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Starting Up

How Google got its groove.

By Richard Brandt

Starting a company was never on Larry Page’s or Sergey Brin’s lists of things to do while at Stanford. Both come from academic families and never expressed an interest in becoming entrepreneurs—until they did it.

But, as Page and Brin learned, Stanford is a great place to turn your research into a business, even an extraordinary one. To test their search engine, they needed computers and a lot of computer memory, and they frequently begged for cash from professors and associates to buy disc drives. In particular, they approached Professor Hector Garcia-Molina, Page’s adviser. “I was their main bank,” he recalls. Finally, he asked Page exactly how much of the Internet they wanted to archive and search. The reply: “All of it.”

Garcia-Molina managed to get $10,000 from the Digital Library budget to help out. Brin and Page bought components and built the data servers themselves. The search engine debuted on Stanford’s site (as google.stanford.edu.). The more data they collected, the more equipment they needed. So the next idea was to find a company to buy or license their technology, and perhaps employ them to continue its development.

In 1996, Page and Brin approached Stanford’s Office of Technology Licensing, and showed off their software. OTL gladly lent a hand, contacting Internet companies to determine their interest in search technology. By 1997, Page was on the road in Silicon Valley as salesman. Several companies started bargaining for the technology, but nobody was willing to pay the million-dollar asking price. Novell reportedly offered $500,000. Brin, Page and OTL agreed it did not represent the value of the patent.

Finally, on the advice of another Stanford dropout (David Filo, co-founder of Yahoo!) they took a leave of absence from Stanford and started their own company to prove their system could search the entire Internet. With Stanford’s blessing—and an exclusive license to the PageRank patent, recently extended to September 2011—they went in search of investors.

They didn’t have to look far. There were a few people right there in the Gates building where Brin and Page had their offices. One was Professor David Cheriton, who had made a sizable amount of money when a company he co-founded with Andreas Bechtolsheim, another famous Stanford dropout (and founder of Sun Microsystems), was bought by Cisco Systems. Cheriton introduced the Google founders to Bechtolsheim, and both ended up investing.

Google took off beyond anyone’s wildest imaginings. As the patent holder, Stanford OTL ended up with more than 1.8 million shares of Google. At today’s prices, that’s worth about $245 million.

And don’t feel too sorry for all those professors who lent money to Brin and Page to buy equipment. One of them jokes that he invested $40 in the pair back when they were scrounging for cash. The Google stock he got in return should pay for his retirement.

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