Jeff Bezos told what may be the best startup investment story ever

Amazon founder Jeff Bezos has made a lot of money for people who bet on his company over the years.

But Bezos told an amazing story in San Francisco on Friday about the first brave souls who invested in Amazon two decades ago.

According to Bezos, the first 20 or so outside investors in Amazon put in around $50,000 apiece for a stake of a little less than 1% of the company at the time. If those early investors had held on to their entire stakes, and those stakes had never been diluted by later investors, they would be $3.5 billion today - a return of 70,000x.

Bezos also said that previous to that, his parents both chipped in a significant portion of their life savings, which worked out very well for them. "It couldn't happen to two nicer people," he said on stage at the Vanity Fair New Establishment Summit.

He explained that the venture capital scene was very different in 1994 when he first started raising money for Amazon.com, which at the time was positioned as a mere online bookstore.

About 20 to 22 investors put in small checks of about $50,000 apiece, he said, for a total seed stage investment of around $1 million. In exchange, those combined investors got about 20% of the company. Most of those investments happened through 1995 and 1996.

Richard Brandt's book about Amazon, "One Click," offers a few more details:

"A Seattle-based stock broker named Eric Dillon was interested in investing, but thought the valuation Bezos had put on the company - $6 million - was pulled out of thin air, until Bezos sat down with him to show how much other Internet companies were trying to raise. Dillon talked Bezos down to a $5 million valuation and put in some money. A Seattle businessman named Tom Alberg was impressed with Bezos's projection that Amazon could turn over the equivalent of an average bookstore's inventory 20 times a year, compared with 2.7 times for most bookstores - with details to back up the claim.

"In the end [Nick] Hanauer managed to get some commitments by making the first investment himself. Others followed, and by the end of the year another twenty investors kicked in money, most of them around $30,000 apiece. Bezos raised $981,000."

Later, in June 1996, Amazon raised an $8 million Series A from Kleiner Perkins, and that was its only VC investment before going public.

When Amazon went public in May 1997, the only one of those three early investors whose name was on the S1 was Tom Alberg, who is still director of the company, as well as managing director of VC firm Madrona Ventures. He owned 195,000 shares at the time. Amazon has split its shares three times, all in 1999, so those shares today would be worth about $1.9 billion.

Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.