On Friday it was revealed the investor offering up the money would be none other than tech titan Google — obviously not willing to stand idly by and let Microsoft win the battle for AI supremacy.

The news was first reported by the Financial Times.

The deal — which gives Google a 10% stake in the company — comes just weeks after news broke of Microsoft’s massive investment in OpenAI.

Anthropic’s AI chatbot, Claude, is in closed beta mode, but in a paper detailing its goals, it is expected to combat harmful prompts by explaining why they are dangerous or misguided.

This is not Google’s and its parent Alphabet’s first foray into AI. In 2015 Alphabet bought DeepMind, a London-based AI startup founded in 2010, and is building an NLP model similar to ChatGPT.

AI dominance

The new year is shaping up to be an all-out AI war. Late last month, Microsoft finally confirmed it has agreed to a “multiyear, multibillion-dollar investment” into OpenAI, the startup behind the artificial intelligence tools ChatGPT and DALL-E for a reported $10 billion. 

Per Crunchbase data, funding in the AI space has accounted for around 10% of all venture funding in recent years. Even last year, as venture dried up, AI flourished in its second-best funding year ever. 

Just this week, it was reported by The Information that an AI startup co-founded by a pair of entrepreneurs who had left Adept AI recently raised $8 million. And Perplexity AI, which is developing a search engine that lets people ask questions through a chatbot, is looking to raise a $15 million seed round. 

Anthropic’s new round could bring the company’s total valuation to $5 billion, The New York Times reported. The startup previously raised $704 million across Series A and Series B funding rounds in 2022, according to Crunchbase data.

Illustration: Dom Guzman

Clarification: This story has changed since its original publication to clarify terms of the deal.

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The company, which is based in Indonesia, provides a wide range of services, from rides to payments to food delivery.

Gojek’s investors include Google, Tencent Holdings and Visa. The company first raised money with its $2 million Series A in December 2014, and has more than $4.5 billion in funding, according to Crunchbase.

The financing deal was finalized over the past week, Bloomberg reported. It’s an impressive sum that comes as the world economy feels the effects of the coronavirus pandemic. The U.S. stock market, for example, has sunk and investors have suggested that there will be a slowdown in venture capital funding.

“We’re not stopping there as we are still seeing strong demand among the investment community to partner with us,” co-CEOs Andre Soelistyo and Kevin Aluwi wrote in an internal memo to employees, which was obtained by Bloomberg. “There are a number of exciting ongoing conversations that we will be able to update you on very soon.”

Gojek competes perhaps most notably with Singapore’s Grab, another ride-hailing giant that’s trying to be the “everything in one” app with rides, payments, food delivery and other services. Grab–which has nearly $10 billion in funding, according to Crunchbase–and Gojek were reportedly in talks about a merger, though Gojek denied it, according to Bloomberg.

Illustration Credit: Li-Anne Dias

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KP19, the 19th fund for the firm, will focus on early-stage investments in consumer, enterprise, financial technology, health care and hartech companies, according to a statement from Kleiner Perkins.

KPCB, which has backed companies like Amazon and Google, said it would go back to focusing on early-stage investments when it announced the closing of its last fund last year.

About 35 percent of its KP18 investments were seed series, 53 percent were Series A rounds and 12 percent were Series B. Enterprise startups made up 43 percent of KP18’s investments, with the firm investing in 15 enterprise companies. Deep tech took second place with 24 percent of KP18’s investments, or eight companies.

KP19 will be “more of the same,” according to the firm.

“It’s the same team, with the same strategy, investing in the same sectors at the earliest stages,” KPCB said in a statement.

Additionally, Annie Case, Monica Desai Weiss and Josh Coyne were promoted to principals at the firm. Case will focus on consumer and health care, Weiss will lead investments in fintech and consumer, and Coyne will focus on enterprise and fintech.

Ilya Fushman, Mamoon Hamid and Wen Hsieh are the general partners listed on the regulatory filing for KP19. Ted Schlein, who was listed as a GP on KP18, closed last year, is not listed as a general partner on this latest fund.

