News & Media

Eduardo Gruener on Amazon in The Virginian Pilot

AUGUST 2018

Jeff Bezos’ Parents May Have Made the Most Successful Venture Investment of All Time

In 1995, the parents of Amazon founder Jeff Bezos, Jackie and Mike Bezos, invested $245,573 into their son’s fledgling e-commerce website, according to a prospectus two years later. One IPO and three stock splits later, his parents’ stake could be worth almost $30 billion today, according to research by Bloomberg.

While Bezos’ parents were rewarded with exceptional returns for backing their son, it didn’t come without significant risk. GFG Co-Founder Eduardo Gruener commented to The Virginian Pilot, explaining the “heightened consequences of such extreme individual company exposures.”

Gruener also pointed to the fact that companies like Amazon don’t come around every day – and if they do turn out to be a success, it doesn’t happen overnight. “Extraordinary returns don’t come around often” said Gruener. “Replace Amazon with nearly any other name in the market, and the ending may have turned out as a nightmare.”

Bezos’ parents were dully warned before they bought in, however. “I want you to know how risky this is,” the son told his parents, “because I want to come home at dinner for Thanksgiving and I don’t want you to be mad at me.”

Recently we discussed in one of our commentaries the concept of an “overnight success,” when individual companies outpace the market considerably over various time frames. Here’s an excerpt specific to Amazon:

Amazon might seem bulletproof today, but the drawdowns the stock has experienced are some of the most extreme we’ve seen in recent history. Between the company’s IPO (1997) and the end of 2016, the stock tallied at least one double digit decline in the calendar year. Over the last twenty years, the steepest drawdown from the previous all-time was 94.4% in September of 2001. If you read Jeff Bezos’ letter to investors in 1997 and were fully onboard, you’ve been rewarded 120,651% vs 309% for the market1. But it wasn’t free, it wasn’t gradual, and it certainly wasn’t overnight.

The bottom line is this: success stories (like Amazon’s) don’t happen overnight, and they certainly don’t come without their fair share of volatility. But, if an investor believes in the company’s vison and has the stomach for potentially significant drawdowns, they could be along for a long, rocky yet potentially very rewarding ride.

To see the full article in The Virginian Pilot, click here. To read our full commentary on “overnight successes,” click here.

SOURCE: 1 Data provided by Bloomberg