Marc Lore : How I Sold My Companies to Amazon & Walmart for Billions | E182

0:00Every day, you have to think about the business through a clean slate lens. Like, knowing everything I've learned up until today, knowing all that information, what would be the strategy and the business model going forward? The only way to ensure that you're going to be able to get what I call sixth gear, get into sixth gear with that life or death situation, is to literally put yourself in a situation where you can't fail. What's your advice to everyone out there who's got a family? You said you've got to be all in 100 hours a week. If you're working 100 hours a week, all the hours you have left, you can put in your family.

0:28If you get to the point where you're eating in a muscle, you got rid of all hobbies, all TV, all chores, and you still don't have enough time for family, then maybe you got to figure out a different way.

0:56welcome to in search of excellence my guest today is mark lor the billionaire owner of the minnesota timberwolves serial entrepreneur sold diapers.com to amazon for 545 million dollars and then jet.com to Walmart for$3.3 billion. Mark, thanks for being here. Welcome to In Search of Excellence. Thanks, Randy. Great to be here. We'll get to the pit in a second, but I want to focus on you were head of risk management at San Juan when you left, executive vice president. You were exhausted and you quit without having another job. Is that craziness? It's pretty crazy. Yeah. Looking back, that was crazy.

1:33It's not something I'd recommend to my daughters to do, But it is consistent with this idea that when you're an entrepreneur, you sort of leave no escape hatch open, no plan B. You sort of just go for it where you can't afford to fail. And so I had a baby at the time. I'd saved some money in banking, invested all that money into the new startup and couldn't fail. Basically, in any startup, if there's an easy out, I think people sometimes just take it. It's hard. It's very hard. So the only way to ensure that you're going to be able to get what I call sixth gear, get into sixth gear, it's that life or death situation, is to literally put yourself in a situation where you can't fail.

2:14And that's what I've always done. Even now, I've put myself in these situations. My goal before we started our tech company was I wanted to put money away. So, and I figured my nut was 40K a year. So I worked at Sun America. I was the assistant to the chairman. It's a great job, stock options. number one performing stock on the New York Stock Exchange for one, three, five, and seven-year period of time. The problem was there were a lot of young people who had been there five, six, seven years. They were worth tens of millions of dollars. So there was nowhere for me to go. Okay. And so I figured, all right, I got 10 years to make something of myself.

2:51And I left when I was 30 years old. And I figure, okay, this is crazy, but I'm going to commute to a Boston unfunded, untested, unproven company with no CEO, sleeping on friends' couches. And it worked. You started the pit when you were 28 years old. You raised$4 million, and 10 months later, you sold it to Topps for$5.7 million. It was the first time you really raised money. Yeah. No institutional, though. All angels. So for everyone listening, the entrepreneurs out there, what did you do to raise your first round of capital from investors? Who did you go to? So I didn't know anybody with money.

3:28It turned out 80 investors put in about 50 grand each. 80? 80. That's a lot to manage. 80, 50 grand. I think the biggest investor might have been 250, and the smallest was like 10 or 25 ,000. I think it was 10 ,000. By the way, for everyone listening, the smallest investor is usually the biggest pain in the ass. Always. Always. Even to this day. Yeah. Even to this day. But how it started was, because people say, oh, you must have known people with money. I didn't know anybody with money at that time. My boss at San Juan Bank, who thought I was absolutely insane to just quit to do this, was like, no, I feel like there's something you know that I don't know here because you're quitting this incredible job to go do this.

4:09You've got an incredible drive. I like to invest 50 grand in this. So that was my first 50 ,000 was from my boss, Jerry Goldstein at San Juan Bank. I said, great, Jerry, 50 is great, but I need a lot more 50s. Do you know anyone? This is what I always tell people, anybody invest, but they don't invest. Do you know anyone? He gave me two friends of his and I went to see them. I don't remember where they invested or didn't. I think one of them did when one of them didn't. But the one that did, I asked for two friends. And the one that didn't, I asked for two friends. I probably pitched 250 different individuals and got 80.

