As the cream of Europe’s entrepreneurs filed into the beautifully lit room at a European tech conference late in 2012, picking up their champagne as they went, a VC leaned over to Welsey Chan of Google Ventures and asked: “Why on earth are you guys sponsoring these drinks? You don’t have any investments in Europe, do you?”. Turning to his interrogator, Chan replied: “Not yet.” Thus it was that rumours started circulating around what Google Ventures might be planning in Europe.
Fast forward to March this year, and amid the Caribbean-themed annual birthday party for Google’s Campus London — the co-working space created in the heart of East London’s ‘Tech City’ area — two figures wandered amongst the crowd, brushing shoulders with the likes of the Duke of York and other dignitaries. GV General Partners Bill Maris and Rich Miner weren’t just over for drinks. They had come to figure out GV’s next moves.
Over the next few days and weeks Maris and Miner set about working their way through the most active VCs, angels and entrepreneurs in the London and Berlin tech startup industry, looking for people who fit Google’s particularly quirky way of operating. For since Google Ventures’ founding in 2009, it’s taken on board a more unusual array of partners than the average corporate fund, hiring early stage investors, former entrepreneurs and even luring technology journalists. Amid the corridors and at the parties of the European tech scene the question on everyone’s lips was: would it make the same play in Europe as it had in the U.S.?
Gossip, rumours and speculation have been rife. Yesterday, freelance writer Milo Yiannopoulos has ‘called’ what he says will be the line-up for Google Ventures Europe, naming a number of high-profile people.
When contacted, a Google spokesperson told me they would not be commenting on what they described as “rumour and speculation”.
However, while the jungle drums are strong on parts of this story, there remains enormous variation in the stories coming out from TechCrunch’s sources. For one, our sources say GV has talked to almost “everyone” in the European tech scene regarding their roll-out. So naming names at this stage looks premature.
That said, we’ve checked with our sources and here’s what we’ve found:
The industry chatter is that Google Ventures Europe’s fund is likely to be somewhere between $100-$150 million. In the US the fund is $300m, so a European operation is likely to be around half the size given that, believe it or not. With less repeat entrepreneurs and a younger ecosystem, it’s still hard to deploy the same amount of capital in Europe as in the U.S.
But Google Ventures won’t operate like a pure-play VC fund in Europe. Typically, these might be deployed over several years. But as a corporate fund, Google Ventures is an ‘evergreen’ fund — a line-item on Google’s annual budget, not ‘raised’ like a normal VC fund from limited partners.
Meanwhile, it’s the team that the rumor-mills are focusing on.
First up to be cited as a possible General Partner at Google Ventures in Europe is an obvious choice: Eze Vidra. As head of Campus London and (this year) head of Google for Entrepreneurs Europe, the reach-out programme aimed at startups, he is already a GV adviser.
Vidra is also a long-time Google employee, having launched Google Shopping in Spain and Local Shopping in the UK. Prior to that he held management leadership roles at Shopping.com in Israel, Gerson Lehrman Group in New York, Ask.com in Silicon Valley and AOL Europe in London, where he was the principal product manager for Search in EMEA.
And Vidra has become a well-known person in the tech startup scene in Europe, speaking at multiple conferences and turning his social media feeds into link bait for startup entrepreneurs. In 2012, he founded Techbikers, a non-for-profit cycling community for entrepreneurs that raises money for charity. We approached him about the speculation, but his email says he is on vacation.
One investor told us: “Eze is a slam dunk and has been seconded with GV for some time now as a part timer. As he’s head of campus he’s earned his way forward.”
The omens are strong. Sarah Drinkwater replaced him three weeks ago as head of Campus London and sources say he is very active on Product Hunt.
• Chances of joining Google Ventures Europe: 95/5
Another name associated with GV’s moves in Europe is Peter Read. One of the most active, liked and respected early stage investors in Europe, Read, has worked alongside all the top tier investors (Accel, Balderton, Index, Passion, Seedcamp, Sequoia and Venrock, among others). He has achieved exits to Google, Experian, eBay, Yahoo and Amazon and invested in many companies, including MindCandy, Rightster, Songkick, Return Path, YPlan, BookingBug, Citymapper and Farfetch.
Read has had plenty of offers as a well-known, and liked, Angel investor. And he might be tempted by the thought of doing some Angel investing privately, outside of the day job at Google Ventures Europe, so long as no conflicts existed.
However, the jury is out on whether he is prepared to give up his highly developed portfolio career as an angel investor and advisor to VCs such as Index, private equity funds such as Vitruvian Partners and big corporates. Those who know Read say it is “not really in his DNA” to give up the portfolio lifestyle he has developed. One source told me Read was cooling on the idea, another said he was still mulling it, another said he had rejected the offer. Go figure.
Read did not respond to requests for comment.
