Some people would jump at the opportunity to sell their startup for eight figures. Not Marc Randolph and Reed Hastings.
During Netflix’s early days, its two co-founders got a call that Jeff Bezos wanted to meet them, Hastings said on a December episode of the “First Time Founders with Ed Elson” podcast. After arriving at the company’s headquarters in Seattle, it was clear that Bezos wanted to buy Netflix to jump-start Amazon’s entry into the video market, Hastings said.
“It never got to, like, a formal offer. It was sort of exploratory,” he added.
The year was 1998, and Bezos’ team offered Netflix “somewhere in the low eight figures” to acquire the company, Make It in 2019. Back then, Amazon was also relatively young — it was four years old, and had debuted on the stock market a year earlier, raising $54 million — but it made a series of acquisitions that year, ranging from other online book retailers to non-book related properties like IMDb.com.
“When someone uses ‘low eight figures,’ that means barely eight-figures. That means probably something between $14 million and $16 million,” Randolph wrote in his 2019 memoir, “That Will Never Work.”
The Netflix founders discussed the pros and cons of selling on the flight back home, Randolph told CNBC Make It. The company wasn’t yet making any money; it didn’t have a repeatable, scalable or profitable business model; and while they were doing plenty of business — mostly through DVD sales — their costs were high.
But both men knew they were “on the brink of something,” said Randolph. Netflix had figured out how to source virtually every DVD on the market, making it “unquestionably the best source on the internet for DVDs,” he said.
They decided on the plane ride that it didn’t seem like the right moment to give up and turned down the deal “politely” as soon as they landed, Randolph said. The decision taught him that when an opportunity comes, you don’t necessarily have to open your door, but you owe it to yourself to at least look through the keyhole.
“We said no and [then] worked our a– off for 20 years,” Hastings said.
In 2000, the duo found themselves in a similar situation with Blockbuster, but this time they were the ones hoping to strike a deal. Randolph and Hastings wanted to sell for $50 million, and CEO John Antioco didn’t take them seriously, even struggling not to laugh at them, Randolph wrote for Vanity Fair in 2019.
“We realized that if we’re going to grow really big, we’re going to have a big fight with them,” said Hastings. “How about we just give them 50% and then help them profit … But they’re a big, serious corporation. We were a bunch of scrappy Silicon Valley kids … They didn’t see any need or interest in buying us.”
Randolph left Netflix in 2003, and Hastings now serves as its executive chairman. Today, Netflix is a video streaming and production company with a market cap of $411.34 billion and, according to the company, more than 300 million subscribers worldwide.