The Google Ventures Cheat Sheet

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Earlier this week, Google finally announced the formation of a new venture arm called Google Ventures. It is where all smaller-scale venture investments from Google will now originate. The day of the announcement, I chatted on the phone with Bill Maris and Rich Miner, the two Google executives who are managing the fund to get a sense of what they are interested in and how the fund will work.

It turns out they are open to investing in pretty much anything from the Internet and cloud computing to healthcare and mobile. “We don’t want to artificially limit ourselves,” says Miner. What about space elevators? “Show me one that works,” retorts Maris, “and I will invest in it.” The two of them will run the entire fund pretty much by themselves, bringing in other Googlers as needed for expertise and to help evaluate startups. Both Maris and Miner have done venture investing before: Maris for Swedish holding company AB and Miner for Orange Ventures. Miner will be leaving the Android team at Google, where he negotiated many of the deal with carriers and handset manufacturers.

A couple weeks ago, I argued that setting up a venture arm is a bad idea because there are better ways for Google to be deploying its capital. Maris pointed out the relatively small amount of capital involved ($100 million) and responded: “Google has always had a strong belief in the power of entrepreneurs to do amazing things. Google has always made investments in companies, and we will continue to do that.”

My big concern, however, was that Google would invest for strategic reasons instead of purely economic ones. Both Maris and Miner assured me that this would not be the case. “It is true that strategics have had mixed results,,” acknowledges Miner, “but we think we can put this money to work. Startups end up doing one thing and then have to shift direction. If you take money from someone who wanted to see you do X because you said you would do X in that first Powerpoint, they may restrict your movement as you need to adapt.” Miner says Google Ventures will avoid that pitfall.

If you are an entrepreneur trying to figure out how to navigate your way to a pitch session with them, below is a cheat sheet with the basics you should know.

  • A $100 million fund (that is the amount of capital allocated over the next 12 months).  “We don’t have to invest $100 million this year,” notes Maris, “it is what we want to do.”
  • It will focus on seed and early stage startups across any industry, but “won’t invest in a company that we don’t think we can properly vet and understand,” says Miner.
  • The first two portfolio investments are Pixazza (“AdSense for images”) and Silver Spring Networks (smart grid technology).
  • The sole limited partner is Google
  • All venture investing from the company will now be done through Google Ventures (for instance, Google.org will no longer be making venture investments)
  • Larger strategic investments in the range of hundreds of millions or billions of dollars will still be done by Google’s corporate development team led by David Lawee
  • One-way mirror policy to protect startups from prying eyes. “We can look into Google, but Google can’t look into the companies without asking,” promises Miner.
  • Overriding investment criteria will be ROI, not strategic motivations.
  • But that doesn’t mean strategic considerations will be ignored either.  “If a company comes in the door and it looks like something important for Google to acquire,” says Maris, “we will defer to Google’s corporate development department to take a look.”

So where does that leave startups and can they really trust that one-way mirror?  Any startup related to the consumer Internet, search, or advertising would be well advised to be wary about revealing too much of themselves to Google Ventures. “This is a self-limiting process,” admits Maris.  “We are not going to know the group of people who do not want to talk to us.” I’m sure they will have plenty of people knocking on their door regardless.

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