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Netflix was founded by Marc Randolph and Reed Hastings on August 29, 1997, in Scotts Valley, California. Hastings, a computer scientist and mathematician, was a co-founder of Pure Software, which was acquired by Rational Software that year for $750 million, the then biggest acquisition in Silicon Valley history. Randolph had worked as a marketing director for Pure Software after Pure Atria acquired a company where Randolph worked. He was previously a co-founder of MicroWarehouse, a computer mail-order company, as well as vice president of marketing for Borland. Hastings and Randolph came up with the idea for Netflix while carpooling between their homes in Santa Cruz, California, and Pure Atria's headquarters in Sunnyvale. Patty McCord, later head of human resources at Netflix, was also in the carpool group. Randolph admired Amazon and wanted to find a large category of portable items to sell over the Internet using a similar model. Hastings and Randolph considered and rejected selling and renting VHS as too expensive to stock and too delicate to ship. When they heard about DVDs, first introduced in the United States in early 1997, they tested the concept of selling or renting DVDs by mail, by mailing a compact disc to Hastings's house in Santa Cruz. When the CD arrived intact, they decided to enter the $16 billion Home-video sales and rental industry. Hastings is often quoted saying that he decided to start Netflix after being fined $40 at a Blockbuster store for being late to return a copy of Apollo 13. Hastings invested $2.5 million into Netflix from the sale of Pure Atria. Netflix launched as the first DVD rental and sales website with 30 employees and 925 titles available—nearly all DVDs published. Randolph and Hastings met with Jeff Bezos, where Amazon offered to acquire Netflix for between $14 and $16 million. Fearing competition from Amazon, Randolph at first thought the offer was fair, but Hastings, who owned 70% of the company, turned it down on the plane ride home.

Netflix was founded by Marc Randolph and Reed Hastings on August 29, 1997, in Scotts Valley, California. Hastings, a computer scientist and mathematician, was a co-founder of Pure Software, which was acquired by Rational Software that year for $750 million, the then biggest acquisition in Silicon Valley history. Randolph had worked as a marketing director for Pure Software after Pure Atria acquired a company where Randolph worked. He was previously a co-founder of MicroWarehouse, a computer mail-order company, as well as vice president of marketing for Borland. Hastings and Randolph came up with the idea for Netflix while carpooling between their homes in Santa Cruz, California, and Pure Atria's headquarters in Sunnyvale. Patty McCord, later head of human resources at Netflix, was also in the carpool group. Randolph admired Amazon and wanted to find a large category of portable items to sell over the Internet using a similar model. Hastings and Randolph considered and rejected selling and renting VHS as too expensive to stock and too delicate to ship. When they heard about DVDs, first introduced in the United States in early 1997, they tested the concept of selling or renting DVDs by mail, by mailing a compact disc to Hastings's house in Santa Cruz. When the CD arrived intact, they decided to enter the $16 billion Home-video sales and rental industry. Hastings is often quoted saying that he decided to start Netflix after being fined $40 at a Blockbuster store for being late to return a copy of Apollo 13. Hastings invested $2.5 million into Netflix from the sale of Pure Atria. Netflix launched as the first DVD rental and sales website with 30 employees and 925 titles available—nearly all DVDs published. Randolph and Hastings met with Jeff Bezos, where Amazon offered to acquire Netflix for between $14 and $16 million. Fearing competition from Amazon, Randolph at first thought the offer was fair, but Hastings, who owned 70% of the company, turned it down on the plane ride home.