4:45So that was a pretty good hit rate. It was like one in three. Institutions are not that way, but angels are a little easier than institutions. but the reason why I was able to get such a high rate and do it is because I was putting my own money into it. So I'll never forget one investor is like, no, I'm not interested, but I'm just curious how much are you investing in your own money? I said, oh, yeah, 390 ,000. And he's like, wow, that's a big number for someone your age. Okay. Wait, sorry. Why do you say 390? Why didn't you invest 400? I said, oh, because I only have 390 ,000 in my account. He goes, you put your entire life savings in this?

5:22I said, yeah. And I'm prepared to mortgage the house too, if I need to. And that switched him. He went from a no to a yes right there. And I realized how powerful that line was. So I always started with that with investors. Hey, just so you know, I'm putting my entire life savings in this. And that was really the catalyst. And I think too many entrepreneurs are afraid to take the risk, but they say, okay, putting the 390 ,000 in, And that's too risky. But what I, and I'm actually writing a book about this, but it's how taking risk reduces the ultimate risk. It's actually less risky because by putting the$390 ,000 in, I just increased the probability of getting the funding.

6:00And we all know companies that don't make it, they don't make it because they don't have funding. And so if you can actually reduce the risk of getting funded by taking risk, you can argue that you're better off. And I've always done that. Even now, I'd wonder, I'm putting an extraordinary amount of my own money at risk to reduce the risk of the company not working. I hope you're enjoying this video so far. But before we jump back in, I want to know if you've ever thought about what you need to do to reach the next level of success in your life. Over the last 25 years, I've been an advisor to more than 50 companies.

6:34I've invested nearly 100, including Google Lyft and Seagate. And I also co-founded a company that today is worth more than$15 billion. I've been incredibly blessed in my journey. And at this stage of my life, I want to give back. I want to share the lessons I've learned so you can reach incredible success way faster than I did. In my own journey, I've learned that having the right mentor is a massive advantage to achieving our goals. I'm hugely passionate about mentoring others. I'm looking for a few hungry entrepreneurs who are excited to take action on their journey to incredible future success.

7:04So if that's you, I've got an opportunity. In the description of this video, there's a link where you can apply to work with me. All you need to do is answer a few simple questions. And if you're a good fit, my team will reach out so we can build a game plan together. All right, now let's get back to the video. I'm sure this has happened to you, but I've probably taken over the last 20, 25 years, 500 or 1 ,000 in-person pitches. And it's not like I'm going to meet with all the people who contact me, right? There's some due diligence and screening that goes on. And I think all but maybe a handful of five people.

7:33Yes, people come in, I'm experienced, I made money, this is my third sale. And then you got guys or women in their 30s or 40s, they come in, yeah, look at what I've done. And then they're raising money and said, how much of your own money are you putting in? Oh, no, my sweat equity is my money. I said, no, it's not. Your sweat equity is not your money. If you're not eating your own cooking, I'm not eating your cooking either. Akamai, we raised money, I'd say$400 ,000. And I put in$100 ,000 of my own money. And people thought I was paying for our own wedding, I was engaged. And I thought, oh, gosh, you know, people thought I had lost my friggin mind.

8:18And it ended up being a very good investment at the end of the day. And what I tell people all the time coming in, even young entrepreneurs, because I'll say, you're coming in to me asking for my capital, right? You're asking, I'm a fiduciary of this capital. So I want to know how much of your money are you putting in? I have not met with a single entrepreneur under 30 years old, even with a successful exit, who's put in a penny of their own capital. And it scares me. By the way, investors will fund it all day long. Most of these companies, I'd say - No, I love though. I mean, the idea of having your own money at stake is a different level motivator.

