Yes, the rumors are true. Google’s Rich Miner is moving from the Android team to a new venture arm called Google Ventures. Miner recently appeared at a conference identified with a Google Ventures name tag, which reignited rumors from last summer about Google’s venture investing plans. A source confirms that Miner is part of that team and expects a formal announcement in a few weeks. Google’s chief legal officer, and one-time SVP of corporate development, David Drummond is overseeing the fund, which will be led by investor Bill Maris.
A Googler at another conference confirmed that Google’s investment activities are shifting. At the Plugg conference in Europe last week (which is organized by our editor Robin Wauters), Google M&A exec Anil Hansjee said of his group’s investment activities, “”We are doing fewer and fewer of that out of my team as we form a proper investment fund that will be a separate effort.” (Jump to the 50 second mark in the video below).
The history of corporate venture funds is a grim one. Companies invest in startups for all sorts of “strategic” reasons, not all of which end up making them any money. That is the problem with corporate VC funds: their main goal is not always to maximize returns. If a startup is truly strategic for Google, it should just acquire it outright. In effect, this has been its venture strategy so far (outside of its philanthropic arm, Google.org).
Starting a venture fund is not really the best use of Google’s capital. It is in effect saying that it has so much cash it doesn’t know what to do with it. Google would be better off paying a dividend to shareholders or buying back stock than playing venture capitalist, no matter how smart its venture capitalists might be.
What do you think?
Anil Hansjee, (Google M&A Director EMEA Region) – Introducing himself at Plugg from Plugg Conference on Vimeo.
bad idea
Means waht? they still have enough cash !
Or Google could keep acquiring companies for the purpose of throwing away money, like Dodgeball and Jaiku. That seems to be working…
Who controls the voting shares? Sergey Larry and Eric? Then clearly they think that this in the “shareholders” best interest.
i wouldnt signed up with them but others may since its google. i guess its their way of keep future acquisition prices down
Great idea, dreams will be funded and millions will benifit, thanks google. {seesmic_video:{”url_thumbnail”:{”value”:”http://t.seesmic.com/thumbnail/ygLrhQlK0i_th1.jpg”}”title”:{”value”:”Great idea, dreams will be funded and millions will benifit, thanks google. ”}”videoUri”:{”value”:”http://www.seesmic.com/video/b69QIhNDaP”}}}
What a major egomaniac dork looking for what? Approval? Validation? Someone to give him a bath?
not nice of you jill
Maybe I would be nice to him if he was not so arrogant and combed his hair, after taking a bath, of course! The video is so out there it almost looks staged.
I like the bit when he says “.. I finally for got some medication..”. Well, looks like he needs some potent stuff! haha what a nutter
Jill right, I want approval and validation. {seesmic_video:{”url_thumbnail”:{”value”:”http://t.seesmic.com/thumbnail/G3rpneO8te_th1.jpg”}”title”:{”value”:”Jill right, I want approval and validation. ”}”videoUri”:{”value”:”http://www.seesmic.com/video/TKBaI4WfIb”}}}
Wayne man, you just scared the shit out of me. Seriously, you want funding. Stop freaking people out and talk less.
Seconded… I started getting really REALLY weirded out about 4 minutes in. *shutters* I feel bad for actually listening that far. Maybe I need -my- brain scanned.
Some interesting quotes from this meandering vid post:
0:28: A lot of people I know say “Wayne, I’d give you money if I had it, I just don’t have it, man.”
4:30: All of my friends say “I have money but I can’t solve problems.”
So which is it, Wayne, do for your friends have money, or not?
This guy’s kooky in an almost endearing way. Good luck, Wayne!
Holy cow that was hilarious!
He is mixing ganja with pills… stop it Wayne!
wow… i know nothing about venture capitalists but i know thats not the way to find one! lol
I LOL’d so hard
LOL. That was awesome.
what a psychotic tool
Good idea!
its not a bad idea in itself. they are beginning to play the numbers. It’ll have been a bad idea if five-eight years down the line their portfolio is doodoo, no exits, and no synergistic technology.
Anil is not a director. He’s a manager.
what does that matter? and how would you know about this anyway? i happen to know you are wrong, so you should keep your pompous hierachical suggestions to yourself Mr Bob.
very exciting stuff. this puts intense pressure on all other funds to be on there toes because big mama’s on the hunt. the internet is shrinking as a result of innovation and recessionary efficiency curve. simplicity is the rule of thumb. the game changing websites and promising visions are already out there in cyberspace. now the competition is more intense for funds to locate promising startups. best kind of hunting is finding the hottest startup with the greatest vision, promise and potential to change the world.
StrategicLocator.com – pure skill
Guess this moves the Google Twitter purchase up a few weeks.
They’ll probably end up funding their Nemesis. LOL
pay a dividend!
There’s a difference between trying to organized the world’s information on the web and trying to own the web outright. If Google wants to truly be altruistic then they’ll add extensions to Chrome… if they have so much cash then why is that so much to ask? Leave the guess work to Y Combinator
Cisco, Intel, Microsoft all have venture arms. If nothing else, it gives these companies a close peek at startup technologies so they can rip them off.
