In 1994, Jeff Bezos was a senior vice president at a successful Wall Street hedge fund. He came across a statistic that stunned him: the internet was growing by 2,300% per year. This explosive growth was an opportunity he couldn't ignore. He made a list of 20 product categories that could be sold online and quickly narrowed it down to books. Books were a perfect starting point. They are pure commodities—a copy of a book in one store is identical to a copy in any other. Plus, the sheer number of titles available meant no physical store could ever stock them all.

Bezos left his high-paying job, packed up his life, and drove from New York to Seattle. The decision to base the company in Washington wasn't random. The state had a small population, which meant Amazon would not have to collect sales tax from most of its customers in the early days. It was also close to a major book distribution warehouse in Oregon and had a large pool of tech talent, thanks to companies like Microsoft.

On July 16, 1995, Amazon.com went live. It was billed as "Earth's Biggest Bookstore." The website was simple, but the concept was revolutionary. Within 30 days, Amazon had sold books to people in all 50 U.S. states and 45 different countries, all from Bezos's garage. This early success was a clear sign of the massive, untapped potential of e-commerce.

Amazon grew at a breakneck pace, and to fund this expansion, the company went public. The initial public offering (IPO) took place on May 15, 1997. The initial stock price was $18 per share (or $1.50, adjusted for later stock splits).

While the IPO provided a crucial injection of cash, the path forward wasn't smooth. The late 1990s were the height of the dot-com boom, a period of wild speculation on internet-based companies. When the bubble burst in 2000, hundreds of online companies went bankrupt. Amazon's stock price plummeted from a high of over $100 per share to less than $6.

Critics and investors were skeptical. They questioned whether Amazon's business model, which prioritized growth over profits, could ever be sustainable. Bezos famously told shareholders to "get big fast," but the mounting losses worried many. The company was burning through cash and faced intense pressure to prove it could survive.

Despite the market crash, Amazon focused on efficiency and customer experience. It refined its logistics, opened new fulfillment centers, and relentlessly worked to lower prices. This strategy paid off. In the fourth quarter of 2001, Amazon reported its first-ever profitable quarter. It was a modest profit of just $5 million on revenues of over $1 billion, but it was a monumental achievement. It proved that an online retailer could not only survive the dot-com bust but also become a profitable, long-term business.

Let's review the key terms from this early period.

Now, test your understanding of Amazon's founding and early challenges.

Amazon's survival of the dot-com crash and its first taste of profitability set the stage for its future expansion beyond books into the "everything store" it aimed to be.