Google has formed Google Ventures, an in-house venture capital arm bankrolled by it parent to make a wide range of early stage investments. It will target sectors including consumer internet, software, cleantech, biotech and healthcare.
“By borrowing the best practices of top-tier, financially focused venture capital firms and bringing to bear Google's unique technical expertise and brand, we think we can find young companies with truly awesome potential and encourage their development into successful businesses,” Rich Miner and Bill Maris, Google Venture’s managing partners, wrote in a blog post this week.
We think we can find young companies with truly awesome potential and encourage their development.
Rich Miner & Bill Maris
They added that despite tough economic times, “great ideas come when they will” and Google Ventures thinks “the current downturn is an ideal time to invest in nascent companies that have the chance to be the ‘next big thing’”. The blog post gave no indication of potential amounts Google Ventures will invest in deals, though sources familiar with the matter told the Wall Street Journal the division will deploy $100 million this year.
Google Ventures is “looking for entrepreneurs who are tackling problems in creative and innovative ways. As a venture fund, however, we're also looking for investments with the potential for significant financial return,” it says on its website.
Intel Capital and Nokia are among other large companies with corporate venture arms, though for Google, this is by no means its first VC exposure.
Leaving aside its own “two-guys-and-a-garage” beginnings which saw Google win backing from venture heavyweights including Sequoia Capital and Kleiner Perkins Caufield & Byers, the internet search giant has frequently helped fund tech startups, like broadband company Current Communications or 3G mobile phone access provider Ubiquisys. It’s also been a lucrative exit source for venture and private equity firms, as with its $3.1 billion purchase of DoubleClick, $1.65 billion acquisition of YouTube and $625 million deal for e-mail management company Postini.
Last year, its $1 billion philanthropic arm, Google.org, launched an investment programme called “renewable energy cheaper than coal”, that backs companies as well as high-risk projects. The initiative aims to ease climate change by lowering the cost of renewable energy sources so as to better compete with coal-powered electricity. In the process of bettering the environment, Google would also likely better its bottom line, as powering its servers and data facilities would become less expensive.
“We wanted to play our money in ways that will really accelerate the kind of cost reductions that are critical, and in order to do that, we want to put it into both the technology investments and the project investments that are going to lead to those sorts of innovations,” Dan Reicher, Google.org’s head of Climate and Energy Initiatives, told sister magazine Private Equity International last year. “We tend to not want to have our money duplicate available resources; we want to put it in places where often the risks are higher.”
This initiative will not be moved under the Google Ventures umbrella, a spokesman said.