BY DAVID SPEAKMAN
The last dot-com company standing from the venture capital-funded class of 1999 says it has no interest in going public.
Google Inc. co-founder Sergey Brin told the assembled crowd at the PC Forum in Scottsdale, Ariz., March 25 that the online search company has no plans for an initial public offering.
Because Google of Mountain View is projected to be valued in a public offering at more than $2 billion, Brin’s no-IPO stance is seen by some analysts as kicking a down technology IPO market in need of a Google-sized boost.
“Basically, we’re not planning an IPO,” says Cindy McCaffery, a Google spokeswoman. “Our focus is really on the business and continuing to innovate with our technology so that we’re leading in the search space.”
McCaffery says by not being a public company, Google can spend money on long-term planning rather than having to answer to the stock market every three months with quarterly reports.
“We have a research team that is looking at search a year out or so,” she says.
The team is spending money on developing technology to search voice, video and other Internet content that is not yet profitable.
Google is also one of the few Internet companies with a large hiring program during a time when public companies face investor pressure to cutback on staff to meet quarterly numbers.
“We have something around 800 employees now,” McCaffery says, explaining that as a private company, Google is able to pay top dollar for talent. “Absolutely, by bringing in the best and the brightest now, we can build a very solid company.”
Some solid companies opt never to go public. Forbes magazine publishes an annual list of private companies with estimated revenues of at least $1 billion. The 257 companies on the current list employ 3 million workers worldwide and contribute more than $700 billion annually in goods and services to the economy, according to Forbes. The list of private companies includes No. 6-ranked construction service company Bechtel Corp. and No. 23-ranked apparel maker Levi Strauss & Co., both of San Francisco, and No. 107-ranked San Jose-based retailer Fry’s Electronics Inc.
Staying private affects a company’s shareholders.
With $25 million in first-round funding in June 1999, Menlo Park-based venture capital firms Sequoia Capital and Kleiner Perkins Caufield & Byers gained a significant share of Google stock.
Google, on the other hand, gained money needed for growth and one board member from each firm. Neither returned Biz Ink telephone calls for this story.
But other venture capitalists see a more investment-savvy reason this may be the wrong time for Google to go public.
“I think most venture-backed companies are holding off on any IPO plans that they may have had,” says Jeanne Metzger, a vice president of the National Venture Capital Association (NVCA) of Arlington, Va. “The stock market continues to be extremely turbulent and the situation in the world today just is not a wonderful time to go public — especially for a technology stock like Google.”
Kate Mitchell, managing partner of BA Venture Partners of Foster City, agrees an IPO may not be the best exit strategy for Google right now.
“It’s a rational decision from the standpoint not to rush to go public in a very difficult time,” she says.
Although Mitchell is not privy to Google’s reasoning to stay private, she says although a $2 billion valuation looks big, Google could be worth more in a better market.
“My guess is Google doesn’t need the cash,” Mitchell says. “They’d be smarter to stay below ground because of the flexibility.”
NVCA’s Metzger agrees a lack of an IPO for 4-year-old Google is no surprise.
“When a venture capitalist looks at an investment, they’re thinking it’s going to take between five and seven years before they see a return on their investment,” she says. “For all startup companies, including Google, their hopes are to get profitable so that they can sustain themselves and choose the timing to go public.”
Although as a privately held company, Google doesn’t make its corporate performance available to the public, industry insiders believe the company is profitable now.
But BA Venture’s Mitchell says that there is still no rush for Google’s VC funders to cash in yet.
“The company can get more of a track record,” she says. “Profitability and growth continue to get more interesting to investors over time.”
Because of that, Mitchell says in this case a delayed IPO will probably be more profitable in the long run.
“Google is a fabulous company and I am envious of the investors there,” she says.