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Service des relations industrielles (SRI) EPFL

Fall 2011 Herv 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

Service des relations industrielles (SRI) EPFL

1995

1996

1997

1998

1999

since 2000

The sky seems to be the limit

Service des relations industrielles (SRI) EPFL

Service des relations industrielles (SRI) EPFL

Year Documents indexed Employees Revenue ($M) Income ($M)

1998 24M

1999

2000 1.3B

2001 3B

2002 4B

2003 6B

2004 8B

2005

2006 25B?

2007

2008

2009

2010

39 0.2 -6.7

60 19.1 -14.7

284 86.4 7

682 439 99

1628 1465 105

3021 3189 399

5680 6139 1465

10674 10610 3077

16805 16593 4203

20222 21795 4226

19835 23650 6520

24400 29321 8502

Service des relations industrielles (SRI) 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

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Garcia-Molina, Brins 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 sites importance by analyzing outside links to it.

Source: Stanford Magazine, Nov. 2004

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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 Brins web crawler, and their combined research moved under the Digital Library umbrella.

Source: Stanford Magazine, Nov. 2004

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Google soon overgrew the bounds of their lab In 1996, Brin and Page disclosed the technology to Stanford OTL which contacted several internet companiesand companies were interestedeven one company bid a significant amount of money, but none of the offers equaled Googles 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)

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

Service des relations industrielles (SRI) EPFL

In 1997, Google has become the De Facto search engine for the Stanford community. Pages 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 (Altavistas 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. Pages 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. Yahoos 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 Random House, 2005

Google began in Stanford Gates building!!

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"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.

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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 stvp.stanford.edu

Tip 3: Have a healthy disregard for 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.

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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 (Amazons founder) and a few other angels invested a total of $1M in the A round in 1998.

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

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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 including Logitech and Paypal

then in Mountain View

and finally to the GooglePlex in 2003

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In 1994, a PhD student in the database group; asked if he would join Yahoo! as employee No. 1, he laughed: You couldnt 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?
Source: Stanford Magazine, Nov. 2004

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Service des relations industrielles (SRI) 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)

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Googleware is the nickname given to Googles very powerful combination of Hardware and Software. Founders are known to be extremely smart and pragmatic

Today, Googleware means tens of 1000s of simple PCs

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A technology first .

apparently gives the right answer

and even more

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A technology first . a business model second

advertising in the right column is the secret sauce

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advertising on others sites is another revenue source

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

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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.

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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. Youd better have the energy and not too much family or private commitments. And be young?

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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

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the Google name comes from

GOOGOL = 10100
The Googles people seem to love numbers:

at IPO, they planned to raise $2718281828


e=2.718281828

at IP0, 14142135 shares were finally newly created


2= 1.4142135

at their secondary, they sold 14159265 shares


=3.14159265

Service des relations industrielles (SRI) EPFL Cap. table at Series A Shareholder Brin Page Bechtolsheim Cheriton Bezos Shriram Stanford Others * Series A Total Shares 38'490'304 38'490'304
1'600'000 1'600'000 1'600'000

Cap. table at Series B Ownership 42% 42% Shareholder Brin Page Shares 38'490'304 38'490'304
1'600'000
1'600'000 1'600'000 1'600'000 1842000 7118782

Ownership 27% 27%

Bechtolsheim
Cheriton Bezos Shriram

1'600'000

Stanford
1842000 7118782

1.3%

2%

Others Series A

15'360'000 23'893'800 23'893'800 47'787'600 140'128'208

11% 17% 17% 34%

15'360'000 92'340'608

17% Kleiner Perkins Sequoia

*: others include a number of angles not identified

Series B Total Series B: $25M Capitalization: $70M

Series A: $960k Capitalization: $5.7M

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

Service des relations industrielles (SRI) EPFL Cap. table at Series C Cap. table at Series IPO

Shareholder
Brin

Shares
38'490'304

Ownership
26%

Shareholder
Brin

Shares
38'490'304

Ownership
14%

Page
Bechtolsheim Cheriton Bezos Shriram Stanford Others Series A Kleiner Perkins Sequoia Series B Series C Total Series C: $15M Capitalization: $348M

38'490'304
1'600'000 1'600'000 1'600'000 1'600'000 1842000 7118782

26%

Page
Bechtolsheim Cheriton Bezos Shriram

38'490'304
1'600'000 1'600'000 1'600'000 1'600'000 1842000 7118782

14%

1.2%

Stanford Others

0.6%

15'360'000 23'893'800 23'893'800 47'787'600 6479000 146607'208

10% 16% 16% 33% 4%

Series A Kleiner Perkins Sequoia Series B Series C Common (ESOP)


Eric Schmidt

15'360'000 23'893'800 23'893'800 47'787'600 6479000 105557498


14758800

6% 9% 9% 18% 2% 36%
5.4%

Common (IPO) Total

19600000 271764706

7%

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

IPO: $1.67B - Capitalization: $23.1B in 2005, secondary of 14159265 shares at $295, raising $4B; Stanford announced they made $336M with Google.

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Obviously the company is very ambitious and many new things will come.
One surprising element is the founders interest in clean energies.

Another surprising element is the founders interest in genetics. It seems they may use Googles computing power to develop molecular biology platforms.
Google is teaming up with Craig Venter (of human genome mapping fame) to use Googles vast computing power to help unlock biologys mysteries, and maybe one day to help you search through your genes.
Source: The Boston Globe Nov. 2005 and The Google Story

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http://www.startup-book.com/tag/google

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The Googles motto: Dont 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 Googles 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?


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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

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From Hegel

Nichts Groes 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 fait le mot qui convient pour ce que je veux dsigner ici . Pour moi, l'activit humaine en gnral drive d'intrts particuliers, de fins spciales ou, si l'on veut, d'intentions gostes, en ce sens que l'homme met toute l'nergie de son vouloir et de son caractre au service de ses buts, en leur sacrifiant tout ce qui pourrait tre un autre but, ou plutt en leur sacrifiant tout le reste . [...] Nous disons donc que rien ne s'est fait sans tre soutenu par l'intrt de ceux qui y ont collabor. Cet intrt, nous l'appelons passion lorsque, refoulant tous les autres intrt ou buts, l'individualit entire se projette sur un objectif avec toutes les fibres intrieures 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 LHistoire ditions 10/18, p. 108

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