8:59Every single company, I think, would have failed had I not had this sort of like, this can't fail mentality, had my own money at stake. So, yeah. You got a great new idea. You're threatening an incumbent. Dropbox starts. Steve Jobs tries to buy Dropbox. Drew Houston says, no way. And Steve says, I'm going to crush you. You've got this diaper site, 1-800-DIIPERS. Great name. You've got to get a great phone number. Phone number is huge. And then Jeff Bezos comes along and says, I'm going to undercut you. We can be a loss leader. We have a lot more product than you do. And what was your reaction when you heard Jeff Bezos is going to try to crush you?

9:43And then here you go. You turn around and he buys a company for$545 million, 500 in cash, 45 in debt. Not that long after that. Yeah. I mean, first of all, even though that was life-changing money at the time, because that was the first real exit, it was a very depressing day, because it put so much time, just mental energy into wanting to build something great, and to be sort of in a position to force basically to sell it was, yeah, it was really depressing. And even though it was life-changing money. You had a lot more runway to go. Yeah. And it was life-changing money. I mean, it was never had to work again kind of money.

10:24And it didn't matter. It was literally my co-founder, Vinny, best friend. After the sale, we're like, should we celebrate? He's like, you want to? No. Me? I don't want to either. Right. So at that point, I really learned the difference between a mercenary and a missionary in terms of why we were doing this. It was so clear it wasn't about the money. because if it was about the money, I mean, it was like crazy money at the time to be made. And we weren't even wanting to celebrate the exit. I still think back to what could have been, you know, had really the issue was Amazon had spooked investors.

11:03Investors didn't want to invest in us because they knew Amazon had clearly targeted us with the 30 % off diapers, which was sort of crazy at the time. When Walmart came in with a last minute bid of$625 or$650 million, did you say, I mean, could you have gotten out of the deal with Amazon and taken the extra$100 million? So why didn't you do it? Because if there was any adverse change in the business, Walmart could have walked away. And we thought that there would be an adverse change because Amazon would have, yeah, they might have done some stuff. So, yeah, so we took$100 million less. Amazon shut down the business years later.

11:50You stayed for a couple of years. You left. Then they shut down the business, I think, six years later. Painful? No. No. I think the pain was already in what I call selling out. You know, it was sort of, there wasn't any pain when they shut it down. One of the interesting things that you did at the time, you were at the forefront of technology. There was something called Kiva Robots that has been revolutionary for e-commerce warehouse type businesses. It was developed by a nuclear PhD who had written some crazy software. were. Amazon had bought the company two years after you were using it for$775 million.

12:34Great acquisition, clearly. How important were those robots in your success of the business? And where do you see technology going today in the e-commerce business besides AI and then including AI? So I think at that time, it was revolutionary. This idea that robots, you know, in a big warehouse with millions of products, having somebody go fetch a product and bring it back and put it in the box. It was very expensive. The idea of the Kiva Robots was, what if the product was being brought to you? And it would not bring just a product, but the whole shelf. The robot would slide under the shelf, lift it, and then bring the shelving unit.

13:10So you can stay in one location as a picker and just pick off the shelf. The shelf would disappear. A new shelf would drive up. And so it was very revolutionary. And I think maybe in part due to the reason why Amazon was interested in what we're doing, because we were extremely efficient on the logistics side. Where it's going in the future, I think conversational commerce is the future of retail, no question. The idea that you would just be talking to AI and it would be the most knowledgeable person you've ever talked to about that specific product, like on a showroom floor of a retailer. AI would know you like your best friend does or your parents or whatever.

13:49I mean, and you would just converse, say what you want. And then in the future, I think, just see hologram images of the products and be able to see it right there. We're not quite there yet, but I think that's all coming. I think certainly conversational commerce is going to blow up in the next decade. And then hologram displays of the products. This idea, and I've said it many years ago, this idea that you would put a product in a search engine that you're looking for and see all these results and scan through them, that's going to go the way the cassette tape. That's not going to be part of our future.

