CurrentOfferings.com Story:

Tradition is behind Google�s unconventionalism

David Vise, Washington Post, July 4, 2004

WASHINGTON � Google Inc.�s founders relish describing the company they have built as unconventional and antiestablishment.

However, the search-engine juggernaut�s carefully crafted roster of early-stage investors reads like a Who�s Who of Silicon Valley, placing the company squarely in the middle of technology start-ups.

Initial investors in the company included Jeffrey Bezos, chief executive of Amazon.com Inc.; Andy Bechtolsheim, co-founder of Sun Microsystems Inc. and Wilson Sonsini, of the Silicon Valley law firm that is advising Google on its upcoming initial public offering, according to company filings.

In addition, Google has strong financial ties to Stanford University, which has hatched many startups, and where the co-founders met before dropping out of a doctorate program to launch the firm.

The university�s president, John Hennessy, is a shareholder and sits on Google�s board of directors, as does David Cheriton, a Stanford computer-science professor.

Venture capitalists John Doerr of the investment firm Kleiner Perkins and Michael Moritz of Sequoia Capital serve as Google board members, and each of the firms they represent invested about $12.5 million for 9.4 percent of the company. Analysts estimate those stakes could be worth more than $1 billion after the IPO.

�It is a traditional Silicon Valley old-boys� network,� said Alan Meckler, chief executive of Jupitermedia Corp. �It is very similar to what happened in the 1990s when there was a group of 20 or 30 venture capital firms and key people. There is a lot of history repeating itself here.�

Tom Taulli, a principal of Bridgewater Capital Corp. who has written a book on initial public offerings, said that by having Wilson Sonsini as the company�s lead outside counsel, Kleiner Perkins as a major investor and Stanford as its progenitor, Google is following a time-tested path.

�Wilson Sonsini is blue blood and royalty in Silicon Valley when it comes to IPOs,� Taulli said. �They are it. Call it whatever you want, but the facts are the facts. This is a very traditional Silicon Valley company. It doesn�t look very unconventional to me. This is a model of how it is done.�

Meckler said Bezos has been an early investor in a number of start-ups. The Amazon chief is often sought after because he can ensure access to high-quality software development, the right venture-capital funding, and a cadre of insiders who know how to guide a start-up through early-stage growth and the difficult transition from private to public ownership.

Both venture-capital firms encouraged Google�s young co-founders, Sergey Brin and Larry Page, to recruit a seasoned chief executive who would have credibility with investors and others. Google then retained Heidrick & Struggles, one of the nation�s most highly regarded executive-search firms.

As part of the pay day for its head-hunting services, both Heidrick & Struggles and the firm�s Silicon Valley-based lead recruiter, John Thompson, became Google stockholders. Analysts estimate the value of their holdings could be tens of millions of dollars.

In fairness to Page and Brin, when they describe Google as iconoclastic, they are referring to the way it has transformed searching the Internet and the firm�s culture, rather than its financial backers. Google officials declined to comment.

Googlers, which is what the company calls its employees, work in a headquarters the company refers to as the Googleplex, and have on-site massage, medical care and more. With a high concentration of PhDs, Googlers spend one day per week on personal projects they select, which has led both to flops and successful innovations, including Google news alerts delivered via e-mail.

The company is also taking an unorthodox approach by conducting an electronic auction for its estimated $2.7 billion public offering, and inviting individuals to participate, rather than allowing Wall Street investment firms to decide how to allocate and price shares.

Given Google�s strong brand name and heavy use by millions of Web searchers around the world, the auction strategy is designed to create a more stable base of long-term investors by setting a high price for shares before they begin trading, often a deterrent to speculators looking to buy and sell for a quick profit.

�Even though (Google) has revolutionized how we look at the Internet, it has been birthed in a very traditional manner,� said John Tinker, a managing director with ThinkEquity Partners LLC.

�In the end, I wonder if they may not be traditional in how they bring this company public,� Tinker said. �I wonder, when push comes to shove, if they won�t be looking at big investors getting a large piece of the pie.