Illustration: Li-Anne Dias

On March 2, Twitter and Facebook announced they would back out of the South by Southwest (SXSW) festival being held in Austin, Texas, due to fears over coronavirus (COVID-19). Today, Intel followed suit. A petition is being circulated by mostly Austin residents asking organizers to cancel the annual event (as of this morning, it had more than 31,000 signatures). Now it appears that startup founders and venture capitalists, too, are nixing plans to attend SXSW – scheduled for March 13 to 22 – due to coronavirus concerns.

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I reached out to SXSW organizers to get their reaction, and they referred me to a statement on their website that said they are working closely on a daily basis with local, state and federal agencies to plan for a safe event.

“As a result of this dialogue and the recommendations of Austin Public Health, we are proceeding with the 2020 event with the health and safety of our attendees, staff, and volunteers as our top priority,” they continued.

No doubt the unprecedented cancellation of SXSW would have a major economic impact on the Texas capital. The 2019 South by Southwest festival had a $355.9 million impact on Austin’s economy, according to an October report referenced by the Austin American-Statesman.

In fact, the 2019 event had the biggest economic impact in SXSW’s 33-year history. Further, SXSW “is the most profitable event for the city’s hospitality industry,” according to the Greyhill Advisors report and as cited by the Statesman.

‘Not worth it’

As SXSW organizers no doubt scramble to deal with the crisis, we talked to a few startup founders and VCs to hear about why they’re skipping the festival this year.

Cody Barbo, founder and CEO of San Diego-based Trust & Will, told me he’s going to cancel his plans to attend SXSW. This is a big deal, he said, because his company (which recently raised a $6 million Series A) is in the pitch event for consumer tech.

As a new parent, Barbo said the risk simply isn’t worth it. And his co-founders, team and investors are all supportive of his decision.

“Attending SXSW is not the best decision for my family,” he told me in a phone conversation this morning. “We were honored to be selected for the pitch competition and it hurts me to pass that up, but with so many people converging on the city, it seems inevitable that something will come out of it if the event continues.”

Barbo, too, is disappointed in organizers and city officials for not taking things like Facebook and Twitter backing out, and the concerns of residents and attendees more seriously .

“I hate to say it, because SXSW has always had an immaculate reputation, but this feels like a lack of leadership on the part of organizers and the City of Austin,” he told me.

Vineet Jain, co-founder and CEO of Bay Area-based Egnyte, said he was planning to fly to Austin for SXSW but in light of the virus, his company has “restricted all non-essential travel.”

“SXSW has become one of those events that you feel like you should go to. There’s a lot of creative thinkers there,” he told me via Zoom this morning. “But it takes just one employee coming down with it to shut down a whole office. So I’m not going.”

Jain too shares Barbo’s surprise that the event is even still happening.

“With Google and Facebook cancelling their events, why would these guys continue? In fact, I should get my money back,” he said. “The amount of bad press they’ll get might ruin the brand for years going forward.”

VCs chime in

But it’s not just founders. VCs and investors also are opting to stay home.

Tim Ferriss, investor and host of The Tim Ferriss Show podcast, announced on Twitter this morning that he’s not going.

“After much thought, I’ve cancelled my attendance at SXSW. I love SXSW, but I don’t believe the novel coronavirus can be contained, and I view an int’l event of 100K+ people as a huge risk to attendees and the entire city, given limited ICU beds, etc.”

On Twitter, San Francisco-based Hustle Fund co-founder and GP Elizabeth Yin revealed that after moving all in-person meetings to video, she also “cancelled SXSW.”

Via DM, she told me that her decision stems from the fact that COVID-19 seems highly contagious from the initial data.

“While I’m not worried about how it could affect my health, I’m worried about potentially becoming a carrier,” she wrote. “Our health system in the US seemingly cannot handle a large volume of cases, so I thought it was best to do my part in society and slow the number of cases. If they made it online, including the event I was supposed to judge, I’d be happy to still partake.”

And, a Los Angeles-based VC told me that one of his teammates had agreed to attend SXSW this year. He wrote me via DM: “She has asked not to go and we agreed she should not. We instituted a policy today strongly advising against attending any conferences until further notice (along with other guidelines).”

Ultimately, are organizers willing to sacrifice safety and health for dollars? Guess we’ll see. While it would no doubt be extremely difficult, and expensive, to cancel or postpone at this stage, they may have no choice if public pressure continues to build.

