By the spring of 1999, Google had a problem that most startups would kill for: it was too good to stay small. Larry Page and Sergey Brin were still running the company out of rented space, serving a growing crowd of users who kept telling their friends. The search was better. Everyone could feel it. But better search meant more machines, more bandwidth, more engineers — and the founders’ pockets, plus a scrappy first round of angel money, were running dry. It was time to raise real capital.
What happened next became one of Silicon Valley’s most quietly audacious financing stories: two of the most powerful venture firms in the world, firms that almost never sit at the same table, were talked into funding the same tiny startup at the same time.
Two crowns, one company
In late-1990s Silicon Valley, two names sat above all others on Sand Hill Road. Kleiner Perkins Caufield & Byers, led by the relentless John Doerr, had backed Netscape, Amazon, and a string of internet winners. Sequoia Capital, founded by Don Valentine in 1972 and by then powered by the sharp former journalist Michael Moritz, had money in Apple, Cisco, and Yahoo. Landing a check from either one was a coronation. Landing both was almost unheard of — the two firms were fierce rivals who typically fought over deals rather than shared them.
Page and Brin, characteristically, decided they wanted exactly that. Getting both meant Google would have the two best-connected investors in the valley pulling in the same direction, with neither able to dominate the young company. It also meant the founders could hold onto more control than a single dominant investor might allow. The catch was convincing two proud competitors to split a deal each would rather own outright.
The stare-down
The negotiation was, by every account, a test of nerve. The founders made clear they wanted Doerr and Moritz both, and they were willing to walk rather than settle for one. For seasoned investors accustomed to setting the terms, being played against a rival by a pair of Stanford graduate students was a novel and slightly irritating experience. But the product spoke for itself, and neither Doerr nor Moritz wanted to be the one who passed on the search engine everyone in the know was already quietly using.
So they blinked — together. On June 7, 1999, Google announced a $25 million round of equity funding. Kleiner Perkins and Sequoia split it down the middle, roughly $12.5 million apiece. John Doerr and Michael Moritz both joined Google’s board of directors. Two rival kingmakers, one boardroom, one very small company that was about to get much bigger.
Betting on ambition, not a business model
Here is the detail that still surprises people: Google, in June 1999, had no meaningful revenue. It had brilliant technology, explosive usage, and roughly forty employees — but no clear answer to the question every investor eventually asks: how will you make money? The AdWords auction machine that would later mint billions did not yet exist. The pitch Doerr and Moritz were buying was closer to a conviction than a plan: that search was the front door to the entire web, and whoever owned the best door would own something enormous.
Doerr, as the story is often told, pressed the founders on just how big they thought Google could become, expecting the usual hopeful figure. The answer he got — a market value in the billions — struck him as either delusional or the whole point. He wrote the check anyway. That is the essence of great venture investing: paying for the size of the ambition when the spreadsheet can’t yet justify it.
The $25 million did exactly what it was supposed to. It bought servers, bandwidth, and headcount, and it bought Google the runway to keep improving the product without having to compromise it for a quick buck. Just as importantly, it bought credibility. When Kleiner and Sequoia both put their names on a startup, the rest of the valley took notice.
But money and prestige don’t answer the revenue question forever. A board full of legendary investors would soon start asking, politely at first, how a search engine with no ads planned to become a business — and the pressure to grow up was about to arrive at Google’s door.
Next in the series: the search for adult supervision — how Google went hunting for a CEO who could turn a beloved product into a real company.
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