Google IPO banker tracks two-decade journey from Silicon Valley upstart to $2 trillion

Twenty years ago, as Morgan Stanley banker Michael Grimes was helping lead the general public offering for the young company behind the Google search engine, one of the crucial anticipated IPOs of the last decade, he was among the many first people offered a recent email service. He had his pick of any identifier he wanted, so he asked for michael@gmail.com.

Sergey Brin, Google’s co-founder, chimed in. Grimes remembers Brin telling him, “Oh no, you don’t need that. Gmail goes to be big. You will be spammed perpetually.” 

Grimes told CNBC he does regret passing up the e-mail address. However the IPO helped cement his status as “Wall Street’s Silicon Valley whisperer,” just because the tech industry began to reshape investing globally.  

He calls the IPO of Google, which has increased by 7,600% during the last 20 years, “momentous.” 

The cumulative market value of corporations Grimes has taken public is within the trillions of dollars. Some were more tumultuous, like Facebook‘s IPO in 2012, and a few pioneered revolutionary recent structures, like Spotify‘s direct listing in 2018. But Google’s was groundbreaking.

“It was the beginning of the subsequent era,” Grimes said. “Google [and other megacaps that followed] modified the way in which that we work, live and play. They did it in greater ways than all of us thought and now these are trillion-dollar corporations right up at the highest.”

Now operating under parent Alphabet, the corporate is price greater than $2 trillion. Now not just search and promoting, the tech giant counts YouTube, Pixel smartphones, cloud computing, self-driving cars and generative artificial intelligence amongst its many business units. It is a technology company so expansive that the Department of Justice could also be seeking to split it up.

Alphabet wasn’t immediately available to comment.

On the time of Google’s IPO 20 years ago, the tech industry was still reeling from the dot-com burst of the early 2000s and investors were cautious. Fairly than going with a conventional offering, Google selected a process called a Dutch auction, intended to democratize the IPO process by allowing a broader range of investors to participate. 

The founders’ IPO letter began: “Google shouldn’t be a traditional company. We don’t intend to turn into one.” It also introduced Google’s “do not be evil” philosophy.

Grimes said Brin and Larry Page wanted a level playing field for his or her IPO: “Their perspective was: Wait, if a young engineer sold a few of her vested stock from Cisco or wherever and she or he desires to put $10,000 into Google, why should she get told she only gets $500 price or none? Especially if she’s willing to pay one dollar greater than the institution.” 

“The auction allocations,” Grimes said, “could be determined by price and size. Not by who you might be, and that was the fun. That was the elemental breakthrough.” 

Grimes added that some banks and institutions cautioned Google’s co-founders against the bizarre process and told them it wasn’t the way in which things were done. But others, like his team, said they’d construct with them. 

Winning the coveted “left lead” on the IPO was and still is a competitive race. The Morgan Stanley team embraced the format, built a prototype and tested for a billion bids. 

For the road show,  they split into three different teams. Co-founders Brin and Page each led their very own, and CEO Eric Schmidt led the third. 

By most accounts, the IPO was successful. Google overcame a weak IPO market and an unproven offering model to generate a solid first-day return and a market capitalization of over $27 billion. From there, the stock kept appreciating.

However it would take greater than a decade for the principles behind Google’s IPO to take off. Consumer technology brands like Facebook (now Meta), Twitter (now X) and LinkedIn (now owned by Microsoft) would go the standard IPO route. But several of the high-profile listings between 2019 and 2021 did incorporate elements that aligned with Google’s democratizing intent. Airbnb offered hosts the chance to purchase shares on the IPO price. Uber and Lyft made shares available to its drivers, and Robinhood gave customers access to its IPO.

Assessing the impact of Google’s “do not be evil” credo — and the way it’s aged — is more complicated. Grimes declined to reflect on the Google of today, saying he cannot speak about clients.

Google now stands accused of stifling innovation by U.S. and European regulators, and although the corporate is on the forefront of the generative AI platform shift, search and promoting — still its bread and butter — is facing its biggest existential threat in a long time.