Meanwhile, head here to read about how heightened concerns about germs are contributing to a surge in sales for some startups in the disinfecting space.

Note: Post-publication, Backstage Capital Founder Arlan Hamilton said she is also not attending SXSW.

Illustration: Li-Anne Dias

There are plenty of companies operating outside the unicorn and public company spotlight, but that doesn’t mean their stories aren’t worth sharing. They offer a peek around the corner at what’s coming next, and what investors today are placing bets on. 

Without further ado, let’s check out a few rounds from the week that was in venture land.

Be My Eyes

I don’t know how you’re reading this, but you are. Most of us read with our eyes, but some read with their ears or their fingers. Blind people frequently have options when it comes to reading, but there’s more to life than just reading. 

Imagine going to a grocery store and stepping up to the bakery counter. You might be able to read a label with your eyes, but if there’s no label you could still probably figure out what type bread you’re buying based on its color and shape. But what if you couldn’t see (or see well)? What are you going to do, touch all the bread to figure out its size and shape? Get real down low and smell ’em all? (Which, for the record, sounds lovely, if a little unhygienic.)

You’d probably ask someone who can see for some help. That’s the kind of interaction a service like Be My Eyes facilitates. Headquartered in San Francisco, the startup founded in 2014 connects blind people and people with low vision to sighted volunteers over on-demand remote video calls facilitated through the company’s mobile applications for Android and iOS. The sighted person can see what’s going on, and offer real time support for the person who can’t see.

The company announced this week that it raised $2.8 million in a Series A funding round led by Cultivation Capital. In 2018, Be My Eyes launched a feature called “Specialized Help,” which connects blind and low-vision people to service representatives at companies. Microsoft, Google, Lloyds Banking Group and Procter & Gamble are among the companies enrolled in the program. 

Be My Eyes initially launched as an all-volunteer effort. The company says it has a community of more than 3.5 million sighted volunteers helping almost 200,000 visually impaired people worldwide. According to Crunchbase data, the company has raised over $5.3 million in combined equity and grant funding.

Wildnote

The environment is, like, super important. It’s the air we breathe and the water we drink. Regardless of your opinion on environmental regulations, most come from a good place: Ensuring the long-term sustainability of life on a planet with finite resources by putting a check on destructive activity. Where there’s regulation, there’s a need to comply with it, and compliance can be kind of a drag. There is a lot of paperwork to do.

Wildnote is a company based in San Luis Obispo, California. It’s in the business of environmental data collection, management and reporting using its eponymous mobile application and web platform. Field researchers and compliance professionals can capture and record information (including photos) on-site using either standard reporting forms or their own custom workflows. The company’s data platform also features export capabilities, which produce PDFs or raw datasets in multiple formats.

The company announced $1.35 million in seed funding from Entrada Ventures and HG Ventures, the corporate venture arm of The Heritage Group. Wildnote was part of the 2019 cohort of The Heritage Group’s accelerator program, produced in collaboration with Techstars, which aimed to assist startups working on problems from “legacy industries” like infrastructure, materials and environmental services.

Enveil

Encryption uses math to transform information humans and machines can read and understand into information that we can’t. Encrypted data can be decrypted by those in possession of a cryptographic key. To everyone else, encrypted data is just textual gobbledegook. 

The thing is, to computers, encrypted data is also textual gobbledegook. Computer scientists and cryptographers have long been looking for a way to work with encrypted data without needing to decrypt it in the process. Homomorphic encryption has been a subject of academic research and corporate research and development labs for years, but it appears a commercial homomorphic encryption product has hit the market, and the company behind it is raising money to grow. 

The company we’re talking about here is Enveil. Headquartered in Fulton, Maryland, the company makes software it calls ZeroReveal. Its ZeroReveal Search product allows customers to encrypt and store data while also enabling users to perform searches directly against ciphertext data, meaning that data stays secure. Its ZeroReveal Compute Fabric offers client- and server-side applications which let enterprises securely operate on encrypted data stored on premises, in a large commercial cloud computing platform, or obtained from third parties.