• Chances of joining Google Ventures Europe: 50/50
Tom Hulme is another well-known angel investor who’s known to have been approached by Google Ventures.
As an investor in GoCardless, Passion Capital, DueDil, YPlan and many others, Hulme has plenty of experience, is well liked and respected, and may be ready for the high profile role that GV offers. He’s also been known to work closely with existing funds alongside his angel activity.
However, his desire to scale up OpenIDEO, an open innovation platform with over 51,000 users in 160 countries, and as founder and MD of OIEngine.com, the SaaS product, he may also want to shepherd this forward rather than take on a new role.
That said, Hulme would be a “natural choice,” said one observer, given he knows Google very well because of his work on Ideo. “Tom has been wanting to be part of a fund for a while,” one industry insider told me. The question, of course, is whether Google Ventures, as a corporate fund, is quite what he’s after. Hulme did not reply to calls.
• Chances of joining Google Ventures Europe: 60/40
A strong contender to join GV Europe is Avid Larizadeh, who was named by several sources. She has experience as an associate with top-tier European VC Accel Partners, but later went on to co-found and be COO of the Boticca jewellery startup in 2010, which has gone on to raise a Series A round. However, Larizadeh left Boticca in April this year to pursue, she says, other interests including backing the UK’s “Hour Of Code” for Code.org. She declined to comment on Google Ventures.
• Chances of joining Google Ventures Europe: 80/20
Another name associated with GV in Europe has been Sherry Coutu. The high-profile entrepreneur sold two businesses in the financial services industry, became an angel investor and has tirelessly promoted tech entrepreneurship at government level. However, her various activities make her unlikely to join GV full time, though she could be in the frame in an advisory role, as she has repeatedly stated that UK and European companies need “scale-ups not startups”. When contacted, she told me: “Whilst I have conversations all the time and am aware of what is going on there, most people know that I am horrendously busy and would not / could not entertain ideas of working on google ventures or any other venture company or partnership exclusively.” She added: “I totally and enthusiastically welcome another significant player on our scene- but still value my independence too highly to join them or anyone else.”
• Chances of joining Google Ventures Europe: 0/100 (but may end up as an advisor?)
The former Senior Policy Adviser to the British Prime Minister David Cameron, Silva championed the Tech City initiative in East London, new tax breaks for angel investment (EIS, SEIS), Entrepreneur Relief and Entrepreneur Visas. He went on to join Index Ventures as an Entrepreneur in Residence and is now working with Index Partner Robin Klein on Second Home, a new club for tech entrepreneurs opening later this year. Think “The Battery” in SF but for London.
While his UK government contacts are unrivalled, Silva has less empirical experience as an investor than most of the other names in this piece. That said, he’s served for over 12 months as an EiR at Index Investors — probably the best kind of bootcamp for budding VCs — and Google Ventures does have a history of not going down the traditional VC route, hiring a range of people from outside the investment community. Even so, he went on record with TechCrunch to say any reports that he is joining are “completely (and predictably) wrong” and he is working “seven days a week” on Second Home and other projects.
Indeed, an investor in Second Home told me he would be “very surprised indeed” if Silva were to jump ship at this point given his existing commitments. Actually, his exact words were “What the fuck!”
• Chances of joining Google Ventures Europe: 5/95 (potential advisor)
Another European ‘super angel’ approached by Google Ventures is understood to have been Christophe Maire. Based in the key tech startup hub of Berlin, Maire would be well-placed to source deals for GV. However, there’s been scant indication he would jump over to Google, and Txtr, his ebook distribution platform, is apparently going gangbusters in Asia.
• Chances of joining Google Ventures Europe: 10/90
WHERE NEXT FOR GOOGLE VENTURES EUROPE?
Industry observers we spoke to all say that while the above names have been “bandied about” the Google Ventures Europe team is nowhere near to being put together and the names potentially involved actually keep changing. “It was never a formal interview process for anyone – some of the names circulating are just ones that they have kept talking to longer than others, that’s all,” said a well-placed venture source.
And, said one tech accelerator head, “These names are used a lot but no-one has signed with Google yet. Eze is the only one properly signed up to this.”
What most of those we spoke to said was that ‘if’ the above names were involved, the core of the team would most likely be formed around Read and Hulme, as the two most experienced investors — with Read nosing ahead as the most experienced of all. But that’s still an ‘if’.
Plus, if this is indeed the Google Venture Europe team then it is “early stage heavy,” as one source put it to us.
“Google Ventures Europe, with $150 million, would be competing or even co-investing on deals with VCs like Index, Accel and Balderton. Firstly, they would need an experienced institutional person. Second, the team would need people on it that serial, late stage entrepreneurs are used to dealing with. This is not quite that team yet,” said one prominent early stage investor.
THE MISSING LINK
With the lack of a Partner with institutional experience, such as someone from a late-stage venture fund or perhaps private equity, there remains a question about who would actually manage the fund day to day.
