Executive Interview: Mark Vadon, CEO Blue Nile Marty Ritchie Shannon Hughes February 15, 2002

Blue Nile Background Blue Nile created to offer best-quality diamonds and fine jewelry at reasonable prices Education and easy buying over Internet Education and easy buying over Internet Bought out small company in SeaTac Attracted $57 million in venture capital funding Peaked at 132 employees in 2000 Currently 82 employees, $50 million in revenue and profitable last quarter All work “in-sourced” All work “in-sourced” Receives positive press as an Internet company doing thing right Great customer service and quality merchandise Great customer service and quality merchandise

Mark Vadon Biography Co-founder who leads Blue Nile as CEO Prior to Blue Nile, Vadon was consultant for Bain & Company, a worldwide strategy consulting firm Extensive experience in brand marketing, strategic planning, and mergers and acquisitions Bachelor of arts degree, magna cum laude, in social studies from Harvard and MBA from Stanford Stumbled upon Internet Diamonds on search for engagement ring. Put together the company as “a deal transaction” then later realized he needed to run company as CEO

Leadership Style Hires the best people CEO/COO/CFO trioka CEO/COO/CFO trioka Gives people room to run – asks questions Lets employees make decisions Lets employees make decisions Spends 20% of time with employees Uses mentors/asks for advice Creates fun place to work Employee survey cited good people to work with Employee survey cited good people to work with Communicate the vision in three sound bites Ties any conversation to those three goals Ties any conversation to those three goals

Leadership Evolution Gaining confidence in running organization Understanding every aspect of business makes it easier to trust instincts Addressing conflict more easily Going thru layoffs Going thru layoffs “Saving the company” “Saving the company” Getting help needed from outside sponsors Learning the work and time required to establish and manage Board of Directors How to present and manage information How to present and manage information

Leadership Learnings Hire people you like Complementary personality and skill set Complementary personality and skill set Committed to “Grow the Business” Committed to “Grow the Business” Use your resources Internally - COO/CFO Internally - COO/CFO Externally - Board of Directors Externally - Board of Directors Be willing to change Major company evolution over three years Major company evolution over three years Always a sales person: sales critical in the job Selling to investors, media, employees, vendors Selling to investors, media, employees, vendors

Leadership Challenges Initially had too much talent in a small company Hard to keep people from becoming bored Hard to keep people from becoming bored People were stepping on each other’s toes People were stepping on each other’s toes Managing young, talented workforce in small organization Major retention concerns Major retention concerns Weathering changing dot-com environment Balancing company size/scale with profitability and investor market whims Balancing company size/scale with profitability and investor market whims

Our Observations Mark defined leadership as management Jumped into defining his management team Jumped into defining his management team “I had never managed more than 4-5 people” “I had never managed more than 4-5 people” Always talked in one of three areas Customer focus Customer focus Cost management and margins Cost management and margins Grow the business Grow the business Mark could not separate himself from his job When asked about him, most of his answers focused on the company When asked about him, most of his answers focused on the company Just realized that “I could do this job for next 20 years” Just realized that “I could do this job for next 20 years”