Enveil raised $10 million in its Series A round, which was led by C5 Capital. Participating investors include 1843 Capital, Capital One Growth Ventures, MasterCard and Bloomberg Beta. The company was founded in 2014 by Ellison Anne Williams and has raised a total of $15 million; prior investors include cybersecurity incubator DataTribe and In-Q-Tel, the nonprofit venture investment arm of the U.S. Central Intelligence Agency.

Image Credits: Last Week In Venture graphic created by JD Battles. Photo by Daniil Kuzelev, via Unsplash.

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Over the years, Iguodala’s funded over 40 companies including Zoom, Datadog, PagerDuty and Allbirds. As an investor and a Jumia board member, he helped the company grow and go public in April 2019 with a billion-dollar IPO.

In recent weeks, Iguodala has taken on new roles in both the basketball and startup worlds. He recently joined the Miami Heat with an impressive debut. And on Feb. 5, he was tapped as a venture partner for Catalyst Fund, the venture capital arm of Comcast Corp. Catalyst’s focus will be on early-stage investments in companies founded by African American, Latinx and female entrepreneurs.

For Comcast Ventures’ Head of Funds and Managing Director Amy Banse, Iguodala’s investment experience and network, combined with his “his passion for supporting entrepreneurs from diverse backgrounds,” is a perfect fit for the firm’s Catalyst Fund.

Since its formation in 2011, the fund has backed more than 70 startups.

Catalyst Fund Principal Fatima Husain (a Muslim of Indian descent) told me the fund gives her and Iguodala a chance to help back founders who might not otherwise have access to capital and networks.

“We both come from unconventional backgrounds, and we want to be able to help founders who also come from unconventional backgrounds,” she told me. “We both truly believe talent and brilliance is equally distributed amongst individuals and that we can help get them the right level of resources.”

In a telephone interview, Crunchbase News caught up with Iguodala to hear more in-depth about his and Husain’s plans for the fund, and just how the NBA star got into startup investing.

CB News: How did you get into startup investing in the first place?

Iguodala: About 8 or 9 years ago, I started seeing a large return in the tech sector in the public markets. From there, I got interested and wanted to dive deeper into learning how I could invest before companies hit the public markets. I started seeing the growth in the private space, and that eventually led to where I am now.

Things I look at are: market size, does a company have a competitive advantage, can it fight off tech giants like Microsoft, Amazon and Google? I also look at founders and their vision–where they see themselves in 10 years. I ask myself, “How can I personally add value to a company, not just from a capital standpoint?”

CB News: What’s the most interesting part about investing in startups and helping them grow?

Iguodala: For Fatima and I, it’s really exciting. Look at technology, and how it’s changed our lives from everything to scheduling a flight or getting my son’s basketball game schedule. Everything is on my phone these days, and how we move in general is so much different than just say, eight years ago. Technology is doing so much to make our lives more efficient. So when I’m looking at that, this is an exciting time to be in this space. Not only for capital gains, but what you’re adding by having involvement in people’s day-to-day lives over the next 20, 30 or 40 years.

CB News: How does being a pro basketball player help you when it comes to making startup investments?

Iguodala: I just joined a new team, the Miami Heat, in basketball, and one here at Catalyst. With the Heat, I was hyper focused my first couple of times on the court. While every team runs the same plays, each one has different terminologies for them. So I’ve been watching and learning on the fly, and having to figure out things fast.

It’s similar in the tech space. There’s different terminology and different acronyms for different industries and teams. Different companies have different vibes, some are more laid back and others are more buttoned-up. I have had to learn how to add value to different cultures within companies in the same way as I have with different teams.

There’s lots of egos on both sides. I thought it was just in the sports world, but I see it too in tech in other VCs, entrepreneurs or the best engineers. So I’ve had to learn how to deal with different personalities in both sports and investing. I’ve also learned to adapt and learn about different industries, from consumer to enterprise brands for example.

CB News: As someone with an unconventional “non-traditional VC” background, what skills or perspective do you have that make you a better investor and startup consultant than someone who may not have this diverse background?

Iguodala: I’m really excited because what we’re doing with the Catalyst Fund and what we represent is investing in underrepresented communities, and determining how we can put them in our ecosystem and help them grow in a responsible and sustainable way.