14:21Explain that a little bit more. Like when you go into a search engine, you go into Amazon or Walmart and you type in black boots or whatever, and then you just get this list of thousands of black boots and you're sort of going through them and trying to figure out and reading the descriptions and things. You won't be typing in black boots like that. You'll just be using your voice and just saying, I'm looking for a pair of black boots, but much more personalized. We'll know the kind of boots you typically like or shoes or the outfits you typically wear and we'll be able to have a conversation about it.

14:58No, I don't like those. Those are a little bit too high. Do you have something lower? Good. Actually, let me see if these fit. No, these are a little tight.

15:11Let me on how to purchase. It'll be much more personalized that we won't be having to weed through tons and tons of stuff because your own personal AI will know your look. So 10 years ago, you're 42 years old and you started a company called Jet.com and your fundraising prowess continues to raise$820 million. And 28 months later, Walmart buys a company for$3.3 billion. Scale works until it doesn't work. So what happened there and how were you able to sell a business that ultimately in Walmart's hands didn't work and they shut it down a few years later? Well, this was a different situation than the Amazon sale in that we were actually very excited about this sale because it wasn't selling out.

16:01When I say selling out, But I mean, really, you have a vision for what you want to create. And then when the vision is no longer valid, I call that selling out because you had a vision and now you can't pursue the vision. With Walmart, they said, how would you like to continue to pursue the exact vision you had for Jet, but do it with the resources of Walmart? So, Mark, we're going to give you the keys to be CEO of Walmart e-commerce. and you bring Jet and Walmart e-com together and create a real formidable e-com company. We'll give you capital. You'll have access to like 3 ,500 retail stores, which is a big advantage.

16:41We're the number one grocer in the country. So it was very exciting. You know, it was, even though the company was sold in the sense that the shareholders were no longer, in terms of my personal passion and the team as well, we were even more motivated because we had all the resources of Walmart behind us. And so it was my decision in the case of Jet to merge Jet and Walmart Ecom together. It didn't make sense to have two separate brands. And so we could put all the resources together on one brand. And it was a fantastic run. I was there for four and a half years and learned a ton. And yeah, we did some pretty good stuff, the team.

17:26Tell everybody what it's like to actually sell a company for$3.3 billion. I think people read, oh, we had a sale on Doug McMillan. I think it was the CEO at the time. Just comes in and says, hey, Mark, let me write you a check for$3.3 billion. What was the first bid? And then how long did it take for you to actually negotiate that price? Where did he start? Well, I think he asked, if I remember correctly, sort of what we were looking for. And now he came to you individually or you had bankers that were working with you? There's no bankers. I've never used a banker in diapers or jets. So it was just me.

18:03I think the initial meeting with Doug was just talking about how maybe we can work together. Maybe they can invest in us. Maybe we can help them. It was just sort of a more strategic conversation. And we continued to talk. And then I think we both realized maybe it'd be more fun to do this together and join forces more officially. And so I think he asked if we'd be open to that. And I said, we would. And he asked what price we were looking for. We had raised around, I think it was a$1.6 billion valuation roughly, post-money, the previous round. And I thought, if we're going to sell, it should be a nice markup from what we had just raised.

18:47So I think I proposed$3 billion to Doug. I worked at Sun America. Eli Broda was my boss. I was technically in the Corp Dev Group. That was my main job where we would go out and we'd look for companies. And then it starts with this L. Goldman was our banker. So they come in, they do the whole pitch. These are eight companies. And, you know, who do you want to meet with? And Sun America was a highly profitable company. So it was hard for us to pay out and not to dilute earnings. and at some point, you know, said, okay, I want to meet with CEO of Conceco, which was a competitor in the business or First Colony was a competitor.

19:25So it started with a phone call and then someone goes to meet someone in person. So how does that actually work? Is Doug calling you because he's interested or are you meeting him at some conference or, and then who goes to who first? Yeah, I think I, well, I think I went to him multiple times, had the first discussion on strategy, went ahead a second, third, and he introduced some people and stuff. So yeah, it was me going to see Doug. I think at some point he came when we sort of had a sort of tentative deal, then he came and met some of the folks and things on our side. I don't know exactly when he came to Jet, but I had a few conversations with him before that.