One source – a former Googler – said to us: “Running a $150 million fund is not for the faint hearted. It’s about managing the fund day to day, it’s about maximising your portfolio — it’s a proper finance job.”
And time is ticking away on all these hires.
Sources say Google Ventures was planning to hire its team to start working in September this year, but would only formally draw attention to its presence in January next year when it had investments ready to announce.
The fact that no team has emerged fully-formed before the summer suggests that the September start date may have to be put back.
Google Ventures Europe could dump as much as $150 million into the European scene. This is a size described by at least two early stage investors I spoke to as “massive and potentially game changing for Europe.” Run as an ‘evergreen fund’, it’s funded off Google’s balance sheet.
But most people I talked to struggled to see how you could spend $150 million on deals in Europe annually when the ticket sizes would have to be in the region of $10 million+ a piece. Those kinds of investments are rare in Europe even now.
More likely, one said, was that the $150 million would be spread over an annual allocation over 5-7 years (the typical life-cycle of a fund). If it really did turn out to be $150 million a year, well, most investors I talked to spat out their proverbial coffee at the thought.
Whatever the case, the money is welcome.
“If it’s like Google Ventures in the U.S., there is no upper limit. They will invest as much as they want to,” one investor told me.
Its big cheque book is part of the attraction.
The big question is, how will Google Ventures Europe operate?
GVE could act like “major league scouts” – sourcing deals for Mountain View, assisting the European founders they do end up investing in, and generally running the regional HQ of what is in effect the venture arm of a big corporate – albeit one with a very good reputation.
In this instance, GVE may even second a couple of partners from the US to run the operation, while the local team sources the deals.
However, as perhaps Google is finding, it is extremely hard to lure VCs from an existing fund over to a corporate entity.
The main reason is that, unlike pure-play VCs, corporate VCs pay a straight salary and do not pay ‘carried interest’ or ‘carry’ when an investment exits. ‘Carry’ is a share of the profits of an investment paid to the venture partner upon successfully exiting an investment, which may take years.
Thus, trying to poach a VC from a fund that offers Carry to one without is very hard. This is something that would concentrate the mind of any successful angel investor being wooed by Google.
More likely targets are Principles or Associates at a VC fund who do not get Carry, but are interested in building profile and experience at a high profile corporate VC like GV. The ‘Associate gene pool’ in Europe of potential hires for GV in this case is healthy, but none have the profile or standing of any of the above mentioned people. And it’s likely that GV Europe does not want to be seen to be hiring its founder Partners from the ‘subs bench’.
But, fundamentally, although Google Ventures is among the best in its class — ranking alongside Intel Capital, Cisco, etc — this is still a corporate venture. That means the way it is run and interacts, and the talent it attracts, makes it a different beast to a pure-play VC.
A key factor in running any fund is how investment decisions get made and very few firms operate a single partnership across multiple geographies. In Europe, Index Ventures operates this way, with partners in the US and Europe involved in all decisions. Accel US and Accel Europe, however, are run as different funds, so the decisions are made locally.
Which method would Google Ventures choose for its European operation?
History has shown it’s hard to play second fiddle. The Sequoia team in Israel, for instance, has had to clear investment decisions with the West Coast. As a result it has ended up losing some partners, who feel frustrated by this process.
Thus, it’s likely that one reason we have not heard about the final line up for GVE is because either those issues have not been resolved, or the people they want to hire don’t like whatever arrangement Google Ventures has proposed.
Will Europe run its own game or need to work hand in hand with the U.S. team? Who will call the shots on investments?
And there are other issues.
Since Larry Page took up the CEO position, Google has reached out across the far-flung corners of the world and brought almost all its product people over to Silicon Valley.
Today, product and engineering heads are almost all centralized back at Google HQ. The power of having all those people accessible by the team at Google Ventures is hard to underestimate. So any Google Ventures team run out of Europe faces a tougher job, as it would be cut off day-to-day from the ability to easily access that those key product and engineering people when making investment decisions.
So, some might say it’s an up-hill battle. Europe doesn’t need that much capital, any GVE team would still need an experienced fund manager and product and engineering is far off in the Valley. It doesn’t look easy.
On the flip side, Google is staffed full of brilliant people, has limitless resources and deep pockets. Who would’t want to be part of that team?
And certainly, in Read and Hulme’s case at least, the ability to operate both as an angel on some deals and as a VC on others — even if it’s as a corporate VC — could still prove attractive.
Whatever happens, we know one thing for sure: Google Ventures will — whoever joins – have a team in Europe. And that has to be a good thing for European companies that desire that all-important cash injection at post-Seed or Series A funding.
As one VC put it to me: “It’s great for Europeans, in that this is a fund that will invest and co-invest on a pan-European basis, with deep pockets and US eyes.”
And, God-willing, some European eyes running things.
Picture credit: keepcalm-o-matic.co.uk