Being a minority, you have to have a grander scope in terms of the people you deal with on a daily basis. Many of us have that back against the wall mentality, and a passion and grit.

Every morning I wake up with a chip on my shoulder, and know I have to wake up with that passion and juice to go and prove myself. I’ve learned that I have to sacrifice, work hard and step up when it’s my turn. I’m ready to help other unconventional founders, and founders who are underrepresented in funding in the tech space, in their own journey.

Reporter’s note: For more on NBA players who are also startup investors, check out this article I wrote last summer here.

Blog Roll Illustration: Li-Anne Dias

They are not alone, however.

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Today news broke that Google, an online search giant and mobile hardware aspirant, is joining the mix. Yes, it’s not just Chime and Acorns and Wealthfront and Betterment and Robinhood and Venmo and SoFi and Uber. Banking now also encompasses Mountain View.

As the Wall Street Journal wrote:

Google will soon offer checking accounts to consumers, becoming the latest Silicon Valley heavyweight to push into finance. […] Google is setting its sights fairly low. Checking accounts are a commoditized product, and people don’t switch very often. But they contain a treasure trove of information, including how much money people make, where they shop and what bills they pay.

The story goes on to note that Google won’t “sell checking-account users’ financial data.” (Fellow technology giants Twitter and Facebook have apologized in recent months for using certain consumer information for ad targeting that was provided for security purposes; Google itself has a history of adding more information to its ad algorithms over time.) That point matters for both attracting customers (who, presumably, would rather their financial data remain private), and generating revenue (Google could resort to the sort of fees that some banks use to monetize checking accounts).

Two quick points. First, the trend of tech companies adding banking features is spreading more widely than we expected. We should have thought bigger.

Second, a trend that I’ve kept tabs on for about a half-decade is continuing. Back in 2014, I wrote about how major tech giants were working to expand their product lines horizontally, that the most valuable tech shops were offering an increasingly broad array of products far from their core offerings.

Quoting briefly from that piece, here’s how I described the situation in light of a then-current Apple product decision:

Apple’s aggressive product expansion is hardly shocking. Along with the other platform companies, it is building a wider and more diverse set of offerings: If a product, program or service can run on Apple’s platform, it wants to build it in-house.

You can see this plainly in the case of cloud storage. Google, Amazon, Microsoft and, now, Apple all offer consumer-facing cloud storage, for example. They can bake it into their web products (Google) or their operating system and productivity apps (Microsoft) or use it to drive their device experience (Apple).

You can see the analogy between that point and Google moving into checking accounts.  We’re seeing the collision of big tech’s platform push and the startup trend of adding checking accounts and debit cards.

Understanding what the giants might get out of a banking push isn’t clear. For startups, the move seems to be a simple focus on revenue and juicing more long-term value from already-acquired customers. What might Google get out of the same effort? I would have said data for targeting and the like, but as we’ve seen, Google doesn’t intend to roll in that direction. If checking accounts can generate enough revenue to be material to Google isn’t clear.

Illustration: Li-Anne Dias.

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Founded in 2011, Santa Cruz, Calif.-based Looker has raised a total of $280.5 million in its lifetime, according to its Crunchbase profile. Backers include Kleiner Perkins, Meritech Capital Partners and First Round Capital, among others. Once the acquisition closes later this year, Looker will be folded into the Google Cloud umbrella.

In a press release, Google Cloud CEO Thomas Kurian said the addition of Looker to its cloud offerings “will enable customers to harness data in new ways to drive their digital transformation.”

Also, in a blog, Kurian pointed out that Looker extends Google’s business analytics offerings by helping it “offer customers a more complete analytics solution from ingesting data to visualizing results and integrating data and insights into their daily workflows.”

“It will also help us deliver industry specific analytics solutions in our key verticals,” he said.

The companies are not strangers to each other, considering an existing partnership where they share more than 350 joint customers, including Buzzfeed, Hearst, King, Sunrun, WPP Essence, and Yahoo!.

The buy marks Google’s first “big” acquisition since Kurian, a former Oracle exec, joined the company earlier this year, noted MarketWatch. In February, it picked up Alooma, which offers a real-time data pipeline as a service. Over time, Google has acquired 233 companies (that we know of), according to its Crunchbase profile, including at least nine last year.

