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Summary:

Google Ventures will have to brace itself for the majority of investments to break even and lose money. Its investment into green car company V-Vehicle is the classic case in point of how far Google Ventures can miss the mark.

Google’s venture capital arm, Google Ventures, which now counts 10 companies in its publicly announced portfolio, has been operating for about a year now, but it wasn’t until Monday that the company invited reporters down to Mountain View for a progress report. During the event Google Ventures execs reportedly emphasized that the fund plans to invest at least $100 million per year into startups across various industries, will be shooting for better than average venture capital returns (more than 1 in 10 investments would make money), and also that the fund is for-profit, meaning Google Venture’s investments won’t be just for the sake of acquisition. (See GigaOM senior writer Liz’s What Entrepreneurs Should Know About Raising Money From Google Ventures)

But because Google Ventures is going out of its way to operate as a VC fund, and notably has been investing significantly outside of its core web competency, it — like other VCs — will have to brace itself for those other 9 startups that merely break even or lose money. In particular its investment into V-Vehicle, a startup working on high-efficiency cars, is the classic case in point of how far Google Ventures can miss the mark.

Last year Google Ventures joined a $66.26 million round raised by V-Vehicle, a then-stealthy company looking to make low-cost gas cars with higher-than-average efficiency and a plastic shell. David Drummond, Google’s Senior Vice President, Corporate Development and Chief Legal Officer, is listed as on V-Vehicle’s SEC filing.

Other investors in V-Vehicle include former oil baron T. Boone Pickens and Kleiner Perkins investors John Doerr and Ray Lane. As Liz points out in her article, one of the best ways to garner a Google Ventures investment is to work with one of the two VC firms that have closely aligned themselves with Google: Kleiner Perkins and August Capital.

Following along with Kleiner Perkins’ greentech investments isn’t always (or ever?) a good thing. As Josie has been chronicling, V-Vehicle had basically bet everything on securing $321.1 million in federal loans under the Department of Energy’s Advanced Technology Vehicles Manufacturing (ATVM) loan program to set up manufacturing at an old General Motors-Guide Corp. plant in Monroe, Louisiana. But the DOE denied V-Vehicle’s loan application in March, much to the “surprise” of then V-Vehicle CEO and founder Frank Varasano. Varasano left the company soon after and Kleiner Perkins managing partner Ray Lane stepped in as temporary chief executive.

Other green car startups — Tesla Motors and Fisker Automotive — have managed to secure loans under that DOE program. As Josie explained in this comparison chart, V-Vehicle brought to the table a shorter track record than even the earliest-stage awardee (Fisker), and V-Vehicle’s technology — a gas-powered, highly efficient car — represents a relatively small step away from fossil fuels, compared to the leap that could be possible with the electric vehicle tech that the DOE has supported in legacy player Nissan’s project.

V-Vehicle isn’t necessarily out of the game quite yet — it’s trying to raise another $100 million private investors and with such celebrity backers could turn itself around. But it’s clearly not a player that’s leading the pack — on advanced technology, on production goals, on partnerships, on raising needed funding . . . on really anything that’s been publicly revealed to date. Google.org, Google’s philanthropy arm, also invested in Aptera, the developer of three-wheeled hybrid and electric vehicles that will likely miss its previous goal of launching volume production in October 2009 by more than a year. Aptera also requested and has yet to receive $184 million through the ATVM loan program.

While Google isn’t normally expected to be an expert on what next-generation green technology will prevail, now that it’s placed itself alongside the greentech venture capital players of the world — which are trying to back the winners — it’s going to have to trek up the investing learning curve pretty quickly.

Image courtesy of Flickr user jardenberg’s photostream.

Related research on GigaOM Pro (subscription required):

Finding a Niche in the Electric Vehicle Market

How to Build Better Apps for Electric Vehicles

How EV Battery Startups Can Cross the Valley of Death

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  1. Lessons for GM from Google, Intel’s Venture Capital Arms Friday, June 4, 2010

    [...] hope more than one out of every 10 investments will make money. But as Katie has explained (in this analysis of Google Ventures’ investment in V-Vehicle) going out of its way to operate as a VC fund and investing large sums outside of its core [...]

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