The Story of Google's Origins and Early Success

© Service des relations industrielles (SRI)
© EPFL

Fall 2011
Hervé Lebret
www.startup-book.com

Disclaimer: this is the Google story, not the Google history …
some information may be untrue as it comes mostly from the Internet

© EPFL

1995 1996 1997 1998 1999

since 2000

The sky seems to be the limit
© EPFL

© EPFL

Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Documents 24M 1.3B 3B 4B 6B 8B 25B?
indexed

Employees 8 39 60 284 682 1‟628 3‟021 5‟680 10‟674 16‟805 20‟222 19‟835 24‟400

Revenue 0.2 19.1 86.4 439 1‟465 3‟189 6‟139 10‟610 16‟593 21‟795 23‟650 29‟321
($M)

Income ($M) -6.7 -14.7 7 99 105 399 1‟465 3‟077 4‟203 4‟226 6‟520 8‟502

© EPFL

“In the spring of 1995, Larry Page and Sergey Brin
first met at a social outing in San Francisco
designed to welcome new applicants to Stanford
Doctoral Program.”

Despite their differences and not initially working
together, they became friends and were quickly
known as “LarryandSergey”.

Sources: Brainstrom, the news letter of Stanford Office of
Technology Licensing – vol. 9 – no. 2 – Spring 2000
and The Google Story by D. Vise - Random House, 2005

© EPFL

Garcia-Molina, Brin‟s adviser, recalls how it all started.
Page came into his office one day in 1995 to show him a
neat trick he had discovered.

The AltaVista search engine could show what other sites
linked to them but did not exploit this link information; Page
suggested it would be a good way to rank sites.

The PageRank system, invented by Larry Page (and
named after him) judges a site‟s
importance by analyzing
outside links to it.

Source: Stanford Magazine, Nov. 2004

© EPFL

Meanwhile Brin worked on a research project within the
database group in associative data mining. Brin worked on
ways to find specific word combinations that often occurred
together on the Internet.

Later, Page combined his method of analyzing
“back” links pointing to a given website with Brin‟s
web crawler, and their combined research moved
under the Digital Library umbrella.


© EPFL

Google soon overgrew the bounds of their lab…
In 1996, Brin and Page disclosed the technology to Stanford
OTL which contacted several internet companies…and
companies were interested…even one company bid a
significant amount of money, but none of the offers equaled
Google‟s potential…
For the next two years, while
continually completing an
increasing number of searches,
the technology incubated in the
OTL portfolio of technologies.

Source: Brainstrom, the news letter of
Stanford Office of Technology Licensing
vol.9 – nb.2 – Spring 2000
(and www.archive.org for the picture)

© EPFL

Interestingly enough, Derwent gave in 2006
- 3 patent filings with Page‟s name (2 from Stanford and 1 Google)
- 6 patent filings with Brin‟s name (all Google)
- Page‟s key patents as US only

© EPFL

In 1997, Google has become the De Facto search engine for the
Stanford community. Page‟s advisor funds $10k for new computers but
Google quickly reach limits in resources.
In March 98, Page and Brin try to sell the engine to Alta Vista for $1M
but DEC (Altavista‟s mother company) was not “very open to outside
technology”
Later, with the help of Stanford professors and OTL, they contact
Excite and other search engines without success.
Page‟s advisor, Terry Winograd, contacts VCs but they are not interested
by search engines anymore. Brin and Page, “who have a skeptical view
of authority” are frustrated but more determined.

Yahoo‟s founder, D. Filo then advised them to take a leave of absence
from their PhD and to start their own business

Source: The Google Story by D. Vise Google began in Stanford
Random House, 2005 Gates‟ building!!

© EPFL

"Larry and I mapped out a strategy to talk to existing search-engine
companies to see if there was any interest in licensing this," said Luis
Mejia , an OTL senior licensing officer.

Steve Kirsch, CEO of search engine Infoseek, met with them a couple of
times and made a verbal offer. Mejia declined to name the amount, but
said: "It wasn't sufficient for us to feel he was really committed to it."
(Kirsch told the Wall Street Journal that he had offered $250,000.)

Yahoo declined to meet, Mejia recalled.

He contacted venture capitalist Vinod Khosla, who set up a meeting at
his firm, Kleiner Perkins, with Excite, one of its portfolio companies.
"There was a lot of disbelief in what the capabilities of the page-rank
search algorithm were," Mejia said. "They weren't convinced it was worth
much. They decided they weren't interested in licensing it.''

Mejia doesn't recall being particularly thrilled
about Google's prospects.
Source: Carolyn Said, San Francisco Chronicle, August 2004.

© EPFL

Tip 1: it is very important to find
great people you are compatible
with.

Tip 2: There is a benefit from being
real experts. Experience pays off.

Source: Stanford Technology Ventures Programme
Tip 3: Have a healthy disregard for
stvp.stanford.edu the impossible. Stretch your goals.

Tip 4: It is OK to solve a hard
problem. Solving hard problems is
where you will get the big leverage.