Illustration: Li-Anne Dias

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Uber’s IPO last week was an important moment for the unicorn era: Could a company with slowing growth and persistently sharp losses defend its private-market value or IPO price? The answer so far is no and no.

With Uber’s equity off 8.5 percent as of the time of writing ($38.02 per share, or a value of $63.78 billion), the firm is now worth less than it was as a private company, let alone the $45 per share at which it went public. It’s a disappointing result, and not one that can be fully blamed on market conditions.

Let’s make two points this morning. First, let’s remind ourselves about some common wisdom from Silicon Valley. Following, let’s kick the knees out from under some historical revisionism that is being bandied about in defense of Uber. You know, that old “Amazon lost money while going public and did fine, Facebook’s shares fell after its IPO and it did fine” argument.

If This, Then That

Cover young, technology-related, growth-oriented companies long enough and you’ll hear a few saws trotted out as conversation blockers. The first for us today is the old chestnut that “great companies can always raise.” It isn’t true, but it is meant to indicate that the strongest startups won’t ever run out of capital because private investors will always be able to see past market conditions to provide cash to the most promising outfits.

Again, false, but what is true is that companies perceived to be the hottest things around can always raise. That’s a related, but notably different point.

Corollary to the first concept is one that’s even more interesting: “Great companies can always go public.” I hear this mostly when I ask a private-market investor about things like IPO windows. It’s a defensive response, but one that I think is sincerely held.

And then there’s Uber which made the case for the first point being true during its period of hyper-growth. And it almost made the second point, managing a large IPO during a challenging week of macro and market fear. But then its shares fell sharply on their first day, capping off that disappointment with more losses today. So Uber has shown that companies can go public during periods of turmoil provided that there is enough demand for their shares (this is nigh-tautology but hear me out), but it has also shown that companies which get over the IPO-hump on brand more than fundamentals can get spat back up like a piece of gristle.

Are we being too harsh to Uber? Some would argue yes. After all, some of tech’s largest players today, firms like Facebook and Alphabet, struggled after they went public. Couldn’t Uber be more of the same?

(Update: Uber itself made the point this morning, saying in a memo: “Remember that the Facebook and Amazon post-IPO trading was incredibly difficult for those companies. And look at how they have delivered since.”)

No

No. For a few reasons, which we’ll explore now.

But before, let’s make some allowances: The market is fickle and impossible to predict. Uber’s result likely would have been better had the market not decided it wanted to get sick all over itself during its early trading days. And Uber could turn around its business, find efficient sources of growth, cut its losses, and drive its shares out of the ditch (now off 9.12 percent as of the time of writing this paragraph).

If that happens, however, don’t hail the examples of the Facebook and Alphabet IPOs as historical precedent for the Uber turnaround. The companies are not comparable. For a few reasons, which we detail below:

• $GOOG operating profit, trailing 12 months at IPO: $423.8 million.
• $FB operating profit, trailing 12 months at IPO: $1.75 billion.
• $UBER operating profit, trailing 12 months at IPO: -$3.03 billion.

And in those metrics we’ve done Uber a favor by not counting its preliminary Q1 2019 results. Instead, we used its fully-accounted 2018 quarters which sport a smaller aggregate operating loss.

As you can see, there is a difference between Alphabet and Facebook, and Uber. You can repeat the experiment with growth rates as well, which I recommend that you do (S-1/As are linked in the companies’ ticker symbols).

But what you see above are two companies that were hugely profitable before they went public. And even then they struggled somewhat. Alphabet’s reverse dutch auction was a bit of a mess as Hunter Walk pointed out this morning, and Facebook’s uncertain mobile future weighed on its shares. But since both companies were nicely profitable, and in the latter case cracked the key question regarding its future, they took off and did more than fine.

Both Facebook and Alphabet were younger at the time of their IPOs than Uber was, and they made money. That’s the difference and the reason why their success bears little to do with what may happen with Uber—at least in the short and medium-term.

Making money is better than losing money, I should point out. So while it may be true that Uber pulls through and stems its losses and finds growth and all that, reaching for examples like Alphabet and Facebook is a mistake. Which reminds me, I really do need to finish my post explaining why Amazon’s unprofitability during its youth is no excuse for money-losing unicorns to continue to lose money. Next time!

