Tony Hsieh Comes Clean… One Year Later

People typically react in one of three ways after we publish something they’d rather keep secret: (1) No comment; (2) Confirm and spin; and (3) Deny, deny, deny.

But now there is a fourth path: Deny loudly via an official statement to other news outlets (who accept it as gospel), and then admit the truth nearly one year later.

The culprit here is Zappos CEO Tony Hsieh. When his company agreed last July to be acquired by Amazon, peHUB reported the following:

“The decision to sell hot online shoe retailer Zappos to was more in line with the interests of Sequoia Capital than the company’s CEO, according to two sources close to the company… [Sequoia’s] Moritz and Zappos CEO Tony Hsieh came into conflict about the company’s future. Moritz, the sources say, wanted Zappos to sell while Hsieh wanted to remain independent.”

Hsieh responded swiftly with a statement that read, in part:

“The articles and rumors of Sequoia forcing us to sell are simply not accurate. Nobody was forced to sell to Amazon. The Zappos board was united in believing that joining forces with Amazon would be in the best long term interests of our employees, customers, shareholders, and other stakeholders. The Amazon deal got us the best of all worlds: we can continue to run independently and grow the Zappos brand and culture, our small and larger investors are getting rewarded for all their contributions to Zappos over the last decade, and we don’t have to deal with the headache and overhead of running a public company.”

To be clear, we had never reported that Sequoia “forced” anyone to sell (as Alex explained at the time). We said there was a disagreement and that Sequoia’s initial preferences ultimately won out. But that distinction didn’t much matter, and a bunch of folks publicly accepted the party line (including The NY TimesWSJ and some prominent VC bloggers like Bill Gurley).

So imagine my surprise this morning, to read an article by Hseih titled: Why I sold Zappos. In it, he basically confirms everything we had reported (plus some stuff we had held back, after being unable to double-source). Here’s an excerpt:

“But then Amazon came calling again:

As before, our plan was to stay independent and eventually go public.
But our board of directors had other ideas. Although I’d financed much of Zappos myself during its early days, we’d eventually raised tens of millions of dollars from outside investors, including $48 million from Sequoia Capital…

By early 2009, we were at a stalemate. Because of a complicated legal structure, I effectively controlled the majority of the common shares, so that the board couldn’t force a sale of the company. But on the five-person board, only two of us — Alfred Lin, our CFO and COO, and myself — were completely committed to Zappos’s culture. This made it likely that if the economy didn’t improve, the board would fire me and hire a new CEO who was concerned only with maximizing profits. The threat was never made overtly, but I could tell that was the direction things were going…

I left Seattle pretty sure that Amazon would be a better partner for Zappos than our current board of directors.”

It’s great that Tony has finally decided to tell the story behind the story. My only regrets are that he waited so long, and that he chose to implicitly smear us in the process.

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