Amazon to buy VC-backed Zappos in $900m deal

The US’ biggest online retailer has agreed its largest-ever add-on deal with Zappos, whose backers include VC firms Sequoia and Venture Frogs and direct secondaries firm Millennium. has revealed it plans to purchase Zappos, a venture-backed online shoe retailer, with 10 million shares in Amazon stock valued at roughly $807 million.

That transaction value is based on Amazon’s average closing price over the past 45 days, though tech-focused blog TechCrunch has estimated the deal is worth closer to $880 million given yesterday’s closing price of $88.79 per share. In addition to acquiring all of Zappo’s outstanding shares, options and warrants, Amazon will also give Zappos employees $40 million in cash and and restricted stock.

It is the largest-ever acqusition made by Amazon, which was founded in 1994 with venture capital from firms including Kleiner Perkins Caufield & Byers and Madrona Ventures. Companies Amazon has bought in the past include movie databse IMDb, audio bookseller and Chinese shopping portal

I personally would prefer the headline 'Zappos and Amazon sitting in a tree…'

Tony Hsieh

Since its founding 10 years ago, customer service-focused Zappos has attracted the backing of VC firms including Sequoia Capital and Venture Frogs, the latter of which was co-founded by Zappos chief executive Tony Hsieh.

TechCrunch estimates the company has raised roughly $60 million across seven funding rounds, while the Wall Street Journal puts the figure closer to $45 million. Following the 2005 Series F round, Sequoia had poured roughly $35 million into the company for a 10 percent stake, the Journal reported, noting Sequoia’s current position is unclear.

Zappos: Amazon target

Zappos has more than 100 investors, which also include venture veterans Draper Richards and direct secondaries specialists Millennium Technology Value Partners.

“You will probably read headlines that say ‘Amazon acquires Zappos’ or ‘Zappos sells to Amazon’,” Hsieh wrote in a letter to Zappos employees yesterday. “While those headlines are technically correct, they don’t really properly convey the spirit of the transaction. (I personally would prefer the headline ‘Zappos and Amazon sitting in a tree…’).”

He stressed the company would continue to operate as it has in the past. Its management team will remain in place and Zappos will expand its brand, rather than being folded into Amazon.

The deal is expected to close in the fall.