Illustration: Li-Anne Dias.

Google, now part of Alphabet, a holding company it created, went public in 2004. At the time, the firm frankly told investors in its founder’s letter that it was “not a conventional company,” and it did “not intend to become one.”

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For Google, the unconventional attitude worked, and it worked well. But before its IPO over ten years ago, the company’s future was hardly certain. The climate that Google went public under is almost hard to imagine: In the pre-unicorn era, the most valuable Internet company wasn’t even worth $50 billion (as we’ll see). Today, there are private tech companies worth more than that.

In the end, Google went public worth around $23 billion. That number should sound familiar, as it is a mere $1 billion from Snap’s own IPO value set earlier this year.

To understand Google’s debut, we have to turn the clock back to 2003. Let’s go:

2003

Before its IPO, Microsoft and Google reportedly discussed doing something together. Details are vague, but Ars Technica published some interesting details in late 2003, the year preceding Google’s debut.

Leaning on Ken Fisher’s contemporaneous reporting, here are the words used to describe the potential for a Microsoft-Google link:

Sources are saying that Microsoft was previously courting Google, pursuing options ranging from a kind of merger to an outright takeover. It appears that their overtures failed to materialize any deal, so now the Redmond will have to wait; Google is headed in the IPO direction, and if there’s a merger to be had, it’s likely going to be with a post-IPO Google.

The same Ars Technica piece goes on to report that, yes, Google “appear[ed] to be in preparation to convert to publicly-traded status,” a result that would be “huge.” That wound up being incredibly correct.

(For fun: In 2006, Microsoft launched Windows Live search. In 2007, it was renamed Live Search. It was later rebranded Bing in 2009.)

How close Google and Microsoft ever got to a deal is now immaterial, because, on April 29, 2004, Google dropped its first S-1.

Google Up Close

The firm’s initial S-1 would later be supplemented with another quarter’s financial results as the IPO came together during 2004, but it’s worth noting that, in the original document, the company reported steep growth and growing GAAP profits.

The company’s later filings have an even fuller picture of that expansion, as they included the quarter ending June 30. Here’s the full set of numbers:

As you can quickly see, Google was growing at a tremendous clip, regarding its revenue and profit, when it filed. The firm’s first to second quarter sequential growth rate was just 7.5 percent, but the year-over-year comparison Google set in the second quarter of 2004 calculates to a 181.6 percent growth rate.

A Look Back In IPO: Amazon, The Giant In Progress

And as Google’s revenue grew, its net income grew as well. In the first half of 2004, Google’s revenue totaled $1.351 billion, from $559.8 million in the first half of 2003. Profit grew to $143.0 million in the first two quarters of 2004, from $58.9 million during the first six months of 2003.

(Keep in mind as we go on that Google winds up being worth less than Snap at its IPO.)

Google had something else at the time that we’d be remiss to mention before diving into the pricing saga that surrounded its IPO. The firm had a bucket of cash — nearly $550 million — and limited liabilities.

It isn’t hard to guess from the numbers that Google was growing quickly under its own steam–the search engine didn’t really need the IPO proceeds to fund its business. Doubling down on that point, the Founder’s Letter is illustrative again: “Google has had adequate cash to fund our business and has generated additional cash through operations.” Correct.

Pricing Dance

What was Google worth? The final number was hard to uncover at the time it went public.

To wit, Google’s first S-1 indicated that the firm wanted to raise as much as $2.72 billion in its IPO. Later filings pushed that number as high as $3.989 billion, a valuation that entailed a per-share price of $135.

Google’s IPO aspirations were eventually cut down to allow the firm to cross the finish line. The following New York Times passage from July 27, 2004, describes the company’s mid-summer 2004 pricing moves:

The popular Internet search company, which is attempting to sell shares to the public in an unconventional auction, said in a filing with the Securities and Exchange Commission yesterday that it expected its shares to sell for $108 to $135 each.

That would value the company at $29 billion to $36 billion, putting its market value just below the $38 billion value of Yahoo, a larger and far more mature Internet company. The most valuable Internet company, eBay, is worth $49 billion.

This analysis is interesting for a few reasons.

