obvious examples include Amazon, Apple, Facebook, Microsoft, SpaceX and Tesla.)

Elon and the Zip2 leadership team were able to attract, recruit and retain great talent which was a key to the success of Zip2.”

Amazon – The Importance of Raising the Bar

“I was at Amazon for over ten years starting in 1998 and am very fortunate to have had the opportunity to grow as a business leader at Amazon. Jeff Bezos and the Amazon leadership team always set and held the bar incredibly high on performance — and I think that is what has ultimately led to the company’s success today.

There are several reasons why holding the bar high is important:

First, if you aim to develop high-performing teams, it is important to recognize that high performers need to be challenged to take the next peak. In some ways they are like world-class athletes — they have really high expectations for themselves and they respond to audacious goals and will go and try to exceed those goals. They might not always hit them the first time out, but they are constantly working and figuring how to get there. High performing teams are no different — you should build your company around that mindset and set the performance bar really high.   

Second, you need to continuously raise the performance bar to meet and exceed evolving customer expectations. When I joined Amazon in 1998, customers were delighted when they could click on the buy button and a week later a book would show up at their door. Fast forward a few years, and customers would be contacting us 24 hours after making a purchase saying “where is my order?”  So, the performance bar we set to fulfill our mission to be “earth’s most customer centric company” created higher customer expectations which reset the performance bar higher again, creating a virtuous cycle. As we focused on delivering the very best customer experience, and did that successfully, customer expectations started to evolve. Hence, we had to constantly raise the bar not only internally, but also with the understanding that our performance bar was being raised by our customers.

Third, rapidly evolving customer expectations coupled with the speed of innovation, requires teams to continuously adapt and meet new performance challenges. As an example, in 1998 when I joined Amazon, we sold primarily new, physical books to customers off of our website and 10 years later we offered new, used, digital audio and Kindle books to customers from a single product detail page (not to mention that we also offered customers around the world products from over 50+ additional categories too!) At the same time we had to adapt our marketing focus to Google search, Facebook & social and iOS and Android mobile channels. And to meet evolving customer expectations, the company introduced Amazon Prime, Amazon Publishing and Amazon Studios, as well as AWS and Alexa, to name a few!

Had Amazon not been maniacally focused on continually raising the bar, they would not have been able to grow, innovate, meet, and exceed evolving customer expectations.”

The Influence on Stefan’s Investments

From these experiences, Stefan developed a belief that once he determines the idea he’s evaluating has some merit, he pivots to focus most heavily on the people and the team, and asks himself particular core questions. Here’s the checklist he shared with me.

  1. Can the founder articulate a clear, compelling vision for the future — not only for the company but for the industry she or he is operating in?
  2. What evidence do I see that the founder is incredibly driven?
  3. What is the level of people the founder has been able to recruit to join the team?  Many investors focus first on how they got their customers — I ask first how they got their team members.
  4. How does the founder/CEO think about coaching and developing their team members?
  5. What is evidence that the founder/CEO continuously raises the bar?

What I learned from Stefan: certainly the product and plan needs to make sense. But since so much changes in a startup — it’s whether the founder/CEO can do the above 5 things that makes the difference in realizing outsized returns.

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