20:05So let's talk about Wonder, which is nine years old. You've raised - Uh, seven. Seven years old. Seven. Okay, so you've raised a ton of money again. You're the fundraising king. And the valuation of the company today is reportedly$7 billion. You started one way and then you pivoted$100 million, say, okay, that doesn't work. I'm now going to do this. Tell us about Wonder and what the pivot is and how critical it is for entrepreneurs to listen to customers, know what's working and not have their blinders on.

20:45I hope you're enjoying this video so far, but before we jump back in, I wanna know if you've ever thought about what you need to do to reach another level of success in your life. Over the last 25 years, I've been an advisor to more than 50 companies. I've invested nearly 100, including Google Lyft and Seagate. And I also co-founded a company that today is worth more than$15 billion. I've been incredibly blessed in my journey. And at this stage of my life, I want to give back. I want to share the lessons I've learned so you can reach incredible success way faster than I did. In my own journey, I've learned that having the right mentor is a massive advantage to achieving our goals.

21:17I'm hugely passionate about mentoring others. I'm looking for a few hungry entrepreneurs who are excited to take action on their journey to incredible future success. So if that's you, I've got an opportunity. In the description of this video, there's a link where you can apply to work with me. All you need to do is answer a few simple questions. And if you're a good fit, my team will reach out so we can build a game plan together. All right, now let's get back to the video.

21:40Yeah, that is probably one of the hardest things to do and one of the most important as an entrepreneur. Every day to think about the business through clean slate lens, like knowing everything I've learned up until today, knowing all that information, what would be the strategy and the business model going forward? It's easier said than done because you sort of get tunnel vision. And so I think the first few years I wasn't at the company. We had this vision for a vertically integrated food delivery platform. The way to vertically integrate was rather than cook and then deliver, it was deliver then cook.

22:15That was the idea that could we in the back room of a Mercedes Sprinter van have the driver pull up in front of somebody's house and be able to cook a Bobby Flay steak in six minutes to perfect temp and bring it to your door hot. That was the idea. I think it was a great idea and customers absolutely loved it, obviously. It was cooked outside your door. We invested a lot of money in the technology to be able to cook fast in a small space like the back of a Mercedes Sprinter van, high quality food. So that's where all the investment in the first few years went. We had 450 trucks on the road. It's about$100 million worth of trucks on the road.

22:55Customers were loving it. The economics were definitely challenging. We still saw a path to this model working, but it was heavy cat backs, hard to find parking. Bathroom breaks were actually a real issue, believe it or not, because you couldn't afford to like in the middle of peak, just go and try to find a bathroom for somebody. So that was an issue. And then right around the time that I joined as CEO, which was end of 22, been about three years now, at the end of 22, we had just tested a brick and mortar. Because we built this technology to cook in a really small space, we thought, what if we put all 30 restaurants that we had into one small kitchen?

23:35We set a tight delivery radius to see if we set a tight radius and we cooked it and gave it to a courier. Could we get it to people's house where it was hot and not that much different than being cooked outside your door in terms of being able to hold the heat and customer scores? What we realized is, yeah, we can get it there fast enough that there wasn't any degradation in food quality. But more importantly, multi-restaurant ordering was unlocked, which was a big thing. People can now order from multiple restaurants and get one delivery because it's coming out of the same kitchen, whereas the trucks were individual restaurant per truck.

24:10So that was a big customer unlock. It was more reliable, believe it or not, as well, because the trucks had some level of volatility, whereas the brick and mortar, you can understand the throughput and kind of where you were. And then more importantly, the brick and mortar can go to urban, suburban, rural, bigger TAM, much lower CapEx per revenue dollar and more profitable. And there's no bathroom issues and there's no parking issues. So it was a superior business model, but we had three weeks of data, burning a lot of cash. I came in as CEO and had to take the lesson I just gave on clean sheet.