âThe Internet is the first thing that humanity has built that humanity doesnât understand, the largest experiment in anarchy that we have ever had.â
â ERIC SCHMIDT
The sweltering summer of Mumbai had begun. It was May of 1994. I had finished my matriculation exams and was figuring out what to do next. When I had to choose my optional subjects during high school, my parents would say, âPick the one that interests you mostâ. I blamed them for burdening a kid with the responsibility that should have been theirs. After all, my friendsâ parents picked out the subjects for them. Why were my parents being goofy about the whole thing?
Now that I was âon my ownâ, I was going to enjoy my freedom of choosing my path for junior college:* science, commerce, or arts. It was going to be commerce, of course. Arts had the most girls and science the least. Science had the most hard working students and arts the least. Commerce was a good middle ground. I liked numbers, especially those with a currency pre-fixing them. My elder sister seemed to be having fun in college doing commerce. So it was set then.
Except this time my parents had an opinion. They thought I should consider appearing for the Joint Entrance Examination (JEE) for the Indian Institute of Technology (IIT). Woah, wait, that meant I would become an engineer, and that meant I had to pick science for junior college. But what about social development that comes with co-ed education. Besides, science had biology, and I hated biology. Mother said: âI was talking to our neighbour when doing groceries yesterday. Amit is here for his summer vacations. From IIT Kanpur. You should go meet him. Just to get his perspective. Whatâs the harm in meeting?â
Whenever my mother says, âWhatâs the harm?â, it is a trap. And I walked right into it. I went to meet Amit Agarwal. There was an intensity about him. He wasnât much of a talker, and when he did talk, it was with a straight face. Just as I had been set up by my mother to meet him, he had been set up by his mother to meet me. He was in no mood to talk a kid out of a co-ed life that he himself was deprived of. That made communication easy: he answered my questions in a matter of fact manner. He was in his third year at IIT Kanpur, studying Computer Science and Engineering. He liked it there. He talked to me about the hostel culture, how he was making a lifetime worth of friendships and had all the freedom in the world to pursue what he liked. He thought IIT was about to open a whole new world for him, a world that was otherwise inaccessible. âI want to go to the US and study further.â
The vibe in the room was that we had both talked enough. Enough to go back to our mothers with a clear conscience. As I was about to leave, I saw a picture of a group of youngsters playing in the snow. âWow, where is that?â, I asked.
âThatâs Lake Tahoe in California. Those are my seniors from the department. They are at Stanford now. Thatâs where I want to go.â
As I walked back to my home, my brain was racing between two choices: girls, snow, girls, snow. This was going to be tough. At dinner, it was clear that my parents had plotted to get me to commit to prepare for IIT JEE. They wanted me to make my own choice, as long as it was IIT. The snow was inviting. There would be some girls at IIT, wouldnât there? It was decided. I was going to prepare for the IIT JEE.
That day, my world shifted in ways that would take me a lifetime to understand. At around the same time, half way across the world, some other momentous events were happening. Silicon Valley entrepreneurs Jim Clark and Marc Andreessen had decided to make the Mosaic browser commercial and had incorporated a company called Netscape;1 Stanford grad students Jerry Yang and David Filo had renamed âJerry and Davidâs Guide to the World Wide Webâ to âYet Another Hierarchically Officious Oracleâ or Yahoo!; and a quant named Jeff Bezos working at a New York hedge fund had grown partial to the idea of âthe everything storeâ2 while brainstorming with his boss about business ideas to exploit the coming technology wave called the Internet. The power of the Internet was limited only by human imagination. After all, what is technology except a way to eliminate the constraints of space and time? The Internet would fulfil the audacity of such boundless thought.
The US Department of Defense had started opening up the Internet for public use in the early â90s, and the idea of computers being able to âtalkâ to each other caught the fancy of anyone associated with computers and software. During 1993, the amount of data transmitted over the Internet had jumped by a factor of 2,560. Something extraordinary was happening and many were trying to make sense of it. It was like in the movie 2001: A Space Odyssey. The apes woke up in the dawn of man to discover a slick black monolith in front of their caves. There was a spooky background score and the apes scuffled around the monolith to dare to touch it, feel it and figure out what it meant. Eventually, it gave them god, religion and wars, as well as technology and the modern human civilization.
Did the dawn of the Internet mean that the world would become one giant computer with an infinitely large virtual disk? Did it mean that you could see a file on someone elseâs computer halfway across the world? Did it mean we could write to people without posting a letter? Did it mean we could type words on our computers and someone far away could see what I typed, instantly? Did it mean that my software built in one language could talk to another software built in another language? Did it mean I could trade a stock without calling my broker who then ran to the trading floor to yell his lungs out? Did it mean my software running on a Windows could be operated from a Mac? Did it mean multiple people could create software without being at the same location or move files from one machine to another without using floppy drives? Did it mean smart software on multiple computers could self mutate, talk to each other and rise in mutiny against humanity? The world did not know the least of it.
