Alphabet, Google’s parent company that also owns Nest, Verily, and several other profitable assets, has a value of over $1.6 trillion, making it one of the four largest conglomerates in the world.

Despite all of this financial success, Google wasn’t always a profitable company. In fact, founders Larry Page and Sergey Brin struggled in the late 1990s to find a way for their search engine to generate revenues. The Stanford graduates resisted the idea of earning money from advertisements, but eventually accepted ads as a way to make the business profitable. That was a smart move. Google ads made $147 billion in 2020!

Unfortunately for Excite, a company also started by Stanford students, no one knew that Google would become the dominant search engine or that it would expand into countless other types of technologies. When asked if Excite wanted to buy Google for $1,000,000, the company’s CEO passed on the deal.

That might sound like an insane decision with 20:20 hindsight. When you know the whole story, it makes much more sense.

Once Upon A Time, Google Struggled

Larry Page and Sergei Brin built the algorithm that would eventually lead to Google’s success as a search engine while attending the PhD program at Stanford University. At the time, they relied on grants they received from the government.

When they graduated, they owned Google. They had a new problem on their hands, though. They needed to find a way to make money. Grants weren’t an option anymore.

In 1998, they incorporated Google as an official company and moved their operations into the Menlo Park garage of their friend Susan Wojcicki, who would soon become Google’s marketing manager and eventually the CEO of YouTube.

Source: Unsplash

Google didn’t have much money. Andy Bechtolsheim, a co-founder of Sun Microsystem, had invested $100,000 in the company. Later in 1998, they would receive about $1,000,000 in total from angel investors – one of whom is Jeff Bezos.

These people undoubtedly understood the remarkable technology built by Page and Brin. Still, the company wasn’t generating revenue. It relied on money from people who wanted to see Google succeed.

The Story Of Larry, Sergey, and Near Failure

Imagine having a remarkable product but not knowing how to make money from it. That’s the situation Larry and Sergey found themselves facing in 1999.

Yes, they had more than $1 million in funding. A million dollars sounds like a lot of money to most people. It doesn’t take a technology company very far, though. When you consider the cost of leasing office space, buying servers, housing equipment, and hiring staff members, it’s easy to see how quickly a company can burn through $1 million.

Even though Google wasn’t making much money, it was growing. It didn’t take long before it outgrew Wojcicki’s garage. It needed to rent real estate.

Google was getting tons of attention from tech insiders. A handful of publications were publishing excitedly about how Google had improved search engine technology. None of that really mattered without top line sales.

Google Founders Pitch To Excite, And Fail

In 1999, Page and Brin probably felt that they would never turn Google into a success. They were both ambitious young men who dreamed of owning successful businesses. If Google wasn’t going to be that company, they would sell their technology to someone and use the proceeds to explore new concepts.

The Google founders focused their efforts on Excite. Excite had recently purchased two other search engines, so it probably looked like a good option to Brin and Page. Plus, Excite had a growing reputation as a web portal that offered users customized homepages, email, instant messaging, and other services.

Brin and Page approached Excite and offered to sell Google for $1 million. CEO George Bell passed on the opportunity. Vinod Khosla, founder of the venture capital firm that had backed Excite, convinced Page and Brin to lower their offer to $750,000. Bell still declined.

Why Did Excite Refuse To Buy Google For $1M?

Why would a savvy CEO like George Bell turn down radically impressive search engine technology selling at such a low price?

According to him, it didn’t have anything to do with the money. Larry Page had terms that Bell would not accept. With Page’s terms, Excite probably wouldn’t have purchased Google at any price.

Bell says that Page insisted that Excite remove all of its other search engine technologies and replace them with Google.

George Bell was running a successful company that had enough money to acquire smaller businesses and dictate how they would operate. Now, the founder of a company with half a dozen employees wanted to tell him what to do?

Larry Page was absolutely correct. Excite should have thrown out its search engine and installed Google. Bell could not see the advantage of this move, though, because it sounded so audacious coming from a beginning entrepreneur with so little experience.

Bell also says that he and his team didn’t see a huge difference between Google and its existing search engine. It’s impossible to know whether they compared the results accurately. Many Google hadn’t indexed enough of the internet to prove its value. Regardless, Bell wasn’t going to fire any of his current employees and replace them with people from Google. That was a non-starter.

Google Turns The Corner with Sequoia Investment

Page and Brin got lucky when Bell turned them down. Later that year, they received $25 million in funding from major investors.

The bulk of the money came from Sequoia Capital, a venture capital firm that also helped fund Apple, PayPal, YouTube, Instagram, GitHub, LinkedIn, Oracle, and Yahoo!.

The evaluators at Sequoia knew how to recognize a great opportunity, and they took advantage of it.

Google IPO Market Cap

Google’s founders maintained private ownership of the company until 2004. After the IPO, Google stock had a market capitalization of about $23 billion.

Over five years, Page and Brin went from business owners willing to sell their product for $1 million to billionaires in charge of one of the world’s most impressive tech companies.

How Close Did Google Come To Failure? Lessons Learned

How close did Google come to failure? Probably not as close as the founders felt. Ultimately, they were forced to accept that Google’s best option for generating revenue was to sell advertisements. If anything, getting turned down by Bell and Excite probably helped them realize that they couldn’t remain purists in a capitalist market.

It’s difficult to say what lessons to learn from Google. Not every company has a product that works as well as Google’s search engine. If the company had had an inferior product, it would have made sense for Page to forget about his unreasonably demands and just sell to Excite.

As the world knows now, the team made much more money and gained incredible fame by sticking to their terms and waiting for a better offer.

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