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Jeff Bezos Investing in Google: Luck or Foresight?

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After my column a few months ago regarding Jeff Bezos' now famous (and incredibly profitable) investment into Google in 1998, I was deluged with comments and opinions on this question - was his investment luck or was it foresight?

The backdrop again: In 1998 when Larry Page's and Sergey Brin's Google offices were a Menlo Park, California garage - Bezos invested $250,000 of personal funds into the fledgling search engine.

When Google went public in 2004, that $250,000 investment translated into 3.3 million shares of Google stock. At Google's IPO that represented a stock share position worth over $280 million!

While Bezos does not disclose how many of those shares he still holds, at the current price of Google stock they would represent an investment position of over $1.5 billion.

So was it luck? Or foresight?

In Bezos' words, "There was no business plan.  They had a vision. It was a customer-focused point of view."  And more tellingly he adds, "I just fell in love with Larry and Sergey."

So whether luck or foresight, this is a wow story of the first order.  Lessons learned:

1.    Think Long Term. Even though Google has been the fastest rocket ship growth company in the history of capitalism, it was still SIX YEARS from Bezos' investment in the company to liquidity.

2.    Get In Early. Sure, it would have been great to get into Google at its IPO price of $85/share, especially as the shares are up over 535% since then. But Bezos got in, after adjusting for stock splits, at EIGHT CENTS PER SHARE!

Talk about leverage. That translates to a 112,000 percent increase from investment to IPO, and then if he held onto the shares for another 535% on top of that.

3.    Invest in People. At the time of Bezos' investment, there were a large number of very well-funded and far more successful search engines already on the market. Remember this was 1998 not 1994. Yahoo. Alta Vista. Lycos. Excite. Looksmart. Webcrawler. Infoseek. Inktomi and GoTo to name just a few.

But Bezos was attracted to Page and Brin as people, as technologists, as leaders. And obviously their customer-centric focus really tracked the way that Bezos looks at the world.

4.    Take a Shot. For every Jeff Bezos who invested in Google, there are stories of literally dozens of investors that were presented with the opportunity and did not.

This of course does not mean that the probability of any startup having Google-like success is anything but very low, but it does mean that it is far greater than the ZERO percent likelihood of success of those who don't even try.

5.    Get Lucky. Yes, luck is a key, and sometimes the key, variable in entrepreneurship and business. As opposed to fighting or getting philosophical re this reality, a far better question to ask is, "How can I improve my likelihood of, for lack of a better turn of phrase, getting lucky?"
 
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John Horray says

Google enables users to search the Web, Usenet, and images. Please visit slideklip.com for more information.
Posted at 4:51 am

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