Lecture
After taking academic leave in the fall of 1998, to continue working on the most advanced search engine in the world, Bryn and Page moved to the nearby Menlo Park. Having removed the house from the jacuzzi in which they owned a garage and several rooms, they transported computers and other devices there. The landlady, Susan Wojcicki, their first landlord, knew Brin: he had once met her roommate. The rent ($ 1,700 per month) at the request of the tenants included all taxes and fees (in the amount of about $ 200 per month).
On September 7, 1998, Brin and Page officially registered Google Inc. On the same day, they opened their first bank account and deposited $ 100,000 on it - the amount indicated in the check issued by Behtolshay. They also hired Craig Silverstein, their friend and doctoral colleague, who thus became the company's first employee. “We found a fairly spacious house, moved and began to work in the garage - almost all Silicon Valley start-up companies do this,” Silverstein explains.Wojcicki, however, was at first somewhat puzzled: “We thought that they would be there only during the day when we were at work. And they sat there round the clock! She says. - But over time, everything was settled. In addition, we got free Internet access. ”
Soon, however, Brynu and Paige became crowded in the Wojcicki garage, and in February 1999 they moved to the center of Palo Alto, the building on University Avenue. This change of deployment - as, indeed, all subsequent - testified to the growth of the company and the formation of its culture. Larry and Sergey were passionate about their work, she gave them great pleasure, and they did everything to calmly continue in the same spirit. The premises on the second floor in the very center of the pretty town were an ideal option for them: firstly, it was within easy reach of Stanford, and secondly, the atmosphere here was much more lively than in any business district. Neither Larry nor Sergey had a clear idea of how their company would make money, but they knew that if their search engine was better than others, other companies would prefer it. The desire to help users forced them not to give up, it was and remains their main incentive. “We created this company because we’re not satisfied with the existing search engines,” said Page. “Well, if she also makes a profit, we will be just happy.”
Their search engine, which has gained popularity among students and teachers at Stanford University, now processed about 100,000 queries daily. This growth was made possible by the positive feedback from users, sending e-mails and sending ICQ-messages - low-cost and at the same time effective types of e-marketing, which Bryn and Page, who left the campus, now paid much more attention and time. In January 1999, they gave a lecture to forty students and Stanford teachers, and in February sent a message to their users and friends.
“Google’s research project has been transformed into Google. Our goal is to provide the world with a better, better search for information on the Web, and the company as a form of organizing activities seems to be the best way to achieve this goal, Bryn and Page wrote in it. “We are expanding the staff and acquiring new servers in order to increase the computing power of the system (now we order computers in batches of 21 machines). We also started to launch our “spider” more often on the Web, and therefore our search results are not only operational, but also the most relevant. We have enlisted the services of talented professionals who will help us bring our search engine, the most advanced of all, to the World Wide Web. ”
Brin and Page gave ten reasons to work for the company, including: advanced search technology, stock options, free snacks and drinks at lunchtime, and the high probability that "millions of people will use your software." They had big plans, they were still full of enthusiasm, and the number of Google users grew steadily. They have already begun to pay attention: the Google search server, still in beta testing mode, was included by PC Magazine in the list of one hundred leading websites and search engines in 1998.
An additional advantage to Bryn and Paige was that the developers of better known search engines — such as AltaVista, Excite, and Lycos — stopped investing in improving their search technology. Some were forced to submit to the will of the leadership of the parent company, while others focused entirely on sifting advertising dollars from the Internet companies that had just gone on the stock exchange, whose founders had more money than brains. The deterioration in the quality of information retrieval prompted users to look for alternatives - and many of them stopped at Google. Thanks to being on the PC Magazine list, thousands of people learned about the existence of the company, and Bryn and Page realized what the influence of the media was. While their neighbors in Silicon Valley have invested millions of dollars (which they didn’t actually have) in commercial breaks during the Super Bowl and in expensive marketing, Google has gained popularity and recognition without spending money at all.
At that time, it was widely believed in Silicon Valley that universal websites would soon become the main “gateways” to the Internet, but Bryn and Page did not think so. They believed that portals seeking to cover absolutely everything would not be able to meet the specific and specific needs of users as effectively as specialized websites do. Page and Brin were convinced that searching for information on the Internet is the most important of those long-term tasks that they can do, and that their more advanced search engine will certainly become a favorite among users. In order to ensure the accuracy, speed and reliability of the search operations, they invested most of the money in hardware and spent much of their time searching for talent and improving the software. They had a clear goal: to take a leading position among Internet search engines - and this was at a time when others were trying to reorient themselves and even sarcastically called search mechanisms “consumer goods”. The guys firmly believed that the search is very important in view of the ever-expanding Internet space.The number of requests grew steadily, and with it the popularity of the brand.
