Nobody thought this would be the basis of a new company. Most people thought that Yahoo had already won the search engine wars, although Yahoo was really a classification system akin to the Dewey decimal system (without the decimals). It was a portal and did not even have its own search engine, licensing one from Akamai instead. The other search company executives didn't think that search technology could or needed to be improved. Larry knew differently. If the Internet was to reach its potential, it needed new inventions to make it easier to find the right stuff. Without Google, the Internet might still be in the pre-Hellenistic Age. Nevertheless, Lent says, “In early 1996, we all said, âThere will never be another Yahoo.' ”
Just because this was an academic exercise, it didn't mean Larry wasn't ambitious. In order to build a system to test their theory, he and Sergey were repeatedly borrowing money from other students and faculty, and “borrowing” equipment that arrived at the loading dock at Gates Hall before its owners could claim it. “We had stolen all these computers from all over the [computer science] department,” recalled Sergey.
6
Finally, Professor Garcia-Molina asked Larry exactly how much of the Internet he wanted to search. Larry's response: “All of it.” Garcia-Molina managed to get them some money from the Digital Libraries project so they could buy more computers.
The Google search engine, first set up to troll through Stanford's own Web pages, was an immediate hit with students and faculty, and Page and Brin became convinced of its commercial potential. By late 1996, Sergey recalled in an interview, “We had something we thought was quite nice.”
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But they still didn't think this would be the basis for a company. They planned to finish their Ph.D.s, so they tried to sell their technology to other search engines.
Fortunately, they found no takers. Had they succeeded, Google would not exist. For one thing, Larry and Sergey were pricing their technology very high, at about $1 million.
Most companies turned them down flat. Around 1997, for example, Larry called Louis Monier, one of the creators of the AltaVista search engine at Digital Equipment Corp. (DEC). AltaVista was then considered the best search engine in existence. “He tried to explain to me who he was and what he was doing,” Monier recalls. “He sounded interesting. He didn't sound like a crackpot or anything. I said, âYeah, we should meet.' ”
But DEC management showed no interest. The company was not really interested in a search business; AltaVista had been created mainly to demonstrate how its computer server “was bigger and beefier” than other hardware, says Monier.
Before Monier could talk to Larry and Sergey, he needed permission from DEC headquarters in Massachusetts. But now that Google had commercial potential, Larry's obsession with secrecy emerged. He insisted that Monier sign a nondisclosure agreement first, and DEC management wouldn't go for that. “This went nowhere, which was too bad,” says Monier.
Finding Funding
It seems today that it was always inevitable that Larry and Sergey would turn their search engine into a company. But that was not the case. “Larry has a million ideas,” says his early partner Craig Silverstein. “If he didn't make a company out of this, he'd be happy to make it out of something else later. If they had found someone who took their work seriously, and wanted to own it and offered the right price, they would have sold. We didn't find that, so we said, âOkay, we'll do it ourselves.' ” In 1998 they began looking for investors to get them started.
They approached David Cheriton, a computer science professor who had started a couple of companies with Silicon Valley entrepreneur Andy Bechtolsheim, for help finding funding. He decided to introduce them to Bechtolsheim. Just taking the step of asking Bechtolsheim for money was a bold and brash move. They had no business plan or formal pitch. Luckily, Bechtolsheim didn't need either. According to Sergey, he simply said, “Oh, we could discuss a number of issues. Why don't I just write you a check?”
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He filled out check number 4642 to Google Inc. for $100,000.
In the end, Cheriton matched Bechtolsheim's investment, and with those two on board, the rest of the start-up money they needed came easily. Technology angels and executives, such as Ron Conway of the Band of Angels and Ram Shriram from Amazon, also put in money.
