Google Estimated to be worth $20-25 Billion
Buy a bit of Google and search for luck
Web engine may issue shares
New billionaires instant possibility
GARY RIVLIN
NEW YORK TIMES
NEW YORK - Tiger Woods has his small stake. So do Shaquille O'Neal, Henry Kissinger and Arnold Schwarzenegger. All can be counted in that small club of people lucky enough to own a sliver of Google, one of the hottest Silicon Valley companies and what could be the hottest deal on Wall Street this year.
Whether and when Google, the world's most popular search engine, might finally proceed with an initial offering of shares to the public has captivated Silicon Valley in recent days — as it nears a deadline this week to provide a financial disclosure document required under the 1934 securities law.
The company has not declared its intentions but Google is the most anticipated public offering since the dot-com bubble burst four years ago.
The current prediction is that Google, if it decides to sell shares to investors this year, would probably end up with a market value of $20 billion (U.S.) to $25 billion by the end of its first day as a publicly traded company.
People speculate. People dream. And if the numbers are to be believed, people will be drooling.
A $25 billion market value would instantly make Google worth more than Lockheed Martin, the big military contractor; Federal Express, the package delivery service; and Nike, the sports clothing maker.
"It's bound to happen," said Andy Bechtolsheim, the first person outside the company to invest in Google. Bechtolsheim, a founder of Sun Microsystems, said he owns a little more than 1 per cent of Google. Assuming a huge opening day, the $200,000 he invested in Google in 1998 could be worth at least $300 million.
Not everyone would fare as well as Bechtolsheim. Many own a small stake in Google through an investment syndicate that included many Internet failures, and would stand to make only a modest profit on their total investment, if anything.
The list of those who stand to profit handsomely if Google proceeds with an initial public offering certainly includes the usual suspects. Start with the company's two young founders, Sergey Brin and Larry Page, who started Google as graduate students at Stanford University and are known affectionately as "the boys" among Silicon Valley insiders.
Brin and Page, now in their early 30s, together own an estimated one-third to one-half of Google, depending on which insider's number deserves credence.
"In a way, it doesn't make a difference whether the boys own a third of the company or half," said a Silicon Valley venture capitalist who spoke on the condition he not be identified, because Google is a secretive company. "We're all living in a Google world now. You can safely say," he said, that "both of them will be worth in the many billions.''
Kleiner Perkins Caufield & Byers and Sequoia Capital, the two venture capital firms that invested in Google in June 1999, just as it was becoming a daily tool of the digital elite, each own 11 per cent to 14 per cent of the company, several Silicon Valley venture capitalists said.
The list of institutions that stand to make a small fortune from Google includes two of its potential rivals, America Online, now part of Time Warner, and Yahoo.
"People made fun of Yahoo for its licensing deal," said an executive at a search-related startup company that is a partner with Yahoo and Google, who insisted on anonymity to avoid spoiling his relationships. "They helped to create a big competitor. But this deal that hurts them strategically will make the company a lot of money.''
Yahoo invested $10 million several years ago, when Google was the search engine powering Yahoo's operations on its Web portal. Yahoo owns a small stake, a person who has seen the terms of the deal said.
Under a different deal struck in 2002, America Online has the right to buy nearly 2 million shares of Google for roughly $22 million, according to Time Warner.
A list of the others who stand to be enriched should Google go public seems to prove that the rich get richer. It reads like a ``who's who" of Silicon Valley insiders, including Frank Quattrone, the former investment banker now on trial in New York on charges of obstruction of justice and witness tampering.
It includes some of Silicon Valley's greatest entrepreneurial successes, including Marc Andreessen, founder of Netscape; Pierre Omidyar, a founder of eBay; Shawn Fanning, creator of Napster; and Bill Joy, the software innovator who recently left Sun Microsystems.
Stanford, already one of the country's richest universities, also stands to add considerably to its bottom line if Google goes public. Brin and Page, who met in 1995 at a party for incoming computer science graduate students, worked together on a university-funded data-mining project. In the project they invented the search technology that would eventually be Google's core technology.
"The university owns the technology," said Katharine Ku, director of the Office of Technology Licensing at Stanford. "We license it to Google, which back then was just these two kids. They pay Stanford royalties annually. We also took a bit of stock in the deal.''
Under the terms of that deal, the royalties are evenly split three ways among Brin and Page, the computer science department and the university's engineering school. That deal — struck in 1996 — continues, Ku said, and would not be altered by a public offering.
Ku declined to share the terms of the licensing deal or to speculate on the potential value of the university's equity stake.
David Cheriton, a computer science professor at Stanford, introduced Bechtolsheim to Google's founders. On a sunny August afternoon in 1998, the four sat on the porch of Cheriton's Palo Alto home, where Page and Brin tried to demonstrate their product for him.
"My first question was, `How are you going to make money?'" Bechtolsheim said. So pleased was he by their answer that before the pair could finish the demonstration, he decided to write them the first of two $100,000 cheques.
"They needed money to pay the lawyers to incorporate the company," he said. "And I wanted to make sure I was part of this company.''
The founders raised roughly $1 million that September, including Bechtolsheim's investment. Other early investors include Cheriton and Ram Shriram, a former Netscape and Amazon executive.
"Basically they needed money to buy the machines so they could prove out the concept," Bechtolsheim said.
The company closed on a second round of financing in June 1999. By then, much of Silicon Valley's elite wanted a piece of Google, which had become the search engine of choice.
That is when Ron Conway and Bob Bozeman, two partners in a venture fund called Angel Investors, discovered Google — and brought in a long list of the famous from Woods and Kissinger to some of the Valley's best-connected entrepreneurs and financiers, including at least five billionaires.
Andrew Anker, a former venture capitalist and now an entrepreneur, said of a Google public offering, "No matter how you cut it, this will make a lot of people very happy.''
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