Venture Capitalists Who Passed on Google Share Regret and Laughter

Venture capitalists who opted not to invest in Google years ago share their regrets and insights on the venture that could have made them rich. Geoffrey Y. Yang, a top Silicon Valley venture capitalist, and others reveal why they declined to invest in Google, while John Doerr and Michael Moritz, who did bet on the company, are now set to reap enormous rewards.

Key Takeaways:

• Geoffrey Y. Yang, a top Silicon Valley venture capitalist, missed out on investing in Google when the company was still fledgling, citing a potential conflict of interest due to his role on the board of Excite.
• A partner at another venture firm on Sand Hill Road in Menlo Park, Calif., declined to invest in Google due to concerns about working with the company's founders, Larry Page and Sergey Brin, who had a different vision for the company.
• John Doerr and Michael Moritz, partners at Kleiner Perkins Caufield & Byers and Sequoia Capital, respectively, invested in Google in June 1999 and have since seen their initial investment of $11 million to $12 million grow to an estimated $3 billion, with a potential payoff of roughly 250 to 1.
• The two venture capitalists, as members of the Google board, granted themselves the right to sell a portion of their holdings sooner than usual, but it is unlikely they will sell all their remaining shares within six months.
• The Google deal is shaping up to be one of the greatest venture capital deals in history, with the two firms set to receive $900 million in profits, with $100 million each going to Doerr and Moritz.
• The deal's success has been attributed to the company's rapid growth and the venture capitalists' decision to invest in Google early on, with Michael Moritz being particularly willing to take risks.
• eBay remains the record holder for venture capital returns, with a return of over 6,000 to 1 on a $6.7 million investment, according to a book by Randall E. Stross.
• The current market has returned to pre-bubble levels, with a 20-to-1 payoff considered a grand slam for venture capitalists.

Statistics:

• Google's current worth is estimated to be over $3 billion.
• The two venture capitalists, Doerr and Moritz, invested $11 million to $12 million in Google in June 1999.
• The firms will receive 30% of the value of their stakes in Google, amounting to $900 million.
• The partners at Kleiner Perkins and Sequoia are set to receive a minimum of $100 million each.
• Google's IPO is expected to be one of the greatest venture capital deals in history.
• eBay's return on investment is over 6,000 to 1.
• Accel Partners had three investments that paid more than 100 to 1 at the end of the 1990s.

Sources:

• "EBoys" by Randall E. Stross, published in 2000
• An article by Jesse Reyes, vice president of Venture Economics, a unit of Thomson Financial
• An interview with William H. Davidow, a founding partner in Mohr, Davidow