Google unveiled its strategy for its year-old venture-capital-funding arm Monday: Follow the tips from Google employees to find companies worth investing in that also need help from Google’s immense computing power in the hopes of making billions down the road.
Google Ventures plans to invest $100 million a year in startups, following on nine initial investments in 2009, ranging from an electric vehicle manufacturer to a company finding ways to bring product-placement ads to online images.
At a briefing Monday with reporters, Google Ventures partners David Krane and Bill Maris struggled to explain the scattershot strategy, until CEO Eric Schmidt dropped in to explain.
“This is not a stalking horse for acquiring companies — if people want to get bought, they are going to talk us,” Schmidt said. “What we have found, with Bill’s leadership, is that Googlers know a lot of people and the employee and knowledge base we can tap are literally thousands of people. The average VC firm doesn’t have access to that knowledge. So, in theory, that gives us a competitive advantage.”
As for why Google is investing, the trio explained that it gives Google a shot at making hundreds of millions from the next Google, as well as keeping itself current and active in emerging technology. Its investments range from less than $500,000 to tens of millions per company — but Google has no interest in launching a competitor to incubators such as TechStars and Y Combinator that specialize in helping webcentric companies launch for tens of thousands of dollars in initial funding.
“Venture investing is a long-term game,” Schmidt said. “Ten years from now, Silicon Valley will be just as vibrant — it always is, and we want to be a player there forever,” Schmidt said.
Schmidt and Maris emphasized that Google wasn’t trying to disrupt the venture capital field, and that it wants to partner with established firms, even if some firms are currently wary of Google’s motives.
Moreover, they argued that companies should want Google’s money because it has a deep well of resources it can use to help companies — even ones that aren’t doing anything like what Google is doing.
Maris suggested the example of a company working on DNA analysis or regenerative medicine.
“Think about the data and the numbers you have to crunch,” Maris said. “There are obvious ways we can help.”
And Google employees themselves could find a windfall, as well. Already, employees feed two or three tips a day to the fund, and Maris promises that if any of the funded companies turns into a cash gusher, the original tipster would be well-rewarded.
“If the company you refer to us is the next Twitter or Facebook, that would be great for you,” Maris said. “It’s not considered ‘Googly’ to just cash the billion-dollar check and walk away.”
That said, any such payday would be years off, and referrers don’t get any equity or a finder’s fee — just the promise that they’ll be treated fairly.
Google is far from the first large tech company to have its own venture capital arm. In fact, on the same day Google briefed reporters, chip giant Intel announced its VC arm had put $15 million into three companies, including one focused on information for taking care of the elderly.
Google’s current portfolio is similarly widespread. On Monday, it added Corduro, a company that offers an innovative online payment system. It also funds an English-teaching site called English Central, a future predictions company, an antibody discovery company and a service that turns ordinary web links into commission-generating links for websites or publications.
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