The professor who made $10B by cutting Google its first startup check | Hacker News Reader

The professor who made $10B by cutting Google its first startup check

finance.yahoo.com

93 pointsredbell83 comments

> Cheriton stands as one of the luckiest and wealthiest educators of all time

Ugh. Repeated in this thread too.

> VMware, where he was an early investor;[4] and Arista, where he was cofounder and chief scientist. He has funded at least 20 companies.[5]

> He campaigned against Asynchronous Transfer Mode (ATM) that was favored by telephone carriers, preferring Ethernet, which he saw as a simpler, proven option. Ethernet gradually superseded alternatives

Sure he's lucky with the 10B, but this guy is very clearly someone who knows what makes a successful company and understands which technological advances have a good likelihood of winning. It would be interesting to see the returns of his investments aside from Google but:

* VMWare: Early investor, the company would go on to be acquired for 625M by EMC before being spun out into IPO.

* Kealia: Founder of a company that got acquired by Sun. Deal undisclosed but probably $10-20M.

* Arista: Founder of a company that IPO'd at ~8B and is worth 44B now.

* Aster Data Systems: Investor & advisory board member acquired for $263M in 2011

* Tintri: Early investor, company IPO'ed at $220M before going bankrupt a year later & getting acquired for 60M (still would be a healthy exit for him)

At whatever point repeated luck is a signal of skill, this guy has heartily hurdled it as far as I'm concerned. Sure, maybe he wouldn't be a billionaire, but he'd still be fabulously wealthy and he keeps taking so many successful shots that if it wasn't Google it would probably be something else (not to mention someone like him was probably already getting well-compensated by Stanford).

[1] https://en.wikipedia.org/wiki/David_Cheriton

> At whatever point repeated luck is a signal of skill

Has he invested in anything that didn’t work out?

I don’t know for sure, but it’s probably safe to assume that he has.

One thing with investing is you don’t need to be right all the time. It’s show more here with huge returns but even picking individual stocks a few winners tend to massively outperform the losers as long as you are not doing something like buying massively on margin.

> even picking individual stocks a few winners tend to massively outperform the losers as long as you are not doing something like buying massively on margin.

Evidently not since I have never seen an investors offer a minimum return equal to SP500 + x%.

> Has he invested in anything that didn’t work out?

If he has, it was not to the point that it ruined him.

He's also a spiteful, not very nice person.

He had an acrimonious divorce where he essentially refused to minimally support his children as a multi millionaire.[1]

He cofounded Arista, but also sued Arista, and lost[2], through OptumSoft, his pet company, out of what can be summarized as spite[3].

[1] https://caselaw.findlaw.com/court/ca-court-of-appeal/1071866...

[2] https://www.networkworld.com/article/3016667/court-finds-for...

[3] https://finance.yahoo.com/news/why-arista-networks-billionai...

I read [1] but I didn’t get the impression that he “minimally” supported his kids, especially since the wife’s appeal was basically largely ruled in his favor. Also, can we talk about how toxic some of the legislation in this area?

> Children should share in the standard of living of both parents.

> child's need is measured by the parents' current station in life.

Basically seems like a principle guaranteed to cause children of rich people to grow up entitled. Additionally, all we know here are the financial amounts. I don’t think it tells us anything about his qualities as a parent.

As for the lawsuit against a company he held a 20% stake in:

> OptumSoft's CEO Henk Goosen tells us Arista hasn't lived up to its end of the bargain, and hasn't given back all the improvements made to TACC.

I don’t really see where the spitefulness comes in here. Seems like a legitimate contracts dispute. Can you elaborate on where you’re getting this characterization of him personally?

I’m not saying he is or isn’t. I’m just saying a couple of lawsuits tell you nothing about a person and a divorce proceeding rarely gives you a good representation of that person’s behavior as a spouse and parent.

Its not a law designed for billionaires, but rather reflects that people often choose to have kids based on their current and expected future station in life; pulling the plug on that isnt a choice we generally respect.

Raising wealthy kids to be respectable citizens is something many rich people manage to do, but you likely need to be an involved parent to get good results.

(agree with your general points)

> Basically seems like a principle guaranteed to cause children of rich people to grow up entitled

I think the point is too make sure that kids don’t have a dramatic drop in their quality of life as a result of a divorce which (in my opinion) makes sense

I don't really understand this idea.

I get ensuring basic necessities are taken care of, by why shelter kids from drops in affluence beyond that?