Soon after moving to Palo Alto, Bryn and Page expanded the staff of their company to eight people. Their unique system, the key components of which were personal computers assembled from inexpensive components and special software, was powerful enough to handle an increasing number of requests and load more and more web pages. However, sooner or later, the amount of memory will need to be increased, and that more than a million dollars that they collected, has already ended. When the number of requests exceeded 500 thousand a day, Brin and Page realized that they needed to get a large amount of money as quickly as possible in order to be able to collect PCs. The more computers they connect to their system, the more requests they can process, the more requests they process, the faster their business will grow. But they also did not intend to lose control over their company.
Taking into account the boom that engulfed Silicon Valley in early 1999, Google’s entry into the stock market could be a good option. However, Bryn and Page didn’t want to disclose their professional secrets ahead of time, and besides, for them, money was not the first place, but the opportunity to improve their offspring. It did not make sense to look for other investors: they needed a rather impressive amount. Business development solely on its own had no prospects. Google developers began to provide licenses for the right to use the search system to companies that expressed a desire to connect it to their internal or external network (the first client was Red Hat, a software company), but there were very few people willing to pay for search programs. So, Google needed a massive financial infusion from outside.
Page and Brin studied the situation in the venture capital market. They hoped to make a deal with a solid venture capital firm, while retaining control over their company. True, then it was as likely as downloading the entire Internet on one computer.But the guys were absolutely sure that they will succeed. Everyone in Silicon Valley knew: to enlist the financial support of any mastodon from the Sand Hill Road is the dream of any budding businessman. The money made it possible to acquire profitable business partners, cooperation with which could cause the rise of the IT company or, on the contrary, its decline. At the same time, the transfer of control over the company to a venture capital firm could significantly affect its founders, their plans and the development of technology.
Studying potential sources of funding, Google developers found out what the loss of control over their company can turn out for the founder: a venture capital firm either quickly takes the company to the stock exchange or forces it to place as much advertising on its website as possible. After consulting with Amazon com CEO Jeff Bezos, who had investment experience in IT companies, Bryn and Page decided to apply simultaneously to two reputable venture capital firms: Kleiner, Perkins, Caufield & Byers and Sequoia Capital. If they can agree on cooperation, both firms will make financial investments in Google, but none of them will get full control over their company. They will fight with each other for domination, control, and the right to be the only investor, and Bryn and Page, remaining the majority shareholders, will manage. If not - well, then the founders will have to look for another source of funding. So what of the fact that to act in a similar way in the business world is not accepted? They will act that way and not otherwise. No concessions. Everything is very simple. And John Derr from Kleiner, Perkins, Caufteld & Byers, and Michael Moritz from Sequoia Sarital are already rather tired of the endless presentations at which budding businessmen presented their ideas. It was rather difficult to single out those on whom it was worth betting: for this it was necessary to determine which of the hundreds of new concepts and technologies have a chance to gain popularity.For two titans of Silicon Valley, Sergey Brin and Larry Page became a breath of fresh air. Instead of a presentation in PowerPoint, they presented a working search engine, surpassing all the search engines that Derr and Moritz had to deal with.Google developers made an impression of extremely talented and penetrative young people. They knew everything a businessman needed to know. In addition, they had years of study at Stanford, there were some connections, as well as drive and determination. Unlike the townsfolk, who have a good idea, but do not have enough strength to implement it, these guys will certainly do everything to bring the work begun to the end.
The key questions were the following: how to evaluate a search technology that was not supported by a real business model, and whether a serious investor can work with developers who want to get as much money as possible and at the same time retain as many company shares as possible. In principle, neither Derr nor Moritz had any particular objections to the company's long-term development strategy presented by Brin and Page. Their firms earned a lot of money due to the boom in the field of Internet technologies. Professor David Cheriton, who acted as an intermediary, stressed that he does not doubt the honesty of the creators of Google and their conscientious attitude. In addition, Larry and Sergey - despite the fact that they had prepared a very serious technical rationale - made an impression of pleasant young people and interesting interlocutors. This they compare favorably with other start-up entrepreneurs.
For the first time then doctoral students Brin and Page met Moritz in 1996 with the assistance of David Filo, one of the founders of Yahoo !. Its Sequoia Capital provided Yahool with financial support in the amount of $ 2 million, and later, when Yahoo! placed its shares on the stock exchange, tore a good sum. Friends then collected information on how to create their own company, including various methods of asset valuation. It was necessary to do this in order to conclude an agreement with Stanford - this would speed up the process of obtaining a patent for PageRank and allow them to obtain a license from the university for the right to use the patent for the program. They were advised to talk on this topic with entrepreneurs specializing in venture investments. “They asked me how to open their own business. But we did not talk for long, to be honest, such questions are asked to me daily, ”recalls Moritz. “I did not attach any importance to them.” And in 1999, when Google started having financial problems, Ron Conway’s manager of financial turnover regulation from Silicon Valley, one of the company's first investors, contacted Moritz and asked him to meet with the developers.