Those who did invest made fortunes. Stanford, which holds the patent to the PageRank algorithm Larry created, received 1.8 million shares of Google stock in exchange for long-term rights to the patent. Stanford's profit was $336 million, by far the most money it has ever received from spinning off technology invented on campus. It's probably the most money
any
university has ever received from a single invention. Cheriton, already wealthy when he became the second investor in Google, is now a billionaire. One Stanford professor who loaned Larry and Sergey money when they were students joked that the stock he received in return would cover his retirement.
But this initial funding could get them only so far. So in the spring of 1999, Larry and Sergey started seeking $25 million in venture capital. Again, they were incredibly brash. For the money, they were willing to hand over less than one fifth of the company's equityâthus valuing the company at more than $125 million. Most Silicon Valley companies have a hard time getting that much money, and they give away a much larger percentage of the start-up's ownership to get it.
But the fact that they had already persuaded Bechtolsheim and other prominent angels to invest impressed enough people to allow Larry and Sergey to get the pick of the litter. They went to the top of the heap, and got interest from two of the most prominent venture capital firms, Kleiner Perkins Caufield and Byers, and Sequoia Capital. These firms are used to setting their own terms, and most entrepreneurs feel lucky if they can even get in the door to make a pitch. But Larry and Sergey did not want to give too much control of their company to any individual firm, and insisted that they split the deal: each venture capital firm could invest $12.5 million in return for 9 percent of the company.
It almost killed the deal. Both firms wanted to do the investment alone. John Doerr from KPCB and Mike Moritz from Sequoia had never come across entrepreneurs refusing to take their money before. Just having one of them on board lent extraordinary credibility to any entrepreneur trying to make a name for himself.
Finally, Larry and Sergey went to two of their angel investors, Ron Conway and Ram Shriram, and said they wanted to drop out of the deal and seek more angel funding instead. They told the angels that they were giving the firms only a couple more days to decide.
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Conway and Shriram had a good relationship with each other and were sometimes coinvestors with Doerr and Moritz, and they passed the threat on. Faced with the prospect of losing any part of the deal, both Doerr and Moritz caved. With this deal, Larry and Sergey showed that they were extraordinary negotiators. They have become accustomed to getting their way.
Kleiner Perkins venture capitalist John Doerr was later quoted as saying, “I have never paid more money for so little a stake in a startup.”
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Sequoia head Mike Moritz said that the pair's “manic devotion” helped to convince him.
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But he also admitted that he really made the investment because, if the search engine turned out to be good, he could sell the company to Yahoo, another company he had invested in. Sergey just thought they had negotiated a reasonable price in the Silicon Valley game of fund-raising. “I feel we negotiated a good deal at the time. They [the VCs] thought it was a lot, we thought it was too low. Angel investors treat [investing] as a hobby. The VCs do it as a business, or at the very least as a competitive sport,” he said.
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Nevertheless, it turned out to be a spectacular deal for both VCs. After Google went public, each VC firm found itself with stock worth about $3 billion. It's possibly the biggest return on a VC investment in history. Once again, Larry and Sergey were right. But it would not be the last time they were to do battle with their venture backers.
With money burning a hole in their bank account, the boys from Stanford were on their way.
Chapter 3
Controlled Chaos
Innovators and men of genius have almost always been regarded as fools at the beginning (and very often at the end) of their careers.
âFyodor Dostoyevsky
Â
The place where optimism most flourishes is the lunatic asylum.
âHavelock Ellis
The Library of Alexandria became a playground for the great intellectuals, philosophers, and scientists of their day. Ptolemy ensured this by offering incentives. The library may have contained a garden, a zoo, and an observatory. Scholars who came to study there were given free board and lodging in the royal part of the city, exempted from taxes, and given commissions as tutors, often teaching in outdoor classrooms by the library. They participated in games, festivals, and literary competitions organized at the library. They were also, of course, given the liberty to study the scrolls and conduct research in their fields of interest. The mathematician Euclid studied at the library, where he may have done the work that led to the rules of geometry. Archimedes invented the screw-shaped water pump there; Eratosthenes calculated the diameter of the Earth, mapped it, and argued that it should be possible to reach India by sailing west from Spain. Galen wrote works on healing and anatomy that dominated medicine until the Renaissance. Never underestimate the value of perks.