Netscape, Yahoo! and Amazon
By the end of 1994, Netscape launched the worldâs first commercial Internet browser called Navigator. Netscape Navigator was the window through which the world saw the World Wide Web for the first time. In 1995, Navigator gained 20 per cent market share every quarter. On the day of the IPO in August 1995, the Netscape stock that was first offered at $14 and then doubled to $28 last-minute soared to $75 on the same day, and closed above $58. By the end of the year, it had shot up to $174. To many, it was the year that the Internet was commercially launched. The performance of the Netscape IPO was a sign of times to come. There was a general sense of agreement that the Internet changes everything, and everyone who was alive at the time had a once-in-a-lifetime opportunity to invent how.
When a pair of eyeballs glared through the window of the Internet, they needed a start page to figure out whatâs out there and where they should go. Yahoo! became the home page of the World Wide Web. Just like a directory of files on a computer, it was a directory of web-pages and web-sites on the Internet organized in a hierarchical structure. After an initial investment of $2 million from Sequoia Capital in April 1995 followed by a second round from Reuters and SoftBank in fall 1995, with less than 50 employees, Yahoo! went public in April 1996 valuing it at $848 million on the day of the IPO. For youngsters around the world, and especially at Stanford University, Yahoo! inspired the first generation of right-out-of-college Internet entrepreneurs to dream up a new business on the World Wide Web.
Jeff Bezos and his wife Mackenzie flew to Texas. Bezos picked up his fatherâs Chevy Blazer and they started driving cross-country to Seattle. For most, driving coast-to-coast in America is a once-in-a-lifetime experience, especially with your life packed in a suitcase. The sense of freedom, exhilaration, and adventure of a road trip was reflected in the still nascent Internet world â the journey had just begun. The Internet was moving information on the superhighway as budding entrepreneurs were moving their stuff on regular highways. This entrepreneur in particular was about to start something that would move a large amount of transactions and products on both highways. At D.E. Shaw and company, a hedge fund on Wall Street, Bezos had recently been elevated to the position of heading Internet initiatives. He saw the profound effect of the Internet on commerce. Anyone who was selling anything in the real world started creating web-pages and web-sites with their catalogue of products and services.
Bezos fell in love with the idea of an Internet store for virtually everything. It occurred to him that for the practical constraints of building a supply-chain of products to compete with big box retail, he would need to start with one category and expand from there. He picked books as the category to start. The 1992 Supreme Court ruling with regard to mail order businesses was on Bezosâs mind: merchants did not have to collect sales tax in states where they did not have any physical operations. In his shrewd mind, this ruled out Silicon Valley and New York City since the states of California and New York had a large population, and opening an office there would mean collecting sales taxes for all orders delivered in those states. Bezos picked Seattle because the population of the state of Washington was small and Seattle was a bit of a technology hub.
At the time, he had picked the name Cadabra as a placeholder for the company. He was looking at names starting with A or B since websites used to be listed alphabetically, and registered Aard.com, Awake.com, Browse.com and Bookmall.com. He got cozy with another possibility, Relentless.com, which till date points to Amazon.com. Shel Kaphan, Amazonâs first engineer (who many, excluding Bezos, considered the co-founder) had previously consulted with a company called Symmetry Group. Kaphanâs friends disparagingly confused the name Symmetry with Cemetery. He was horrified about the name Cadabra Inc., since the same folks would now confuse Cadabra with Cadaver.
Thankfully, Bezos was soon struck with an epiphany about the worldâs largest river, and registered the domain amazon.com on 1 November 1994. It started with the letter âaâ and had the letter âzâ. With the arrow in the logo going from a to z, it spoke to Bezosâs ambition to offer the widest selection to customers. Bezos said, âThis is not only the largest river in the world, itâs many times larger than the next biggest river. It blows all the other rivers awayâ. When Kaphanâs former co-worker became the first person to order a book from Amazon.com on 3 April 1995, there were several other online bookstores in the US. The choice of name and the way Bezos built Amazon over the next two decades showed his relentless ambition to âblow all the others awayâ.
Based on Amazonâs S-1* filing, Amazon was bootstrapped with a little over $300,000 of equity investment from July 1994 to May 1996, including $10,000 of his own money to start and $245,000 from his parents in 1995. Bezos then raised $1 million at a little under $5 million in valuation by pitching to sixty individual investors in the Seattle business community. Business at Amazon had grown well since inception, and further accelerated in 1996. Bezos decided to raise VC money and pitched to Connecticut-based private equity firm General Atlantic. Silicon Valley VC John Doerr of Kleiner Perkins Caufield & Byers caught wind and flew to Seattle to meet Bezos. After some back and forth, Kleiner invested $8 million valuing the company at $60, a whopping 6x of the valuation General Atlantic had started with. John Doerr joined the board after initially suggesting a junior associate take up the role. Two other board members joined in 1997 after investing $100,000 each. After three years in operation and having raised less than $10 million in funding, Amazon went public in May 1997. The new shares issued to the public valued Amazon at $438 million. Jeff Bezos owned a majority of the company at the time of the IPO.
