Cuil’s Current $200 Million Valuation May Be Questionable

Posted Sep 14, 2008

Cuil received a ton of press when it first launched.  As soon as people started tinkering around with it, a ton of negative reviews were published.  Tyler Hall, a developer at Yahoo! was able to replicate Cuil using Yahoo! Boss and the Google App Engine.  He called it Yuil, but later took it down.

Investors somehow believe that Cuil was worth $200 million when they put money into the company.  Cuil raised about $33 million in funding from several investors.  What possibly drove Cuil’s high valuation is it’s confidence in challenging Google.  Google is the most powerful search engine company on the map today and they are worth $140 billion. 

It seems like that any search engine that believes they can challenge them will get funding and a high valuation.  And Cuil used the same strategy as Powerset to get funding: building the hype.  Cuil claimed that they index more links than Google, but they struggle to find results as accurately.  

Powerset claimed to have better search technology than Google.  So they raised $20.5 million and was acquired by Microsoft for $100 million.  The only product that Powerset launched was a Wikipedia search solution before the acquisition.  Microsoft plans to integrate Powerset into Windows Live down the line.

To shake things up further, Cuil’s VP of Product Louis Monier resigned from the company.  Building the hype usually works against the founders of a start-up because it puts more pressure on them.  More pressure means more stress and more stress leads to less of a desire to stay with a company.

Matt Marshall of VentureBeat wrote an interesting article about how Cuil may have a hard time finding an acquisition with such a high valuation.  Cuil needs to do something drastic to prove that they are a worthy adversary of the big 3 search engines out there.