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After startup buyouts efforts, Google to launch venture fund
By siliconindia
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Saturday, 02 August 2008, 17:41 IST
California: Google now thinks it is better to invest in startups rather than buying out them bluntly. Sources say that the search firm is working on plans to start a venture-capital arm under the leadership of David Drummond, Google's senior vice president of corporate development and chief legal officer. Google has hired William Maris, a 33-year-old former entrepreneur who has worked as an investor, to help set up the venture.
While Google has been pursuing acquisitions in the U.S. soil directly, it has been investing indirectly in start-ups in India through three funds and an angel network - Mumbai-based Seedfund, Bangalore-based Erasmic Venture Fund (now Accel India), Chennai-based Ventureast TeNet Fund II and the Delhi-based Indian Angel Network.
WSJ reports that the move would make Google the latest firm to join a venture league of high profile technology firms including Intel, Motorola, Comcast, Walt Disney's Steamboat Ventures and Amazon.com.
Corporate venture-capital arms have been hampered by challenges that traditional venture-capital businesses don't face. Many start-ups fear that taking corporate money limits their options and comes with strings that could turn away other potential investors - such as a right to buy the company at a later date.
Some funds with less competitive compensation have struggled to retain managers, and corporate venture funds often don't allow senior employees to invest personal money in their funds, while other venture funds typically do.
According to PricewaterhouseCoopers and the National Venture Capital Association, corporate venture capitalists' share of overall venture-capital dollars invested in U.S. companies fell to 7 percent in the first half of 2008 from 8.4 percent in 2007. Corporate VCs were involved in roughly 20 percent of the venture-capital deals signed during the first half of 2008, compared with 21 percent in 2007.
With an abundance of venture-capital money available today, Google will have to convince entrepreneurs that it has something to offer that other investors don't. It has several advantages, including a brand admired by start-ups and the ability to offer sizable technical resources.
Google has long preferred to buy companies rather than invest in them, and has plenty of cash to keep doing so. But it has invested millions of dollars in companies ranging from Current Communications, which offers broadband Internet over power lines, to Meraki, a wireless-Internet-equipment manufacturer. The new venture could help formalize those efforts.
