Given that it’s nearly a year since the blessed event, I thought it’d be fun to post a portion of my chapter covering the IPO. This is just a taste, the first 1000 or so words. As always, if I got stuff wrong, let me know….
Success and failure are equally disastrous.
Sergey Brin is jet-lagged; he has the vaguely disoriented look of
a young man still finding his bearings after a very long,
strange trip. I watch him enter a crowded restaurant and look
around for familiar faces—save for me, the persistent author, there
are few. He is in Davos, Switzerland, attending the World Economic
Forum (WEF), the annual conference of political and business lead-
ers. The room is full of captains of industry and members of the
media from around the world, and all of them stop to regard Brin,
who is, quite literally, the man of the moment (he is slated to give a
short dinner presentation that night).
Brin forges ahead around the tables, acknowledging a greeting
here and there, his hands pressed together at his chest like a yogi’s,
his eyes more alert as he warms to the task at hand. He sits down at
a table near the back, shakes hands all around, then informs his dinner
companions that he really did just step off his plane. He was
here to stand in for Larry Page, who was supposed to be at the dinner,
but Page was feeling under the weather after the ten-hour flight.
It is January 2005, and Brin is at Davos for the fourth time, but
this is his first as a billionaire helmsman of a newly public company.
At last year’s soiree, Bill Gates, CEO of Microsoft, acknowledged
quite publicly that “Google kicked our butt” in search, but promised
that Microsoft would respond with an even better offering. One year
later, Microsoft had indeed introduced an early version of its new
Back at the dinner, Brin is accepting congratulations
and plaudits for Google’s unusual initial public offering.
The stock’s stellar performance since the IPO
(it had more than doubled in less than four months)
had nearly everyone asking Brin what might be next for Google.
Brin accepts the plaudits, but is clearly uncomfortable lingering
on the story of the IPO itself. “We have more time to focus on the company
now,” he later tells one well-wisher. Clearly, Brin is glad the IPO is
The journey from dorm rooms and Burger King takeout to private jets and
a starring role at the World Economic Forum has been dizzyingly brief;
certainly Brin can be forgiven a resultant touch of jet lag. And as
years go, 2004 ranked as a critical turning point for Google, the
company, as well as Brin and Page, the men. For 2004 was the year Google
began to grow up, not necessarily because it wanted to, but in the end,
because it had to.
Rumors of an IPO
On October 25, 2003, the top story on news.google.com read:
“Google Sparks Hope of New DotCom Boom.” Given that the
Google News computers choose stories based on popularity and
prominence of source, it’s fair to say that the speculation about
when and if Google would file papers to become a public company
had reached fever pitch. Later that same month, the New York Times
reported that Microsoft was eyeing an acquisition of Google, a story
that Bill Gates later disputed. In any case, it was clear that by the
end of 2003, Google was crowned Silicon Valley’s latest golden child.
Expectations were high—reports claimed Google’s IPO would value
the company at $16 billion, roughly the same size as Amazon.com.
As 2004 dawned, Google had become the talk not only of Silicon Valley,
but of Wall Street as well. Whispered financials for the
secretive company pegged 2003 revenue at nearly $1 billion, with
profits estimated at more than $300 million.
By this time, both Yahoo and Microsoft had realized the threat
Google posed to their businesses. Each of those companies had
valuable public shares and massive piles of cash, and they scrambled
to redeploy them against Google. Simply put, if Google was going
to compete, it could not afford to stay private. Valley watchers, press
pundits, and Wall Street writhed in ecstatic speculation: Would
Google’s IPO augur the second coming of the Internet bubble?
Could it usher in a new, more profitable era of tech growth? Who
would get rich? Who would fall behind? Who would follow in
Google’s footsteps? Might the company stumble?
In its early years, the company had downplayed talk of an
IPO—after all, the markets were in the tank, and no one seemed to
have an appetite for any kind of Internet stock, no matter how robust
the company might be. But 2004 marked a transition of sorts—it seemed
to be springtime again in the Valley—and the spotlight was squarely on
Google. With its venture backers, its thousands of option-holding
employees, and its massive profits, clearly the company was heading
toward one of the largest public offerings in the history of
In fact, the answer was a qualified no. In an interview with the
San Francisco Chronicle in the fall of 2001, Eric Schmidt laid down
what would become the triumvirate’s standard answer to the IPO
question. “The IPO question we’ve debated internally, but frankly,
we’re profitable,” Schmidt said. “We’re generating cash. We don’t
ever need to go public.”
This line was repeated, over and over, for the next three years,
to the point where Google’s evasive responses were becoming
something of an industry joke. At a conference in early 2004,
Brin even went so far as to joke that an IPO was not in the offing
because “filling in all those accounting forms is too difficult.”
Turns out Google’s leaders were wrong about not needing to go
public. Because the company had given stock options to more than
one thousand of its employees, an obscure SEC regulation would
force Google to begin reporting as if it were a public company, as
early as April 2004. The stage, therefore, was already set.
Despite the realities of SEC regulations, that Google would be-
come a public company was never really in doubt. Once a company
takes money from venture capitalists, the event is nearly a fait
accompli—only an acquisition or bankruptcy can easily divert the
path. “The day I was hired I understood the company would go
public because it had venture investors. The only question was tim-
ing,” Eric Schmidt told me after the IPO, giving the lie to three
years of transparently disingenuous corporate line-toeing.
But despite their company’s obvious course, Brin and Page
struggled with the idea of becoming public. Google had prospered
in private, and its founders worried that the company would be
forced into a mind-set of short-term thinking, a trait common to
many listed companies.
Throughout 2003, Google toyed with scenarios that would allow
the company to stay private. It hired consultants to model complex
financial mechanisms—such as repurchasing options and the deploy-
ment of a shadow equity plan that might protect the company from
avoiding its seemingly predetermined fate. But the math never satisfied
Page, Brin, or their board—any way you cut it, the maximum payout
for Google’s investors was the public markets, plain and simple.
From “The Search – How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture,” Portfolio, 2005. Buy it here!