Zappos CEO Tony Hsieh

Amazon.com's announcement last year that it planned to acquire online shoe and apparel retailer Zappos was followed by a report in peHub that Zappos investor Sequoia Capital had been pushing for a sale while Zappos CEO Tony Hsieh preferred to stay independent. Shortly after, Hsieh issued a statement stating unequivocally that "Nobody was forced to sell to Amazon." Now Hsieh, in an article adapted from his new book "Delivering Happiness," gives a more nuanced account of the behind-the-scenes maneuverings that preceded Zappos' sale to Amazon, making clear there was some friction over whether to sell.

In the article on Inc.'s website, Hsieh writes that after a second approach by Amazon in 2008, "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, a Silicon Valley venture capital firm. As with all VCs, Sequoia expected a substantial return on its investment -- most likely through an IPO. It might have been happy to wait a few more years if the economy had been thriving, but the recession and the credit crisis had put Zappos -- and our investors -- in a very precarious position.

Later Hsieh writes:

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.

Hsieh says he and Lin came up with the idea of buying out the board. But he later flew to Seattle to meet with Amazon CEO Jeff Bezos, and "left Seattle pretty sure that Amazon would be a better partner for Zappos than our current board of directors or any other outside investor," adding that, "With Amazon, it seemed that Zappos could continue to build its culture, brand, and business. We would be free to be ourselves."

Amazon ended up acquiring Zappos in a mostly stock deal valued at $1.2 billion when it closed in November last year. I recently looked into how Zappos and Amazon are fitting together since the acquisition.

PeHUB has its own take on Hsieh's article on the Amazon deal.

Interestingly, Alfred Lin is leaving Zappos to take a position at Sequoia Capital in 2011.

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