Google Ventures will have to tread a fine line between
1. insinuating that being funded by GVentures will make it easier to be acquired by Google if you’re successful and
2. promising Google won’t use any insider knowledge of your startup when you shop it around.
They’ll probably do both but, on first glance, they do seem mutually incompatible.
Stupid ideas – one and all. And Google will abandon this after 24-36 months. (MS does not have a venture arm).
Lots of retweets at http://vc.tEarn.com/, not much twitter reaction just like here at TechCrunch.
Has Google gotten so large that developers may not trust them for early stage funds?
Don’t know why this would be an inherently a bad idea. Sure Google has oriented its IT startup strategy around M&A to date, but making an argument that corporations should not invest in companies (but only acquire), is akin to saying all venture firms should be PE buyout shops.
I look at it as a diversification of risk, many bets instead of one or few. It’s likely they will be putting ROFRs on M&A for the Companies they invest in, so if it turns out M&A is the way to go, they’ll have first look at it.
This will put them in a better position strategically to foster business relations instead of having the carry the cost of acquisitions.
Smart move by Google to do this.
You have to look at the shift in developer mind share.
Two years ago, everyone was focused on developing things around Google so Google would buy you and make you rich. That well has dried up.
Meanwhile, a little company called Apple has come out of nowhere with this apple iPhone platform and there are 25,000 new applications for the platform with some app makers pulling down high six-figure amounts in a couple of months.
Meanwhile, back in Google land — chirp…. chirp….. nothing but crickets.
Time for Google to set off an explosion and rip the attention of the developers back to building Google apps.
Get it?
Remember, Google has flopped with just about every venture they’ve tried. They have no new-new thing on their plates and even in the best of circumstances, one home-run emerges out of 1,000 start-up ideas.
No one, not even Google, can manage 1,000 start-up ideas well (they’ve been shutting them down quickly).
So this process is a great way to short-cirtcuit development and (hopefully for Google) get some spring back in the Google-step.
I wouldn’t be comfortable pitching Google under any circumstance
The problem is not that Google has a venture fund, the problem is how ‘leaders’ look at/treat their investments. Google is the epidemy of this… When they acquire a company (think Dodgeball, Blogger, or Grand Central)… You can immediately see a stagnation of the acquired asset. There is no question in my mind that the same thing that made Google successful (The founders have HUGE egos and are Micro managers) is what kills any acquisition. Specific to Google, I can not see any strategic “investment” being handled any differently. The Google Hierarchy will dictate how/why/where and when to run it…and if the investee doesn’t agree tuff sh*t … This is why Google fails.
This is also why EVERY company who stakes/acquires usually fails…
http://twitter.com/A_F
In these arid times where funds for entrepreneurial experimentation have dried up this is definitely a very welcome development for the startup community.
Folks have talked about jump starting the startup industry by having the govt invest as a VC, what could be better than getting a technically savvy entity putting its money where its mouth is.
It’s ironic that Techcrunch that covers startups should think that taking the next Google beyond it’s seed stage is a bad idea for its investors. If anything it provides Google investors a potential to make more money.
Strategics invest to create an ecosystem that they hope influences the future sales of their products or services. More rarely they invest in order to stay close and get ready to acquire when a certain milestone is hit. Google is smart to create this fund.
And my guess is the naysayers here are all VCs frightened of the extra competition. Rather than trash your competition why don’t you sell a better product? Be more constructive at BoD meetings, actually spend quality time on company building, source customers and exec team members, etc. The CEO’s job is tough enough without having to coddle useless directors.
This seems like a great idea, techgeeks are not necessarily best equipped to launch entrepreneurial business ventures. So, if google funds the business geeks, it’s a win/win situation. Most businesses also hire tech people. so, it’s also a good job creation solution.
Rich, I want you to invest in So33t. You can see me on the I/O attendee list. I hope to meet you at I/O and give your our business plan as I think our service fits in SUPER well with Google.
As stated on our website, the real functionality of So33t is not disclosed. At I/O I will tell you what So33t really does. You may be impressed. Google hasn’t done this yet. Google hasn’t even come close to what this project is doing.
Everything stated on the So33t website is generic mobile labeling.
So33t is also a double digit xeon cluster doing cloud compute and CDN.
Once you see what it really does, I think you may be interested. I hope you are at I/0 to talk with me about this.
This may not be the best way to arrange a talk with Miner for a potential investment, but it could be just me
Robin,
we do not need additional capital to launch, and by the time my carpool drives up to San Francisco and I get to the Moscone Center, I will have forgotten all about this post and Google ventures.
I just made the offer in case Rich makes a note of it and comes and sees me at I/O about it.
Besides some of the service, the CDN/Cloud computing part will already be launched by then.
I have to rent a truck on Monday so we can drive up to go pick up the new servers. I thought I could fit them in my car last night and the shipment is far too big. So this is actually moving faster than I had planned.
