Marc Lore’s Critical Startup Advice: Having sold a $6 Mil, $550 Mil, $3 Bil string of Startups

Marc Lore sold Diapers to Amazon.com and then Jet.com to Wal-mart. Here’s the highlights from his experience.

1) When you get acquired, and you are still passionate about diapers….it’s best to ensure that you are not given your own silo within the acquirer company but rather are allowed to commandeer the part of the acquirer company’s child-care department since you specialize it that are. For example, with Diapers.com, Lore’s team was isolated from the Amazon hierarchy and not able to contribute outside of the shell of the diapers.com brand. This approach was applied for most of Amazon’s acquisitions of note; for example, Zappoos. It’s much better to be integrated or you’ll be isolated.

 

2) Before launching a startup, consider offering customers equity in the firm in exchange for them getting other people to sign up for your service. The catch here is that these customers have to have confidence in the firm’s ability to realize equity gains. The customer that added the most new customers got $1 million worth of Jet.com equity when it was sold to Wal-Mart.

3) Employee salary transparency helps boost the sense of fairness amongst employees. So every employee should know how much every one else is making on their level and should also know how much the CEO and C-Suite staff are making. A sense of fairness is ideal; equality and prevents unconscious gender bias in negotiating salaries that (since there is pure transparency) do not need to happen.

 

4) Get the customer to help buy products based on other products that a logistically available to them in the distribution centre. Imagine you want to buy…diapers, well if the same distribution centre ALSO carries baby tooth brushes, then the system will provide a discount of say 10% on tooth brushes since the customer will be able to select the tooth brush and the diapers in one basket rather than waiting for a lawnmower which is at another distribution centre. This bundling of purchases is customer led and facilitated through discounts that motivate strategic purchasing which drives down the cost of shipping. Brilliance or bullshit, either way Wal-Mart bought Jet.com for $3 billion.

5) Being a CFA is critical to being at the table in negotiating mergers, acquisitions and other deals. Marc Lore worked 7 years in Investment Banking before returning to his roots to start his first company. It’s a critical skill set that anyone serious about leadership in business should consider even if they aren’t going to go into Investment Banking or the like.

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