Can you hack this by “losing your job” XX months before getting divorced? How long do you have to go before the lower level of affluence is established?

I am not a lawyer, but based on some horror stories out there, so I doubt it.

It is fairly common for individuals to be assessed support based on "earning potential" earnings. This means that obligations are not reduced if someone changes to a less lucrative, but potentially more fulfilling career, or if they voluntarily retire when they could still be working.

In my opinion, it is pretty twisted when earnings aren't based on a % of variable income.

The real reason is that it makes it easier for courts to decide custody issues.

Should the child go to a poor parent with no criminal record, or a rich parent with a criminal record?

That’s also why courts don’t care too much that divorce usually causes a drop in the standard of living of both parents. It doesn’t make th decision any harder.

As long as the drop in living standard results in equalized poverty, it’s not an issue.

Which is pretty messed up, but that’s divorce.

It can seem pretty crappy when you’re watching a court destroy your standard of living to feed your ex-wife’s drug habit.

I’m happily married, and never divorced. But I’ve seen some things.

So the children an entitled to living a rich man's life?

I can't speak to his personality, but 120k+/yr plus educational and housing trusts hardly seems minimal in 1990s dollars. That's about 240k/yr of child support in 2023 currency.

There's also nothing wrong with fighting against payments you are legally required to make. It says nothing about how much he supports his kids outside child support payments, which he does, to the tune of hundreds of millions in trusts.

Child support can be covert alimony. Seems they separated and got back together with a prenuptial agreement that separated his assets from hers. It's very one sided, why did she agree to that? Infidelity? There is two sides to every story, can't condemn someone from what is presented here.

I don't even think the prenup is particularly unfair. Both would work and contribute to shared assets, with him presumably making a larger total contribution.

This seems reasonable in a household where both parties are working and you don't have one which is only supporting the other.

I never understood the rationale for considering all assets and income joint property in marital situations you don't have a dedicated/primary homemaker.

> I never understood the rationale for considering all assets and income joint property in marital situations you don't have a dedicated/primary homemaker.

Because proving you're a homemaker is very difficult and a homemaker with no resources is unlikely to be successful very often in a court of law. Everyone is aware of the laws around joint property and the ramifications of divorce. If you don't like the prospect of losing half your shit, don't get married. Prenups are also often worthless if they're one-sided and frequently get entirely thrown out.

My anecdotal observations have been that child support is also largely alimony in practice. I don't have strong feelings as to whether this is a good or bad thing.

Your lack of strong feelings is someone else's suffering. Not everyone agrees that marriage should resort in a lifelong ball and chain post-divorce.

And the case for child support is stronger than that of alimony so to use alimony as an excuse for child support payments weakens the argument, it doesn't strengthen it.

i don't deny that child support is frequently extremely burdensome or even impossible for the person paying it. i don't have strong feels about alimony as a general concept being a bad idea. i do have strong feelings that the way child support is awarded is broken.

Is there an update on #1? Appeals court sent it back and I don’t see a conclusion.

You don’t understand the meaning of “minimal”. Not showing your ex with money isn’t the same as “minimally supporting”.

I think the more interesting thing is that he was actually in the position to come into contact with all these people. Let’s say he didn’t invest and was just a professor, there are very few people who can look around around and say “yeah I know a couple of dozen people who became fabulously wealthy”

Seems like he was in the right orbit of people at the right time, and then put his money where his mouth was.

Specifically, he worked at a VC fund that has a top university attached to it.

Ahh the suits are back in style.

This is a classical submarine PR blurb: http://www.paulgraham.com/submarine.html

Notice the last paragraph talks about some crowd funding platform - their PR guys did this article.

Not that it is a particularly bad article, just need to be aware of where it comes from.

When I was a young lawyer in Silicon Valley, I recall a senior partner (who was himself very successful) telling a group of us about how the wealthiest lawyer he knew was a modestly-talented lawyer who went to work for eBay in its early days.

Timing/luck can play a large role in life, especially if you look at the tail ends of a distribution.

Also, Andy Bechtolsheim:

> Bechtolsheim and Cheriton were two of the first investors in Google, investing US$100,000 each in September 1998. When he gave the check to Larry Page and Sergey Brin, Google's founders, the company had not yet been legally incorporated. Claims that Bechtolsheim coined the name "Google" are untrue. However, he did motivate the founders to officially organize the company under that name.[14][15]

* https://en.wikipedia.org/wiki/Andy_Bechtolsheim#Investments

I had no idea he'd done that well. I was in one of his classes back in the 1980s, before he did all this.

