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Big windfalls from YouTube, Google pact
2007-02-08
Television talk show host Maury Povich hasn't always been a big fan of YouTube Inc. because the online video sharing pioneer frequently displays unauthorized clips from his copyrighted program. But Povich's feelings softened a few days ago when he found out that he was on a long list of universities, foundations, Silicon Valley executives and, yes, television personalities who will share in the windfall from YouTube's recent $1.76 billion sale to Internet search leader Google Inc. His windfall: More than $80,000. "It's like I caught lightning in a jar," Povich said in a Thursday interview. "I had no idea I even owned a part of YouTube." Povich's piece of action came through a small contribution he made a few years ago to a venture capital fund managed by Sequoia Capital, a Menlo Park firm that parlayed an $11.5 million investment in San Bruno-based YouTube into one of Silicon Valley's biggest paydays since the dot-com boom. The biggest winners, not surprisingly, are YouTube's co-founders, Chad Hurley, Steve Chen and Jawed Karim, who, collectively, received nearly $700 million worth of Google stock -- the prized currency used to finance the acquisition. That payoff punctuates the meteoric rise of a pop culture phenomenon that began in a Menlo Park garage two years ago when the Hurley, Chen and Karim -- all of whom are in their 20s -- began working on a sketchy idea for a video sharing site that was initially funded by credit card debt. The Google deal also made instant millionaires out of at least 18 other YouTube employees, including Hurley's younger brother, Brent, and the office manager, according to a Securities and Exchange Commission filing Wednesday. Hurley's parents also are getting nearly $5 million in Google stock. The eye-opening numbers laid out in the SEC documents will probably fuel even more dealmaking, predicted Keith Rabois, who agreed to invest in YouTube during a June 2005 barbecue. "You can sort of look at Silicon Valley as a giant casino where you need the slot machines to pay off at certain intervals," said Rabois, now an executive at LinkedIn, a professional networking site. "It's payoffs like this that makes people want to keep taking risks." Eager to cash in his winnings, Rabois on Thursday sold about 25 percent of the roughly $4 million in Google stock that he received in the sale. Google shares gained $1.02 Thursday to close at $471.03 on the Nasdaq Stock Market. While clearing the way for YouTube's employees and investors to begin selling their Google shares, Wednesday's SEC filing also provided a rare glimpse at the institutions and people given a chance to participate in the venture capital funds that make risky bets on unproven startups like YouTube. Venture capitalists usually don't disclose the names of their limited partners, but the YouTube sale forced Sequoia Capital to make an exception. The breakdown included many of the universities and foundations that regularly pour money into venture capital funds as part of their investment strategies. The list also revealed that Sequoia Capital raised money from a cross-section of Silicon Valley executives and TV personalities like Povich and Forrest Sawyer, who currently works for NBC and MSNBC. The prominent executives increasing their net worths in the YouTube deal include Electronic Arts Inc. Chairman Lawrence Probst III (5,048 Google shares worth $2.4 million), Yahoo Inc. (Nasdaq:YHOO) co-founder Jerry Yang (340 shares worth $160,000) and Netscape Communications co-founder Marc Andreessen (256 shares worth $120,000). The schools sharing in YouTube's fortune include the University of Notre Dame (39,848 Google shares worth $18.8 million) and the University of Southern California (30,901 shares worth $14.6 million). Povich and Sawyer each got 170 Google shares in exchange for their investments in the venture capital fund. This isn't the first time that a Silicon Valley success story has enriched well-known individuals with no direct ties to the high-tech industry. For instance, the eclectic list of early investors in Google included golfer Tiger Woods, former Secretary of State Henry Kissinger, movie-star-turned-politician Arnold Schwarzenegger and basketball star Shaquille O' Neal. Google also shared another common denominator with YouTube -- Sequoia Capital invested in both of them before they became household names.
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