“Ron Conway told us a lot about them,” says Moritz. “We heard something about them too - mostly from the founders of Yahoo!” It was in the spring of 1999, so everything was done at a crazy pace. It was a very hectic time. ”
Moritz made a great impression on Google. “We met several times in the Sequoia Capital office and in Palo Alto, where they had a small office in a building on the main street. Google then worked in beta testing mode, the excellent quality of the search was evident. Their initial business idea did not involve advertising, they wanted other companies to sell licenses to use the technology. ”
How did Moritz evaluate the potential of their enterprise? His answer will help to understand how successful investors approach decision-making: “It's more of an art, it's hard to learn.” Played his role and the fact that he already had experience working with Yahoo! - relations with other business entities still have a certain impact on the decision-making process. “We, too, were wrong, and were wrong more than once,” explained Moritz. - But the quality of information search at Google was noticeably higher than that of other search engines. That is why we began to invest in it. We have already benefited from the boom in the field of Internet technologies and believed that as the Web develops, the importance of search will increase, not decrease. Besides, these two, Larry and Sergey, are very talented. Another factor is that Yahoo! has already entered into licensing relationships with a number of companies specializing in searching information on the Internet - Open Text, AltaVista, Inktomi. Then they were joined by Google.
Yahoo! Developers were very interested in google search engine. That's why they wanted us to invest money in it - they thought that Yahoo! from this only benefit. Sequoia agreed to work with Google in part because it wanted to help Yahoo !.Their approach was correct, because then, in 1999, no one knew how everything would turn out. Google was a potential provider of services for Yahoo !. In general, the Internet has generated two useful things: the first is e-mail, and the second is search. And the guys just developed a more sophisticated search engine. ”
Moritz also noted for himself that Brin and Page possess all the qualities necessary for an entrepreneur. He knew from his own experience that start-up companies founded by two partners with a similar vision of development strategy are more likely to succeed than companies of one-on-one companies. Microsoft succeeded by Bill Gates and Paul Allen. Apple succeeded Steve Jobs and Steve Wozniak. Yahoo has succeeded !. Maybe Google will succeed. “They are extraordinarily talented young people. It is obvious. The specifics of our business are such that we constantly meet new people and eventually learn to isolate exceptional people from the crowd - partly based on what they have done or are doing, partly on how they express themselves. The guys were inherent extreme sense of purpose - the quality necessary for everyone who wants to start their own business. A strong belief in ultimate success helps a lot to overcome obstacles. ”
If Moritz was impressed by the system itself and its developers, then John Derr of Kleiner Perkins professed a more pragmatic approach. He considered possible cooperation through the prism of the long-term development of the Internet and the prospects of Google in the context of such development. For Derr, only those technologies were of interest that will bring more and more profits to their owners with an increase in the number of users. Even in the period of the Internet boom, he did not share the conventional wisdom that the market is clearly “overheating” and that the media are paying undue attention to it, insisting that the Internet has more potential than many people think. Derr made a fortune by financing Compaq Computers, Sun Microsystems and Amazon.com before most of the market operators understood the concepts of these companies. It is worth noting that he also had access to Google - through Amazon.com founder Jeff Bezos, one of the company's first investors and unofficial consultant Brin and Page. The creators of Google knew that Derr had a great experience and reputation as a leading venture capitalist, and understood that his participation in an enterprise called Google would help them transform their plans and ideas into good income. Derr was also one of the first investors of America Online, the largest Internet provider, a potential Google client. Larry and Sergey realized how much money such transactions could bring. Money for them was a prerequisite for the realization of a big and bright dream - to create the best, most advanced search engine on the planet. Financial support from Kleiner Perkins will be the key to future success for their start-up company.
In the spring of 1999, both Moritz and Derr decided that their firms should invest in Google. Bryn and Page did succeed, but there was one problem: Kleiner Perkins and Sequoia Capital refused to invest in the company together, so the founders of Google risked losing both. Each wanted to “command the parade” - to call the deal with Google “their own.” Each had large assets and did not want to cede control of Google to a competitor - and therefore did not agree to the role of a minority partner. Neither Kleiner Perkins, nor Sequoia, of these financial “heavyweights” of Silicon Valley, was tempted by the prospect of being a co-investor of a start-up company. Such a number in the field of venture capital investment will not work - at least in relation to the two most influential inhabitants of Sand Hill Road.
