A VC - Latest Comments in A VC: Corporate Venture Capital

Re: A VC: Corporate Venture Capital

Jayrag — Wed, 01 Apr 2009 05:10:11 -0000

duh yes.. For example, if the stock price of a company doesn't grow, a company like google cannot attract or retain good talent. If it doesn't have good talent, then it can't continue its business as efficiently as it was.

I am sure you can find several other reasons for having a good stock price.

Re: A VC: Corporate Venture Capital

jhi247 — Wed, 01 Apr 2009 04:47:35 -0000

IMO venture investing has a lot to do with brand. E.g. Sequoia has a great brand, this attracts the top entrepreneurs, they build the best companies, Sequoia's brand further improves, ... Over the course of the years this becomes a money making machine that is hard to screw up. Why wouldn't Google try to do the same? They are THE brand in the Internet era. Which entrepreneur wouldn't want to boast that Google is an investor in his or her company?

Re: A VC: Corporate Venture Capital

Web Design — Wed, 11 Feb 2009 08:46:30 -0000

what I believe the companies must empower their workers. The main benefit why some people prefer to be a big fish in a small pound is the fact of being more close to the central body and less hierarchy mean more chances to get rich and climb vertically up to the ladder. Their are big giants which have very good employee police and no doubt they are moving leaps and bounds.

Re: A VC: Corporate Venture Capital

Allan — Sun, 21 Sep 2008 02:38:44 -0000

Corporate venture groups, if they're halfway successful, end up leaving the parent's safe corporate umbrella. The guys at Scale Venture Partners flew the Bank of America coop after some great performance investing in breakout successes like Omniture. I can think of a half dozen other firms that have sought independence from their corporate sponsor. Strong investing talent wants to operate on its own and reap the bulk of the rewards.

Re: A VC: Corporate Venture Capital

Antman — Tue, 12 Aug 2008 00:13:33 -0000

"One time gains in corporations don't make anyone rich. Wall Street ignores the gain. The company can't put the gain into the pocket of its management. So it just doesn't matter very much."

This is a great point. Motivation is a critical component in any endevour. With out proper alignment, the best of intentions is comprimised. This is a great post, great perspective, great insight.

Re: A VC: Corporate Venture Capital

Amarnath — Sat, 02 Aug 2008 08:39:34 -0000

dont you think google is gearing up for a great showdown? they rock!!

Re: A VC: Corporate Venture Capital

fredwilson — Fri, 01 Aug 2008 11:55:05 -0000

I am a day behind on this comment thread and just suggested the same thing!

That's exactly right

Re: A VC: Corporate Venture Capital

fredwilson — Fri, 01 Aug 2008 11:48:07 -0000

You can't invest that kind of money in vc. The best firms can't figure out how to manage fund sizes much larger than 500mm

The best funds over the history of VC have been even smaller

That kind of money is very hard to invest intelligently. I'd advise them to start paying a dividend of about 1bn per quarter

Fred

Re: A VC: Corporate Venture Capital

fredwilson — Fri, 01 Aug 2008 11:33:07 -0000

It happens all the time and its a big issue with taking corporate money

Re: A VC: Corporate Venture Capital

Taylor Davidson — Thu, 31 Jul 2008 23:49:43 -0000

"Keeping homegrown ideas" in-house is perhaps the best reason for Google getting into VC. But couldn't they have done this in a more innovative structure, perhaps an in-house marketplace for ideas, or "space" (corporate, physical, org) for people to pursue new ideas 100%? Is this an admission that the much-vaulted and misunderstood 20% policy isn't successful?

I'm a bit confused by the strategy because Google has been an active early-stage acquirer, and I always thought that was an intelligent way for Google to get access to ideas and products.

The gains from acquiring and leveraging ideas internally *should* be more valuable than just participating the financial returns from funding new companies, right?

(and it they are not, isn't that admitting that the internal org structure is insufficient for letting good/new ideas percolate through the value chain?)

Re: A VC: Corporate Venture Capital

Marco — Thu, 31 Jul 2008 16:13:03 -0000

Times are changing..... Nokia Fund, BlackBerry Fund .......

Re: A VC: Corporate Venture Capital

asifrahman — Thu, 31 Jul 2008 14:11:08 -0000

How about both? It seems like they have enough cash on hand to give a nice special dividend (a la Microsoft) and still deploy a massive VC fund. Just guessing, but it would probably take them more than a year to invest a $1 billion dollar fund, which is how much cash they generate in less than a quarter. Google isn't betting the farm on this, so it seems pretty risk-free from the company's standpoint.

The more important discussion is how the VC industry will be affected by this. I think founders benefit from Google's presence in this field because of a better alignment of incentives.

Re: A VC: Corporate Venture Capital

Jerry Neumann — Thu, 31 Jul 2008 13:59:07 -0000

"...the best talent in the venture industry doesn't work in large companies and won't work in large companies..."

Well, jeez, don't tell Brad you said that. :)

Re: A VC: Corporate Venture Capital

Brian — Thu, 31 Jul 2008 13:42:18 -0000

How about a dividend to shareholders?

Eventually growth is going to slow. It may be better for shareholders to receive a dividend than spend money on ideas that will have a terrible rate of return.

Managers are always biased to throw good money after bad in the hope of maintaining growth. Maybe Icahn should lobby for a spot on google's board?