Everyone is equating wealth to "reasons to be alive" in this thread. Are there not people lucky to be born with great genes. There are people that get to have a lot of sex. There are people that can think better than most.

So many possible paths in life, don't get caught up in the wealth trap.

Wealth opens more paths than almost anything else in the world.

Some people seek wealth just to hoard it because they love having a huge number in their banks.

I think the majority just wants to escape the grind. And once you're out of the grind, the world is your oyster.

Health opens up many doors. Wealth also closes many doors.

Wealth helps you stay in good health - you don’t need to stress about money and can afford the best medical treatments available.

A very large proportion of the kind of health problems that limit your options in life significantly do not have guaranteed solutions no matter how much money you have.

It’s probably more of a US problem when there are guaranteed solutions but you just can’t afford them.

Stress is bad for your body. You can also eat healthier and get more exercise if you are wealthy - you have the time and energy to do so. Your relationship with family members are also less strained - at least when it comes to money. All generally leads to better health.

Sounds like a nonsequitur, but still, to some extent wealth can afford you better health, in terms of time to exercise, pay for gym/golf/etc, going to the doctor, prepare/purchase more healthy food for yourself, buy equipment for physical hobbies, go to yoga/chiropractors/massage therapists…

What doors are you imagining wealth can close?

> What doors are you imagining wealth can close?

I think it’s more about the opportunity cost of prioritizing wealth

I can give an example - the ability to form a romantic relationship with someone without the risk that they’re just in it for your money.

> once you’re out of the grind, the world is your oyster

That’s true but I don’t think you really need $10B to escape the grind, that’s more of a “huge bank account number” kind of amount

> That’s true but I don’t think you really need $10B to escape the grind, that’s more of a “huge bank account number” kind of amount

He just happens to have arrived at $10B because some investments worked out. He could have been satisfied with 'only' $1B or $100M or $10M. It may be that it was simply an 'accident' that he overshot his escape-the-grind number.

And given the number of times he has started (successful) companies, it seems to indicate that he may be more in it for the challenge.

This shows how important important luck, timing, and connections are. And having a lot of money. Bing at the right place at right time means so much for success. Even the best VCs struggle to do this well, and this guy it it on firs try.

… and money. Two years ago before he wrote that check, he sold his last startup for a cool $220M.

Money begets money!

Don't forget they tried to sell their search engine to Yahoo and others for $1m, and only started Google after no one would buy it.

If that had happened maybe a trillion dollars of productivity since would have been lost!

I would suspect much more, they are responsible for things like map-reduce, containers, kubernetes, golang, android, Gmail, and so much more. Things billions of people use directly or indirectly every day

Don't you mean a trillion dollars of luck as way too many people on this thread and adjacent bring up?

Considering this website, I find it hilarious how the most common talking point on this post is all "luck", like it's a conspiracy. You'd imagine "risk" would come up even once, but a few hours in, I am the only one bringing it up.

Not sure what you mean? Productivity here is in aggregate over the whole economy, whereas luck might come into it where you say "person X got rich off there idea - they were smart, worked hard, but they also needed some luck, such as being born next door to $influencial_person or whatever lucky thing they had.

I guess that no matter what, it's impossible to believe people made things and the magical forces of the universe made it so only a specific people gets to make these things.

> If that had happened maybe a trillion dollars of productivity since would have been lost!

On the flip side, how much productivity has been lost because of Youtube? ;)

That spins an entirely new theoretical, because YouTube wasn't made by Google — could someone else have popularized it to the same extent?

How much have you learned on YouTube as well?

Which is how he was able to write two students a "modest" check for $100,000.

Silly question. How did he turn that $100k into $10 billion? Early stock options? What did he negotiate early on to get that type of return?

He's an investor, so he just owns stock directly, presumably. And the value of Google has grown many, many orders of magnitude since then.

I mean, it's a return of 100,000x, but Alphabet's market cap is $1.5 trillion. The math works fine I think, it's just getting extremely lucky on the very ground floor.

$10B is less than 1% of Alphabet today so it could have been a typical angel deal like $100K for 5% (with subsequent dilution).

Private Equity investor sells $100,000 investment for $10 billion

Did he sell? Is it private equity?

Bloomberg lists his net worth as substantially less than $10B so I guess they believe that he sold a while ago.

VC/angel investing is technically a form of private equity but usually "Private Equity" is synonymous with leveraged buyouts.

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