The Stanford Startup
In early 1996, there were two sets of Ph.D. students in the Gates Computer Science building of Stanford University who were inspired by the exponential growth of information on the Internet and the possibilities it presented. When Stanford Computer Science Ph.D. students are faced with a life problem, they write code to solve it. A popular T-shirt on campus at the time said, âWhy write code, when you can write code to write code?â
While Venky Harinarayan was working to finish his Ph.D., his girlfriend, now wife, was making domestic plans. She went online looking for apartments, visiting several different sites, comparing the various listings, going through the tedious process we all know and hate. During that time, Larry Page had just begun his doctoral work and was scouting around for dissertation topics. He wondered about the structure of the Internet and how the fast exploding information was organized. He imagined the worldâs information as a graph of web-pages with links pointing to each other. His advisor encouraged him to pursue this direction. Ph.D. students measure their productivity by writing papers, and then measure success by how many other papers referred to theirs. The importance of a research paper was determined by how many citations it received from other papers. Why should the World Wide Web be any different, Larry thought.
Venky was working with Stanford classmate Ashish Gupta, and IIT Madras and Stanford junior Anand Rajaraman on a project related to databases. In a primal sort of way, Venky was pre-disposed to connect his current work with the woes of his distressed damsel. He re-oriented the project to build a comparison shopping engine for classified listings on the web. Like any committed boyfriend would, he put his colleagues Ashish and Anand to work with him on the problem. Like any committed project mates would, Ashish and Anand found reasons to like the idea and started working on it. Venky did well because Ashish and Anand were no ordinary students. They were both Presidentâs Gold Medal (PGM) winners from IIT Kanpur and IIT Madras respectively. Every year, each IIT rewards the topper from the entire graduating class with this top academic honour. Considering how competitive it is to get into IIT in the first place, due to the selection of a few thousand out of a few hundred thousand, a PGM is no mean feat.
Around that time, a student called Sergey Brin had started his Ph.D. as well. He met Larry and instantly hit it off with him. He was inspired by Larryâs research project because he thought it represented the quest of human knowledge. In the same lab, Anand Rajaraman was hacking up Attercop* alongside Sergey Brin who was hacking up BackRub.â Professor Jeff Ullman was the Ph.D. advisor for both students. Attercop was a crawler that would organize the worldâs inventory and help users comparison shop in an efficient way. BackRub was a crawler that would organize the worldâs information and help users search it in an efficient way. Attercop would be the transaction search for the Internet and BackRub would be the information search for the Internet. The value of a transaction was tangible and the value of information was not. It would have been interesting to place a wager at the time on which company would be more valuable. Attercop went on to become Junglee in 1996 and Backrub went on to become Google in 1998.
Team Attercop had started falling in love with the notion of starting an Internet company with their idea, what with the Yahoo! IPO success in the background. Ashish had finished his Ph.D. two years ago, had worked at IBM, and was now working at Oracle. As a guy with industry experience, he took the lead to go raise money from VCs. In this process, Ashish started collaborating with serial entrepreneur Rakesh Mathur. They knew each other because their wives were best of friends from IIT Kanpur. After Rakesh saw the Attercop demo, he took matters in his own hands and called his mentor from his early days in the semiconductor industry for funding. Tsuyoshi Taira, or Taira-san, saw the demo and made a few phone calls to a group of seven Taiwanese businessmen who wanted to invest in this new Internet thing but did not have access to it. Taira-san narrates, âI told them $100,000 each, and some said they wanted to do $200,000, and I had to calm them down. I was working hard and was underpaid. I invested what I could, which was $50,000.â With $500,000 raised, Rakesh asked Venky to quickly finish his Ph.D. Ashish quit his job at Oracle. Rakesh and Venky urged Anand to drop out of his Ph.D. at Stanford, just like the Yahoo! co-founders had.
Anand had grown up in a Tamil Brahmin family in Chennai that emphasized the importance of academic excellence. One could only imagine the weight of the decision to quit his Ph.D. to follow some new fad. He was now at his dream university, earning the degree he had always aspired towards. Was his judgement getting clouded by a bunch of yahoos who had dropped out from his university and were already worth over a billion dollars as a publicly listed company? Was he getting swayed by Ashish and Venky, the seniors he looked up to? After all, they had finished their Ph.Ds while Anand was going to take a plunge in the deep end of the pool? He went to his advisor with his dilemma. Prof. Ullman made it easy. He said, âThe best way to prove the value of your research is to build a product and get many people to use it. You can always come back later and write your Ph.D. thesis.â And that is exactly what Anand did â took a leave of absence and promise...