Blog Post

Google's New Fund Should Advance Its Goals, If It Has Them

Google (s goog) late Monday unveiled Google Ventures, a venture fund that seeks to combine the search giant’s technical expertise with strategies pioneered by top-tier venture firms. By looking to invest in what it called “a broad range of industries, including consumer Internet, software, hardware, clean-tech, bio-tech and health care,” Google is either smartly casting its net wide enough so as to ensure it will find success with at least one of them, or continuing an inarticulate company strategy that will ultimately lead it to bloat and inefficiency.

Unlike most corporate venture funds, Google is creating one at the bottom of a downturn rather than the height of a bubble. That means it’s likely to get in on more deals at lower valuations simply because so many other VCs have opted to sit on the sidelines. This is good. On the other hand, the range of industries at which it’s looking to throw money suggests it doesn’t have much of a focus, and focus is something venture funds need in order to build the expertise to make smart investments. (Google already has investments in satellite companies, clean technologies, smart grid and WiMAX.) There’s also a fine line between thinking like a technologist, and thinking like someone out to make money on technology. As an example, Google spent $1.65 billion acquiring YouTube, which is arguably a success, but so far isn’t a big moneymaker. The same goes for some of its other media plays.

One of Om’s sources tells him that the fund will be investing for profits as well as for strategic reasons, which is what Intel’s (s INTC) current corporate VC fund does. Sometimes those two goals conflict — Intel’s money-losing bet on Clearwire and WiMAX is a good example — and watching Google weather those conflicts may help us determine how well it plans to walk the line between backing cool technology and backing cool technology for capital gains. If done well, even the money-losing companies will still advance Google’s goals, much like its aborted bid on the 700 MHz spectrum still led to open access for devices.

5 Responses to “Google's New Fund Should Advance Its Goals, If It Has Them”

  1. telecomterp

    Intel is not the only investor in Clearwire, Google was part of that deal as well and the jury is still out on whether it will be a loser or not.

  2. Maybe their investment focus will be guided by data mining. E.g., if a certain product is mentioned in a lot of gmail, it might point to an area for investment. Of course, telco’s and ISP’s also have this sort of evesdropping ability. The difference is that Google’s explicit mission is to understand consumer behavior, and its users have granted them that right. I recall at one point Google had so much cash that they needed an exemption from the SEC to avoid being subject to rules governing investment businesses.