1. Google failed to maintain that hoped-for price range. The company’s final IPO price, $85, was under range.
2. Yahoo was worth $38 billion.
3. The largest Internet company, at that time, was worth less than Uber is today.

A different era.

Regardless, Google went public at $85 after cutting the number of shares offered to 19.6 million from nearly 25 million. The company’s valuation wound up at $23 billion.

Doing some quick math, at $23 billion, Google priced at a trailing revenue multiple of just over 10. That’s high by today’s SaaS standards (Google wasn’t SaaS as we think of it), but it becomes incredibly cheap by modern standards when you realize that you can calculate Google’s PE ratio at the time (around 120). It was already profitable, and profitable revenue is worth more than unprofitable revenue—all else being held equal.

Despite the fact that Google would have been wildly healthy by today’s standards, it isn’t hard to find naysayers from the time. This lede, for example, sticks out:

Google said Wednesday it will go public at $85 a share, paving the way for the widely awaited but troubled stock offering to finally stumble to market on Thursday.

Good heavens, CNN Money!

The point, however, was that Google thought it was worth more than the market did at the time, hoping for that $135 per share and ending up with just $85. In the end, both parties were wrong. Google was likely cheap at $135 per share, the upper-end of its highest range.

But IPOs are both magic and math, something that Google took to the next level with how it went public.

The Dutch Auction

Google, not content to do things along normal lines, went public using a Dutch auction. If that sounds unfamiliar, don’t feel bad. Aside from Google, I can’t recall a company of real note that has used a similar process since.

And, as we’ll see, perhaps there’s a reason for that. Regardless, back in 2004, the company’s Dutch auction was big news. Forbes quoted a money manager at the time who called the choice “definitely the biggest story” of the IPO.

That wasn’t correct; the strength of Google’s core business was the biggest story, but the quote shows how odd Google’s call was at the time.

The same Forbes piece does a fine job detailing what a Dutch auction entails:

In a Dutch auction, a company reveals the maximum amount of shares being sold and sometimes a potential price for those shares. Investors then state the number of shares they want and at what price. Once a minimum clearing price is determined, investors who bid at least that price are awarded shares. If there are more bids than shares available, allotment is on a pro-rata basis–awarding a percent of actual shares available based on the percent bid for–or a maximum basis, which fills the maximum amount of smaller bids by setting an allocation for the largest bids.

As CNBC noted in 2014, the model may “[t]ake the short-term gains away from Wall Street and big money and give at least some ownership” to regular people. However, Google’s use didn’t help Dutch auctions take off.

The CNBC piece makes two arguments that are persuasive as to why Dutch auctions didn’t pick up a host of fans following Google’s use. First, “[similar] auctions are risky,” especially if you might need some help driving demand. That isn’t a problem for the hottest IPOs, but they make up only a fraction of the total.

The piece goes on to argue:

The second reason is that Google’s offering wasn’t a real auction, but more of a hybrid. After all, there was clearly enough investor demand to price the stock at closer to $100, because that’s where the stock opened, but at the last minute lead underwriters Morgan Stanley and Credit Suisse dropped it to $85. The low end of the expected range had been $108.

Still, after all the stress and pricing work was over, Google opened well and took off.

Hindsight Is 20-20 (And Very Expensive)

Google had a good first day’s trading, bumping up 18 percent or so to just over $100 per share from its $85 starting point. The company’s all-time intraday low was $95.56, and its all-time lowest close was $100.01, according to a 2008 report.

After finally getting its IPO out the door, Google did well, and it has continued to do little else. The firm is now worth around $650 billion, second only to Apple. But placing second out of the Big 5 wasn’t a sure bet back then.

Revel in this:

“It’s still expensive at these levels,” said Will Dunbar, managing director with Core Capital Partners, a venture capital firm with no stake in Google. “There will be substantial competition in the near future and that’s one of the things that gives me pause about the price.”

Janco’s Pyykkonen adds that he was hearing it was difficult for traders interested in short-selling Google to find shares to borrow from the banks and brokers involved in the auction. […]

And according to an informal poll on CNN/Money, 85 percent of more than 23,000 respondents said that they did not plan on buying shares of Google once it began trading.

Illustration: Li-Anne Dias