Re: A VC: Corporate Venture Capital

Farhan Lalji — Thu, 31 Jul 2008 13:39:07 -0000

how do you reward corporate venture staff in a way that a - doesn't make them feel like the poor cousin of the regular venture pros while at the same time b - doesn't piss off other employees because the venture guys are making big payoffs - if they ever actually exit an investment.

Re: A VC: Corporate Venture Capital

asifrahman — Thu, 31 Jul 2008 13:30:41 -0000

Google has $12 billion of cash on their balance sheet right now and they generate $1.8 billion of cash every three months from operations. Does anyone have any suggestions on how they should spend that money? Buy treasuries? Upgrade the free food? VC seems like a pretty logical place to put it given the massive potential synergies.

Re: A VC: Corporate Venture Capital

leigh — Thu, 31 Jul 2008 13:15:11 -0000

"Their [corporations who invest directly in venture deals] track records have been mixed."
Hum...but truth be to told their start up acquisition strategy has been a bit mixed as well n'est pas? I assume they are trying to move up that food chain as well as likely invest in the start up ideas that their own employees are probably coming to them with on a daily basis.....

Re: A VC: Corporate Venture Capital

gregorylent — Thu, 31 Jul 2008 12:35:06 -0000

ok, here we go, econ 101, but for the edge economy new age ... so what if investors pull their money, sell their stock? that has nothing to do with customers, income, sales, product development, does it? isn't that investment action all taking place over there in a sort of parallel market where guys bet on which things will go up and down, and win or lose from each other? does it change anything about day to day business of the company itself?

Re: A VC: Corporate Venture Capital

pedalpete — Thu, 31 Jul 2008 12:25:51 -0000

The quick and easy assumption here is that any VC investments that Google makes will be focused on Internet/IT start-ups. But the google boys may be going against the grain.
The internet based VC market is already changing due to lower start-up, development and operating costs. Maybe google has a model which will better serve this market.
Potentially they would focus on environmental, energy or medical start-ups. With the diverse PHD's working inside the company, and 20% of their time being devoted to non-core work activities, they have the brain-power internally to understand these businesses and potentially make very good decisions, and they may have lots more to offer these companies.

I like to think the S&L haven't gotten old and that they still like to shake things up.

Re: A VC: Corporate Venture Capital

kenberger — Thu, 31 Jul 2008 12:22:07 -0000

WSJ says: "taking corporate money limits their options and comes with strings that could turn away other potential investors".

True, and perhaps just as importantly, it can also preclude landing some key customers. That's not to say that a company won't do business w/ a company funded by a competitor, but it does happen and I've lived through it.

Re: A VC: Corporate Venture Capital

kenberger — Thu, 31 Jul 2008 12:16:47 -0000

The heart of the matter is that corp vc, at least as it's existed for the most part so far, is really about strategic for the corp's bottom line. There are a few exceptions that have come and gone but it's true for the long-term ones. They are beholden to a very different success metric than IRR.

Here's 2 examples of corporate VC that I find fun to think about:

1. Intel Capital: Biggest fund in the world, from what i remember. They can lose a ton of money but it's still seen as a success for Intel if resulting acitivities translate into billions more Centrinos sold (which is exactly what was argued at least at one point). But the principals are not paid a carry (there usually isn't one) and so they get a different type of talent than a garden variety vc might.

2. Nokia Ventures: Started as strategic but then quickly took on a syndicate of LP's, then later completely morphed into an independent fund and even changed their name largely to emphasize that they can and do take investments competitive to their erstwhile parent.

It could very well be that Google can think of some innovative tricks and create an entirely new model. They certainly have the correct mentorship among current board members and alumni. Or maybe not, and they scrap the plan!

Re: A VC: Corporate Venture Capital

Eben Thurston — Thu, 31 Jul 2008 11:47:30 -0000

They're probably looking into VC because their size has made it difficult to keep homegrown ideas, like Friendfeed and Ooyala, in house. If they're doing this just to keep some exposure to products they would otherwise lose entirely, then this may end up being more of an external product incubator initiative than a traditional VC initiative.

That said, at first glance Google doing traditional VC seems like something that could work well, because they already do a lot of investment in tech startups through the M&A side, so presumably they have people with the right skill set and maybe even an edge. However, a big company buying a startup because the startup's products or services can be monetized by the big company is a fundamentally different kind of investment than VC. If Google VC invests in a firm that achieves success what is the exit strategy? Do they buy the firm outright, or sell it to a competitor at a profit? I would think the present value of an investment in a new internal product with a predictable revenue stream is greater than the PV of an investment in an external firm with a necessary yet uncertain liquidity event.

Time will tell how it works out for them, but as a GOOG shareholder, I agree with Fred. I think Google and their stakeholders would be best served by focusing on the online advertising business and leaving the startup investment business to professional startup investors.

Re: A VC: Corporate Venture Capital

Pierre Henri Clouin — Thu, 31 Jul 2008 11:30:22 -0000

The primary motives for a corporate VC arm are attracting talent and innovation - as mentioned by many of the comments here. It begs to ask if it is a sign of slowing internal innovation and lower attractiveness for Google (outside of search). Even Google start up acquisition seem to have not delivered on par with expectations.

Re: A VC: Corporate Venture Capital

jeremystein — Thu, 31 Jul 2008 11:24:06 -0000

Not necessarily through 401k, but I think you get the point.

Goog also has its fair share of accredited investors.

Re: A VC: Corporate Venture Capital

markslater — Thu, 31 Jul 2008 11:21:50 -0000

how would that work? wait till your 55?