L
ike all great young companies, Google and its employees reflect the personalities and ideals of the company's founders. The way any founders keep their company's culture is to hire people who are like them. Larry and Sergey interviewed all prospective hires in the early days, and still insist on interviewing every important hire. The first person they brought in, Craig Silverstein, is a computer geek in their own spiritual image. He looks the part. Short and slender, with a Stan Laurel chin and a usually shy demeanor, in his spare time he runs an online fact site about Muppets.
But he's extremely sharp, and confident when he talks about Google and its enduring culture, which is full of young technologists who share Larry's and Sergey's ideals. “We hired people who were like us in that way,” he says. “We definitely wanted people who were idealistic, and we've been careful to try to sustain that over the years.”
Larry has put his desire to hire idealistic people this way: “We believe strongly that in the long term, we will be better servedâas shareholders and in all other waysâby a company that does good things for the world even if we forgo some short term gains. This is an important aspect of our culture and is broadly shared within the company.”
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These days, nearly every computer scientist wants to join Google. But in order to attract the best of themâin terms both of technical expertise and shared valuesâin the early years, Larry and Sergey had to offer more: a scientific and technological playground that any computer geek would love. That part was easy. They offered what every other Web start-up did when they still had money: employee perks.
Larry and Sergey have mostly retained the notorious frugality they learned at Stanford. They still buy the cheapest equipment they can find and modify it to fit their needs. Google does almost no advertising; new products immediately appear on the Internet in news articles and blogs. And when Google was young, they stuck with cubicles instead of offices, with desks made from doorsâalthough work spaces were decorated with colorful streamers, paraphernalia from favorite movies, props and pictures of exotic foreign cities, fairy tales, anything that struck the fancies of the employees who worked there.
Employee perks are another matter. Google's culture has been described as “part university campus and part kindergarten playground.”
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More realistically, it's a young man's playground. There are the usual lava lamps, game rooms with pool tables, and foosball and video games typical of technology start-ups during the first dot-com heyday. But Google goes further than most: massage chairs, “sleeping pods” where employees can take a nap, and the famous free gourmet food and drinks. (Google lobbies usually have glass-front refrigerators filled with free Naked Juice for visitors.) Google is also famous for hiring a company masseuse. Recalls one early employee, “The full-time masseuse, Babette, was gorgeous. She gave ânaked under the sheets' massages.”
Even in the early days, employees dined on free gourmet food: rack of lamb and rib eye steaks, Cajun food, scallops, as well as hamburgers and hot dogs, fish sandwiches, and salad bars. Free snacks were mostly on the healthy side: Odwalla drinks, granola bars, Yukon Gold chips, decaf coffee.
But the biggest draw for young scientists at Google wasn't the free food. Computer scientists and engineers were infected with the desire to do something incredible, the disease propagated by Larry and Sergey. Sergey has emphasized this fact, noting that it's especially important as the stock price retreats. “This is where you want to make sure you are hiring employees because they love to work here, they love to create things, and they're not here primarily for the money,” he says. “Although when they do create something valuable you want to reward them. That's when these things really pay off.” Employees agree that the opportunity to make a name for themselves even outweighed the perks and the promise of riches from an IPO. Not that everyone ignored the prospect of riches; it's a big draw for anyone joining a promising start-up. But it wasn't everything, according to one former employee:
I had been at another dot-com, and left for Google. At the first dot-com, there was an excitement, but at Google it was a whole different kind of excitement. People were really sure they were on to something. At the earlier dot-com, they were thinking more about how they were going to be rich. At Google, it was almost disdainful to talk about money. It was hot and happening. They all saw the spending and instant riches, but honestly it was never a stated goal at Google. People were too focused on the technology. No one ever came running in with a picture of the sailboat they were going to buy. But they did come running in and interrupting meetings when we passed a milestone.