© EPFL

“We had to buy a Terabyte (which costs about $15,000) …
and put it on our credit cards…”
In August 1998, thanks to David Cheriton,
a Stanford professor, Page and Brin meet
Andy Bechtolsheim, founder of
Sun Microsystems and working
at Cisco.
After an hour, he makes a $100,000 check to “Google Inc.” without
knowing the company does not exist yet.
In October 1998, Page and Brin convinced a friend to rent a Garage and
spare room for $1700/month. They quickly added 8 phone lines, a cable
modem and a DSL line. After two months, they were 8 people and they
moved again in February 1999.
Bechtolsheim, Cheriton, Jeff Bezos (Amazon‟s founder)
and a few other angels invested a total of $1M
in the A round in 1998.

© EPFL

I am sure Google‟s first office will soon become a legend
as it was a Garage. In fact Google had bought it!

© EPFL

From a first office in a garage good for small team,

… they moved to
165 University Ave.
in Palo Alto after 5
months. This is the
home of many other startups …then in
including Logitech and Paypal… Mountain
View…

… and finally to the GooglePlex in 2003

© EPFL

In 1994, a PhD student in the database group; asked if he would join
Yahoo! as employee No. 1, he laughed: “You couldn‟t pay me enough
money to work for a company called Yahoo!”

In 1995, worked with Brin on the process of finding pieces of information
that commonly occur together. Brin wrote his “crawler” program. Lent did
not stick around, a decision he confesses he regrets. But in early 1996,
Lent explains, “We all said, „There will never be another Yahoo!‟ Their
research seemed purely an academic exercise.”

He got a call from Microsoft in 2003, telling him the company wanted “to
kill Google,” he recalls. He declined.
In 2004, he has not given up: he has an algorithm he calls “Dynamic
PageRank,” and he is CEO of Medio. “I need to give it a try. Google and
Yahoo!, be warned.” Did anyone say, “There will probably never be
another Google?”


© EPFL

After raising $1M with angel investors, Google nearly went out of money
quickly. The founders also wanted to keep control of their company, so
they built the strategy to attract the best 2 VCs so that one would
neutralize the other one. Thanks to their angels, it worked!!!

This “divide and conquer” strategy enabled Google to raise $25M in May
1999 with
- John Doerr of Kleiner Perkins (Amazon, AOL,
Compaq, Genentech, Sun,…)
- Mike Moritz of Sequoia (Apple, Cisco, Oracle,
Yahoo, youtube,…)

Another $15M of round C with Yahoo, Eric Schmidt and
many others (Arnold Schwarzenegger, Tiger Woods, …).
Schmidt, the new CEO, joined in 2001 before the company
went public in 2004 (raising $1.6B)

© EPFL

Googleware is the nickname given to Google‟s very powerful
combination of Hardware and Software.

Founders are known to be extremely smart … and pragmatic

Today, Googleware
means tens of 1000‟s of
simple PCs

© EPFL

A technology first ….

apparently gives
the right answer…

… and even more

© EPFL

A technology first …. a business model second

advertising
in the right column
is the secret sauce

© EPFL

advertising
on others’ sites
is another revenue
source

NB: this example does not imply Google is Bluewin ad provider.

© EPFL

Larry Page certainly has a business-oriented mind,

Larry may have been helped by his old brother, Carl, who
founded eGroups and sold it to Yahoo.

Sergey has qualities in cost cutting and it is known Google
is not wasting money. They made cheap computers; they
did not spend a lot on marketing.

Omid Kordestani, their first VP Sales was
previously VP Sales at Netscape and
was instrumental in designing the
business model.

© EPFL
“Genius is 10% Inspiration and 90% Transpiration”
Picasso? Einstein?

I was recently reminded that nothing comes without hard
work, even at Google.
At Google, there is free food; one of the early hires was a
cook. Working environment is nice…

… but this gives more pressure to spend long hours at work.
“It was common to work 6 days a week”. You‟d better have
the energy and not too much family or private commitments.
And be young?

© EPFL

It is well known that it is extremely difficult to keep on being
innovative.

Google has taken creative approaches: employees work in
small teams (3 ideally) and are free to use 20% of their
working time on their personal projects that may become
future Google products.

Google News, Froogle, Gmail have roots in this 20% time as
well as .
And they do not seem to lose their humor…

© EPFL

the “Google” name comes from …

GOOGOL = 10100

The Google‟s people seem to love numbers:

at IPO, they planned to raise $2‟718‟281‟828
e=2.718281828
at IP0, 14‟142‟135 shares were finally newly created
2= 1.4142135
at their secondary, they sold 14‟159‟265 shares…
=3.14159265

