Part 1 of Kurzweil A.4

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What is a company? 

Questions to think about while you are reading this section:

1)      What is a company? 

2)      What is the difference between private and publicly traded companies?

3)      What is an IPO?

So here's the thing about WeSeed: In the end, we're all about the companies. We talk about the shoes we like, who's behind our favorite new blockbuster movie, and things like that.

But our bottom line is to teach people that the stock market is made up of the publicly traded companies that produce those shoes or that movie. That's what makes up the market — companies that people run across every day.

But first, let's take a step back. What is a company? Could it be a lemonade stand? Yes. Could it be a mega-gazillion dollar enterprise like Microsoft (MSFT)? Yes, again.

A company is any entity — anything from small businesses to partnerships and corporations — that makes a service or good that the maker can sell for money. Simple.

Here's the less-than-simple part: Some companies are public. Some are private. So what the heck is the difference?

For starters, private businesses usually only have a few owners. If one of the few owners wants to sell his portion of the company, he will probably negotiate with the other owners, and that's a private transaction.

As a company gets more and more owners, there are more and more transactions, so there needs to be a place to meet. This is called an exchange.

Companies that have many owners list on an exchange to allow owners to transfer their interests freely. In this way, publicly traded companies are not that different from private companies, except that the public company allows its interests to be traded on a national exchange.

Public companies put portions of their company up for sale on the exchange in the form of shares for you and me to buy. That's called an IPO.

Got it? Good. But you should also know what an IPO is: It's an Initial Public Offering. In other words, it's the first time that shares of a company are being sold to a large group of investors.

Before that, if you have fewer than 500 investors, you have the right to remain private. But once you have more than 500 investors, you actually need to list the shares. In other words, you need to give those people the ability to buy and sell shares freely without the company's involvement.

That's a federally mandated rule. So an IPO is that time when a company decides they are willing to have more shareholders.

Let's use the lemonade stand as an example. The more people who'd like to partner with your lemonade venture the better, because those partners are buying a portion of the company, and that money helps the company do more business.

But once your Lemons 'R Us company gets to a certain number of people, the government says: "You don't have the right to be private anymore — you need to be public." So we as lemonade-stand owners say, "Great, we are going to now list our shares on an exchange so anybody can buy or sell them." 

And that's where the adventure begins.

Three Facts to Wow Your Friends at a Party

1) The first company to ever go public was the Dutch East India Company in 1601. You remember them from history class, don't you?

2) One quick way to compare companies is by their market cap. Stock price x amount of shares = market cap. This gives you a rough idea of how big a company is.

3) The sum total of all the world's publicly traded companies is just over $40 trillion.

Going Ga-Ga for Google 

Questions to think about while you are reading this section:

1)      Who started Google?

2)      Where did the Google company start?

3)      What is an IPO?

If you want to be technical, Webster's defines a company as "an association of persons for carrying on a commercial or industrial enterprise." But who wants to be technical?

To get an idea of what a company is, let's look at Google (GOOG), one of the best and brightest companies in the world — and how it got to be that way.

It all started in 1996, when Stanford University student Larry Page was working on a research project with Sergey Brin. They were looking at search engines, and they figured they could put together a formula that made a better search engine than the ones that were already out there.

Instead of just seeing how many times a word was repeated, their system would look at variables like links pointing to a site and rank them according to how "important" they were.

To test out their idea, they started small — their search engine only counted pages on Stanford University's website. But they had ambitions to go big, so in 1997 they bought the google.com domain.

A year later they formally incorporated a new company in a friend's garage in Menlo Park, California.

They weren't the only ones who thought this was a good idea: They had over a million bucks in backing from outside investors like Andy Bechtolsheim, a key player in Sun Microsystems (JAVA).

With that, Google was off and running. And what a run it was — Google's search engine garnered a huge following thanks to its impressive results and its simple home page.

The word "google" even became an official verb. How cool is that?

Then, in 2004, Google had their big day: They went public. Going public not only brought in some major cash ($1.67 billion), but it also made a lot of their employees instant millionaires.

These days, Google is worth around $122 billion. Not too shabby for a couple of guys who got their start in a garage with nothing but an idea.

That's the beauty of going public: If your idea is good enough, you'll be able to get your hands on some serious money to see it through.

Some companies thrive, and others don't. But Google is a great example of a company that created a superior product and found huge success.