Brin and Page are faced with a dilemma. On the one hand, they needed money, and two firms were ready to give it. On the other hand, they may be able to get the money without losing control over the company — if they can convince both companies to become their investor. After long and painful deliberation, they nevertheless chose the latter - it is better to lose very attractive potential partners than the right to be the majority shareholder of Google. Fortunately for the guys, Ron Conway and Rem Srirem (also one of the company's first investors) who personally knew Moritz and Derr volunteered to help them find a way out of the current impasse. Now, the creators of Google began to understand why entrepreneurs specializing in venture capital investments are sometimes called “vulture capitalists” [5], and were increasingly inclined to think that Google, in principle, can do without them.
Larry and Sergey asked Conway, who had good connections, if he could organize a group of small investors as a backup. Having several passive investors will mean that Larry and Sergey remain the majority shareholders of their company.They told Conway that they were ready to take such a step, adding that time does not tolerate: they run out of money.
Conway, however, first contacted not one of the potential shareholders, but Sriram. After deliberation, they decided to tell Moritz and Derr that if they could not agree with each other about working together with Google, Bryn and Page would come out of the negotiations, and they would not bluff.
Since all this was happening at a time when the offices of Kleiner Perkins and Sequoia were daily besieged by hordes of entrepreneurs in the hope of financial support, Moritz and Derr realized: Google is a very promising enterprise indeed.Venture capital firms nevertheless renounced their principles, and a few days later a cooperation agreement was concluded.Kleiner Perkins and Sequoia pledged to invest $ 12.5 million each in Google, accepting the developers' demand to maintain control over the company.
True, Derr and Moritz put forward one condition: the founders of the company will have to put at the head of Google an experienced manager who would help them transform the search engine into a profitable business. Reasonable request, considering that at that time Brin and Page did not even have a business plan. And they agreed: after receiving $ 25 million and the right of a decisive vote, they will be able to block the decision on the appointment of a person by the general director for an arbitrarily long time. They did not want to hire the one to whom they would be accountable.
On June 7, 1999, a year after leaving for academic leave, Brin and Page published a press release stating that Kleiner Perkins and Sequoia Capital had agreed to invest $ 25 million in Google Inc. Everyone at Stanford and Palo Alto was shocked - this is a lot of money! Although the two companies never acted as co-investors, Derr and Moritz became members of Google’s board of directors. Wow, the two guys, who were always considered to be overly confident by their classmates, somehow snatched an astounding amount without giving almost nothing in return. Everything said that the creators of Google made a super-profitable deal: they got the money needed to continue working on their offspring, as well as the control and authority necessary to run everything. “We are very pleased to have enlisted the support of investors of this caliber,” Brin said in an official statement. “We plan to aggressively develop our company and our technology in order to continue to provide the highest quality information retrieval services on the Web.”
Bryn supported these words with a bold remark: “A perfect search engine will collect and analyze all the information available in the world. Google is committed to this. ”
The press release also reported that the PageRank ranking program, a patent for which will be received shortly, contains 500 million variables and two billion logical elements. It is this one that ensures the unique accuracy and quality of the search, which made it possible to transform the research project of doctoral students into a large enterprise for data mining. Probably, if there were no Derr and Moritz statements in the press release, many at Stanford would think that all of this is a grandiose hoax. “Google should be the gold standard for finding information on the Internet,” said Moritz. “I am convinced that the company Larry and Sergey is capable of making Internet users on all five continents convinced Googlers.”
“Providing high-quality search is an extremely difficult task, and improving search technology is of great importance here,” said Derr. “One hundred million information search operations are performed daily on the Web. Quickly finding the right data is extremely important for Internet users of various professions. Google is a revolutionary search engine that presents information the way a user needs. ”
The document mentioned the details of the transaction, additional information about Google, as well as an impressive list of investors of the company, and noted that its growth rate is 50% per month. All this attracted the attention of the international media to the company, which also played into the hands. The next day, Larry and Sergey sent an email to “Google friends”: “This month has become special for us: we received the necessary funds and now we can continue to work on Google search engine. Our computing power is still increasing (thanks to you!), And we are constantly expanding the network to meet the needs of all our users. This month we have installed several new servers in order to provide a higher search speed (now we order computers in batches of 80 pieces instead of 21, as before). We are also working to minimize the number of matches in the search results, and we are developing a number of new services (cfcc!), Which we hope will provide a better search. ”
For Google and its founders, this was a moment of triumph. However, neither the press release, nor the media reports about the deal, which were full of colorful epithets and bold predictions, did not answer the main question: how is the company going to make money?
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History of computer technology and IT technology
Terms: History of computer technology and IT technology