Bloomberg’s Brian Womack and Ari Levy report on Google’s acquisition and investment machine, showing how Google has become the most prolific corporate dealmaker in the world. Their story is a good look at Google’s many tentacles, from its corporate mergers and acquisitions gurus to its venture capital arm, Google Ventures.
About that last part: The history of corporate venture capital is not promising. In general there are two approaches that big companies take. In one, they try to spin out their own ideas into startups. That most often fails because a startup with a lot of corporate executives breathing down its neck is really not a lot nimbler than a corporate division would be.
In the other, they make investments in companies they would eventually like to partner with or add to their business. This also usually fails, because the goal of the big company (acquiring great ideas cheap) conflicts with the goal of other investors (selling a startup for the highest price or going public).
The folks at Google are obviously conscious of these conflicts in corporate venture capital. Google Ventures partner Bill Maris told Womack and Levy that the fund builds in “an unprecedented level of autonomy.” The venture firm even makes a point of saying on its website that it “provides seed, venture, and growth-stage funding to the best companies — not strategic investments for Google.” There’s clearly truth to that: Google Ventures has invested in Blue Bottle Coffee; artisanal coffee roasting doesn’t seem to fit into any long-term Google strategic plan.
It may, however, be one of few. Because Google’s ambitions are so broad, it’s difficult to define just what makes a “strategic” investment for Google. Google Ventures’ biggest success story is probably the home networking company Nest Labs. A Google Ventures investment, Nest was acquired for $3.2 billion by … well, Google. That acquisition undoubtedly made Nest’s other investors very happy. Does it count as a success when one of your investments is worth a fortune if you’re the buyer? Hard to say.
Companies that Google invests in are often eager to flaunt the news. It’s great to have a partner like Google when there are no “strategic” strings attached. Will that be the case forever? Let’s wait until Facebook tries to buy a Google Ventures-back company. Then we’ll know.