Nice write-up Brad; lots of things I didn't know about Google Ventures. Having interned at Intel Capital, I remember that corporate VC was not well regarded in the VC community, both by fellow VCs and by those searching for funding. Intel Capital also cited some of the above, albeit usually for hardware start-ups, but I wonder why this sentiment existed.
The answer is no. There is no career path for Google Ventures folks within Google. Whereas a partner at Sequoia gets to run the show. So the natural life cycle for corporate venture groups is much shorter as a result than for successful venture firms.
I'm counting 6 reasons there, but I know you guys are just checking to see how closely I was reading ;)
Curious, but I wonder if some of this effort on Google's part is in response to Microsoft's efforts with start-ups, the NERN center in Cambridge, the free software, and start-up evangilists in every part of the country. Microsoft makes a compelling case for staying in the Microsoft camp as a start-up. What do you think, who gives you the better deal Google or MS?
Great article. It opened my eyes to a lot of new things going on at google. I say that yes google has the power to disrupt venture capital. Will they remains to be seen. They have plenty of experience disrupting other industries it wouldn't surprise me a bit if they do it again. Personally I choose Google every time over Microsoft. Thanks for the article.
Spot on all fronts Brad.
I'm a co-founder of a Google Ventures start-up and am hugely bullish on how they're planning to disrupt and optimize yet another huge, yet in many ways, hugely inefficient market - VC.
See my Quora post on GV: http://b.qr.ae/jDGVJ4
Way to kiss your investor's rear. That's gotta be worth at least another $100M on next round's valuation.
Google Ventures is an interesting new play. But ultimately will the next Facebook, Twitter, Zynga, Groupon come out of their portfolio? No. It's another Intel Ventures waiting to happen -- a reconnaissance arm for the mother ship but not really disrupting anything that would upset it.
It seems like there's a lot of potential for Google to make an impact in the VC world with their huge resources and talent.
But Google being Google, there's every chance that they'll be too smart for their own good.
Just like the GMail "Call Dad" fiasco that many found upsetting and offensive, Google Ventures is offending some entrepreneurs by requiring ridiculous questionnaires that they claim to be using as part of their rigorous data gathering process. While I could accept this as part of their due diligence, it isn't. It's just for data gathering - to help improve their algorithm. You must fill out this dumb questionnaire if you want to get funded.
Come on, Google eggheads. Get a clue. You're on a good thing with Google Ventures. Don't alienate entrepreneurs when there are plenty of other eager VCs out there ready to steal your leads.
Problems I see that Google Ventures faces if they truly want to disrupt Venture Capital:
They've _got to stop asking founders to opt out of an NDA before founders get buzzed in to Google Venture's office. Otherwise, they are going to have a hard time gaining an entrepreneur's trust. I'm sure it's a "It's not that big of a deal" issue from Google's perspective, because everybody has to opt in/out of an NDA on Google's campus, and it's the Google "normal". But, founders pitching dozens of VC's are going to notice the dramatic difference in signing in to a Google Ventures meeting and stopping by any of the hundreds of VC offices on Sand Hill Road.
Google really needs to relax their "All your IP are belong to us" policy for their engineers, if they are truly going to promote startup culture and have founders want to pitch Google Ventures first when it comes to funding their ideas. There is precious little boot strapping while working at Google. The engineers that I know at Google that are boot strapping pretty much have to be in stealth mode otherwise they run the risk of tripping over Google's IP issues. If they are working on a startup while working at Google, they are _very, __very quiet about it.
That creates a deafening silence silence within 5 miles around Google campus when it comes to Googler startups. Hackers & Founders has been meeting 3 miles away from the Googleplex for years, and I can count on one hand the number of Googlers that show up. How many Googler's hang out at the Hacker Dojo? How many ex-Googler companies are at 500 Startups accelerator, which is a couple of miles away from campus? I hear SunFire is full of them. But, you don't see those people hanging out at 106 miles too much.
Unless they work at Google, hackers in the Valley are getting creeped out by how pervasive Google is, and how much data Google has on them. That very much works against Google Ventures when it comes to founder mind share.
I'm sure to startups based in other parts of the country, Google is quite sexy, and having access to advice from engineers who've worked at Google is quite exciting.
As a VC in the Valley, you want to have a good enough reputation, network and deal flow that you employ people to screen meetings and pitches away to maximize a partner's time. If any other VC in the Valley started offering me $10k per referral that I made to them, I'd run away screaming.
Having had the unfulfilled promises of "access to a portfolio of companies to create scale” never seems to work as well as the courtship period with a VC firm suggests: another reason to justify a higher percentage for their investment. Each portfolio company is trying to survive and keep the growth promises made to the VC firm, let alone help your company do the same.
Big companies incubating start up's to help grow their ecosystem of value added providers is nothing new (See Intel example above). This is done through direct investments at times, but more often through partner programs, incentives and margins.
After reading through the comments to this post I see no compelling reason why this will not work and believe that taking such a high profile position is spot on and will disrupt the normal flow of VC deals as placing Google as a new first tier player creating competition with some compelling differentiation.
A company needs more than capital to grow - most start-up companies lack access - to money, to talent, and to strategic partners to get them in markets that they have not earned the right to enter.
Thanks, Brad - really interesting. Can i pick up and attribute with links to this post in my magazine - which covers corporate venturing!
Jim: Will speak on Brad's behalf. Feel free to post to your magazine (with proper linking/attribution back to OnStartups.com).
Will be interesting to see how this plays out... Indeed the VC scene is antiquated and in sore need of some "new kids" to make them jump.
Would this be like how Google is disrupting social media? Because if that is the case, I do not see much disrupting happening in Google Venture's future.