The top secret part I could still reveal to Rich at I/O but I am not putting it in my planner on my G1.
I would like Rich to
A. read this post and comments
B. put a little AKNotepad item that says, ask ChrisATSo33t for a business plan at IO in 2 months.
If those 2 things do not happen, Google will lose the opportunity to
A. learn about what the true So33t mobile network does.
B. consider whether it’s cheaper to reproduce it with their own developers or simply to invest in the one we already made.
C. consider whether to clone it just to spite me personally.
Means waht? they still have enough cash !
Sorry, forgot to add great post! Can’t wait to see your next post!
Look at it this way… Google Ventures invests in startups and when later on google gobbles up the promising ones the average price that they pay to acquire controlling stake will be much lower
Nice post! Also check out my blog/podcast at http://macmaniapodcast.com.
If there is a limit to how much money Google can re-invest in its business due to the finite number of engineers and good ideas, then the company should in theory considering paying a dividend. It seems like companies have to try re-investing capital in growth in every possible way before paying shareholders, probably because the precedent once set is hard to take back…
Hello World,
This is the first message from Edward Lovey. I am the owner of doctornextdoor.com. I have turned down plenty of buyout offers…the highest being around $850,000 (for the domain name). I am not rich…I am a poor 28 year old grad student majoring in Occupational Therapy.
I hope that Google will fund my website….my ideas for this site are priceless.
P.S. I have not asked anybody for venture funding…I have too much PRIDE.
Its a New World,
Ed Lovey
I think this is a good idea for Google.
At a time when the buzz around VCs seems to be that their disbursements of funds are drying up due to the economic climate – Google Ventures can use it’s brand, cash on hand and operational efficiencies to lure entrepreneurs.
Entrepreneurs are not likely to select ‘Jim-Bobs Venture Fund’ even if they get a lower valuation with Google but have access to some of the infrastructure, social capital networks, and some of the industry’s top talent.
My two cents is that it’s a buyer’s market regardless of whether we’re talking about the Real Estate Industry or the High-Tech Industry. It’s important for Google Shareholders to realize that their money may be better spent buying long-tail equities in innovative ideas instead of reaping short-term dividends on a cash reserve.
If I were a Google Shareholder, I’d have faith in their strategic and M&A division to make appropriate decisions. Sure, there are projects that close down or never make it to mass market. This is the case with all companies, however, Google decides to be more transparent on it’s rollout plan than companies like Microsoft or Apple. This transparency coupled with the fact that they have more projects that start leaks the impression that there is an unhealthy amount of spinoffs being left to dry.
Also, the sheer amount of data collection happening on their myriad of services can give Google access to better information than is available to the general public on the next best acquisition target. Investments are largely dependent on available information and I don’t know anyone in a better position for access to information than Google.
But what do I know …. this is all conjecture
I personally like the idea, I think if they take it in the direction that the Virgin group has, they could be very successful at expanding their base and moving into some markets without too much risk, rather than forking up the money to purchase a company outright.
I would be particularly impressed to see them invest like Y Combinator in startup ideas rather than companies that are already fully existent.
Erick,
Of course there is space for corporate venture capital funds. You approach the idea from a perspective that such funds never work. That’s absolutely untrue. Check, for instance, Intel’s VC arm. Google might be even better by investing in start-ups through such funds instead of acquiring them. The problem Google solves is actually how to have great people working for their money. Currently, Google might not be able to keep and to motivate properly the founders of acquired start-ups. A corporate VC fund fills this gap.
I think that with Apps, Android, AppEngine and Youtube, Google has four really powerful platforms. A Google Fund could help incubate solutions on each of those platforms and let them grow either independently or acquire them when they get to the point where they are mature enough for Google to scale them.
One of your arguments is that Google should acquire those ideas instead of acquire them. This is I think a really bad idea because larger companies usually do not have the focus, patience and iterative/customer centric dev mode necessary to mature a concept (And this gets harder as the revenue numbers grow).
So I think that this venture idea has legs and aligns well with their platform strategies.
Wow another great idea from the king of the Internet, keep it up google, we are ready for your investment in our Celebrity Gossip and News Portal.
if they are really smart they may invest in the next Google!
After free web services, Google gives free money?
I think it is a very good idea, if they focus in early stages they will have access to a lot of companies and even fund them to see their results and finally adquire if matching their portfolio. With this approach they will not use a meaningful % of their cash (they could pay dividend if decided) and on the other hand will have very close “possible big next things” or at least “next interesting things”.
Brave move by Google, but hard a head
Come invest in my site Google before I take over iGoogle.
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Where is the long term growth strategy in paying a dividend or buying back stock? Not that those measures should not be taken as Google begins to look like a mature company. But, where is the growth strategy? That is central to the companies strategic health (defensibility and growth opportunity). For example, what happens if/when AdWords is no longer a cash cow? By that time, Google’s other products or investments (funded with AdWords revenue) will carry the company forward. Google is still a very large one trick pony and needs to diversify. Google Ventures is a good approach to help secure its long term growth and health.