© EPFL

Cap. table at Series A Cap. table at Series B

Shareholder Shares Ownership Shareholder Shares Ownership

Brin 38'490'304 42% Brin 38'490'304 27%

Page 38'490'304 42% Page 38'490'304 27%

Bechtolsheim 1'600'000 Bechtolsheim 1'600'000

Cheriton 1'600'000
Cheriton 1'600'000
Bezos 1'600'000
Bezos 1'600'000
Shriram 1'600'000
Shriram 1'600'000
Stanford 1‟842‟000 1.3%
Stanford 1‟842‟000 2%
Others 7‟118‟782
Others * 7‟118‟782
Series A 15'360'000 11%
Series A 15'360'000 17%
Kleiner Perkins 23'893'800 17%
Total 92'340'608
Sequoia 23'893'800 17%
*: others include a number of angles not identified
Series B 47'787'600 34%
Series A: $960k Total 140'128'208
Capitalization: $5.7M
Series B: $25M
Capitalization: $70M

NB: data compiled from Google‟s S1 documents but numbers give only an idea,
precise data are not known

© EPFL

Cap. table at Series C Cap. table at Series IPO

Shareholder Shares Ownership Shareholder Shares Ownership

Brin 38'490'304 26% Brin 38'490'304 14%

Page 38'490'304 26% Page 38'490'304 14%

Bechtolsheim 1'600'000 Bechtolsheim 1'600'000

Cheriton 1'600'000 Cheriton 1'600'000

Bezos 1'600'000 Bezos 1'600'000

Shriram 1'600'000 Shriram 1'600'000

Stanford 1‟842‟000 1.2% Stanford 1‟842‟000 0.6%

Others 7‟118‟782 Others 7‟118‟782

Series A 15'360'000 10% Series A 15'360'000 6%

Kleiner Perkins 23'893'800 16% Kleiner Perkins 23'893'800 9%

Sequoia 23'893'800 16% Sequoia 23'893'800 9%

Series B 47'787'600 33% Series B 47'787'600 18%

Series C 6‟479‟000 4% Series C 6‟479‟000 2%

Total 146„607'208 Common (ESOP) 105‟557‟498 36%

Eric Schmidt 14‟758‟800 5.4%
Series C: $15M
Capitalization: $348M Common (IPO) 19‟600‟000 7%

Total 271‟764‟706

IPO: $1.67B - Capitalization: $23.1B
NB: data compiled from Google‟s S1 documents but numbers give only an idea, in 2005, secondary of 14‟159‟265 shares at $295, raising $4B;
precise data are not known Stanford announced they made $336M with Google.

© EPFL

Obviously the company is very ambitious and many new
things will come.
One surprising element is the founder‟s interest in clean
energies.
Another surprising element is the founder‟s interest in
genetics. It seems they may use Google‟s computing power
to develop molecular biology platforms.

“Google is teaming up with Craig Venter (of human genome
mapping fame) to use Google‟s vast computing power to
help unlock biology‟s mysteries, and maybe one day to help
you search through your genes.”

Source: The Boston Globe – Nov. 2005 and “The Google Story”

© EPFL

The Google‟s motto: “Don‟t Be Evil”
“They shut down Stanford network once”
“They could have begun earlier”
Source: Stanford Technology Ventures Programme - stvp.stanford.edu

The company is very paranoid: confidentiality is very high in
the company and employees are very cautious about giving
information. A lot is unavailable. Many libraries are very
uncomfortable with Google‟s NDA.
“The Google lawyers advise the Google employees not to read patent
applications or patents from non-employees because that might preclude
the Google employees from future invitations in that area. If you are
interested in selling the intellectual property, the only time Google has ever
bought IP is when there was already a start-up trying to market that IP.”

Develop early stage ideas? © Service des relations industrielles (SRI)
© EPFL

The story gives hints:
yes, focus on great technologies,
but more importantly focus
on great people who
- are ambitious
- keep on innovating
- with patience and determination
- believe in their ideas

© EPFL

From Hegel

„Nichts Großes in der Welt ist ohne Leidenschaft vollbracht worden“

“Nothing great in this world has ever been accomplished without passion”

« La passion est tenue pour une chose qui n'est pas bonne, qui est plus ou moins mauvaise : l'homme ne doit pas
avoir des passions. Mais passion n'est pas tout à fait le mot qui convient pour ce que je veux désigner ici . Pour
moi, l'activité humaine en général dérive d'intérêts particuliers, de fins spéciales ou, si l'on veut, d'intentions
égoïstes, en ce sens que l'homme met toute l'énergie de son vouloir et de son caractère au service de ses buts,
en leur sacrifiant tout ce qui pourrait être un autre but, ou plutôt en leur sacrifiant tout le reste . [...]
Nous disons donc que rien ne s'est fait sans être soutenu par l'intérêt de ceux qui y ont collaboré. Cet intérêt,
nous l'appelons passion lorsque, refoulant tous les autres intérêt ou buts, l'individualité entière se projette sur un
objectif avec toutes les fibres intérieures de son vouloir et concentre dans ce but ses forces et tous ses besoins.
En ce sens, nous devons dire que rien de grand ne s'est accompli dans le monde sans passion. » La raison dans
L‟Histoire – éditions 10/18, p. 108

The Story of Google's Origins and Early Success

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