"The Search" & Bechtolsheim's Balls
I was scanning John Battelle’s book “The Search” today in a bookstore and I ran into an anecdote I hadn’t heard before. While I knew Andy Bechtolsheim was Google’s first angel investor, and I knew the investment happened quickly on the front porch of Stanford professor David Cheriton’s house, I didn’t have the whole story (according to Battelle):
“David had a laptop on his porch in Palo Alto, with an Ethernet connection,” Page recalls. “We did a demo, and Andy asked a lot of questions.” [Then] he said: ‘Well, I don’t want to waste time. I’m sure it’ll help you guys if I just write a check.’”
Page and Brin weren’t ready for such an offer, but when Bechtolsheim went out to his car to get his checkbook, they pondered how much to ask for at what valuation. When Bechtolsheim returned, they told him their suggested valuation. Page picks up the story: “We told him our valuation, and he said ‘Oh, I don’t think that’s enough, I think it should be twice as much’”
Brin and Page were stunned, but of course, they agreed, and Bechtolsheim asked who the check should be made out to.
The obvious temptation is to Oooh and Aaah at Bechtolsheim’s balls. After all, have you ever heard a venture guy tell an entrepreneur to up the valuation on a seed round? I know I haven’t, and I’ve never heard an angel say it either (at least no pre-money).
So, is it that Andy is simply the nerviest seed investor going? I wonder. There is no doubt that writing a $100,000 check wasn’t (and isn’t) a big deal for him, and it is almost certainly true he was wowed by Google’s then-growth as a two-person non-company.
But I think that it was more the times than anything else. Recall, this happened in late 1998: Things were nuts on the net, with people writing checks for just about anything, and doing it at absurd valuations. Unless Page and Brin were suggesting a $200,000 pre-money valuation, you have to figure Andy knew he could get double or triple the valuation on anything hot and growing, and still get a significant mark-up when the first inevitable venture money flowed into the deal.
Further, this was a pretty darn good negotiating technique: Rather than haggling over price, Bechtolsheim flattered Page and Brin by saying their not-yet-incorporated company was worth even more than they thought, thus further ingratiating himself as a ballsy seed investor. A great trick that more venture investors could deploy selectively now and then.