Interesting blog and it must have been very interesting deciding which VC's to go with in the last funding round !!
Some said that corporate VC was not well regarded. That makes sense from the perspective of fellow (non-corporate) VC's.
Is it the case for those searching for funding though? I see both pro's and con's of going with corporate VC. A start-up would have access to all sorts of resources, as described in the article re Google Ventures. On the other hand, there would be more rigid reporting standards etc. But is there such a shortage of ideas, and such an over-abundance of capital that would-be-entrepreneurs will turn their noses up at funds from Google and wait until something else comes along?
Also, the Google Ventures idea isn't unique. While Intel is emphasizing partnership with academic institutions lately, Microsoft runs at least two VC "programs". So does AOL. Both have been around for a long time without depleting the idea pool.
I am very curious about the particulars of the Google Ventures application form that was considered offensive (mentioned in another comment).
Last thought: Google.org didn't turn out that well. It is more of a research incubator, I guess. Google Ventures is mostly about profit rather than corporate good citizenship. But GOOG will need to run Google Ventures differently than Google.com. (Part of the Google.org problem was due to managing it too similarly to reglar Google).
I think it is a good development for all entrepreneurs out there.
what a funny, puzzling query.
NO ONE can alter, change or
disrupt any process other than the one they are using in their own office. VC is older than Google.
I am older than Google.
U guys need to study history and
management and sociology.
How do we get the MS e-Business Innovation Center (Incubator) plugged in to Google Ventures? We got some great Technology Companies needing capital.
Sounds just like any other corporate VC's sales pitch, plus the Google brand.
Google Ventures as a co-investor sounds fine, but as lead = welcome to the Googleplex.
My product is a B-2-B-2-C collaboration platform that has entered a recurring revenue mode. We are positioning for scaleability and have won a Dell Top 10 Innovator Award, a Forbes Most Promising Award and have been featured in Entrepreneur Magazine. I went to the Google Ventures site and there is no way (at least that I found) to contact the group. Anyone know how to do so?
A startup's key capital is their idea - which drives their passion, value and identity. Why would a startup want to share that with Google - for anything? Google Ventures looks like a corporate variation of the saying "a cocaine habit is God's way of telling you that you have too much money"
Google has the extra cash to pour into a venture - great for them. I don't expect to see anything "disruptive" or "innovative" from it
Anything to help the startup stay alive is a good think. Money is always hard to find, doing paperwork is easy.
Thanks! This was indeed valuable reading. Google is really innovative! Lot of value additions in comments section.
Whether it's Mother Google or Google Ventures they will continue to transform how business is done, both on Main Street and Wall Street. Revert back? I doubt it.
Continue to develop new processes, approaches, alliances, strategies, and business models? I expect nothing less.
Arguably more interesting than Google Ventures ( and maybe more fun ) is the " Star-up " concept explained by Gary V
The best thing for them to do would be to look at ventures outside the USA as soon as possible!
Good luck to them VC is great when you have some turnover but sucks when you are starting out - someone needs to break this mould.
Google Ventures is a good firm, but far from disruptive. You mentioned 2 advantages: Consumer Brand name, and rolodex of engineers, clients and collaborators. Only the first one is truly disruptive, yet it can't be fully realized in some recent deals Google Ventures has done, for example in Solar. VC is a people business, and most good firms have a strong Rolodex. Google Ventures with it's limited history does not have a absolute upper hand.
I think i will be the least experience of all of you - when it comes to VC knowledge and exposure.
Google Venture as a disruptor? I am not sure as i have had some very basic issues (perhaps, my lack of knowledge, connections and experience) i.e. have not been successful in receiving any response from them. [Any tips you could provide will be most appreciated :-)]
I have called their office (their speech service doesn't recognize any of their team's name), send them emails - no one responds!; tweeted them - but still no response or feedback!
With Google's might and resources - they could give other VCs tough time (but you would expect that from Google - however, i am not sure they are causing disruption in the industry - the way they did in software, online videos, search, maps, advertisement, etc, - they have model almost similar to Originate Labs (may not be 100% similar) -essentially, they're providing capital + resources + helping address issues on top of usual connections and introductions...
BTW my website is underdevelopment and i am looking for strategic business partners and investors (the current version is <20% of vision).
When choosing a VC to work with, the primary consideration must be trust. Everything
else is less important than trust.
Google fails that criteria -- badly
. Google sucks data out of their partners and then unilaterally changes the deal terms. Partnering with Google is signing your company up for a slow death as Google drains the life blood out of it.
Thanks for sharing. Can someone do a writeup on why not google ventures? My main concern would be is this patient money or impatient money. Any idea?
Google ventures is only limited to north-american businesses :-(
Like someone mentioned, with Google, the issue is TRUST. Google are always in for their good, fair enough, everyone is but Google always flouts privacy. I dont use Google desktop and find it difficult using chrome cos of similar reasons. You may get the money and the technical boost but be sure they won't allow you to grow bigger than them and some of your niche yet-to-be-patented ideas may end up in their products. Sure they may cause a stir in the VC business but disrupt? not in my estimation cos pretty soon, they'll be seen for who they really are and what they stand for.
I guess they would be one of the big players in the market. However, if you looking the investments in terms of acquisition the company has made, a fair share have been very unsuccessful. But then again, that is just my view.
Brad, great post! Interesting way to juxtaposition relationships with some of your lead investors. The commentary was as valuable as the post.
After observing (and sometimes participating as an angel) the venture community for the last fifteen years or so, I think the entire community has seen the light and traditional patterns have finally been broken. I have to believe that Google looked at other corporate venture models (IBM, Msft, HP) and found their own way - as unique as Google is as a company itself. Glad to hear that you think it works.
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