Google Ventures to Invest Beyond North America

Google Ventures, the corporate venture arm of Google Inc., plans to pick up the pace, as the $100-million-a year-fund marked its first anniversary with a larger staff and the intention to look for deals outside of North America.

That was the message last month, when the organization came out of semi-stealth mode during a roundtable for journalists at its Mountain View, Calif.-based campus.

Google Ventures says it plans to partner more than compete with other venture firms. It also thinks it can do far better than its venture peers at their own game, thanks to the know-how and connections of Google’s 20,000 employees.

One year after launching Google Ventures with two partners, the in-house investment group—which counts Google as its sole LP—has grown to 16 full-time investment professionals and has invested in 11 companies, including mobile payment technology company Corduro Inc. (Google Ventures didn’t disclose the amount of the financing, which it revealed during the roundtable.)

Other companies in Google Ventures’ portfolio include EnglishCentral, an online English language learning service that has raised $3.48 million over two rounds from Google and Atlas Ventures; monetization platform OpenCandy, which has raised $8.5 million over two rounds, including from Bessemer Venture Partners, O’Reilly AlphaTech Ventures and numerous individual investors; and Silver Spring Networks, which has raised roughly $220 million over five rounds, including from Kleiner Perkins Caufield & Byers, Foundation Capital and Northgate Capital.

Google Ventures had a $100 million budget in 2009, and Managing Partner Bill Maris said last month that the fund would aim to invest $100 million this year, backing companies in sectors including biotech and Internet technology.

Maris expects the fund to participate in more deals and invest more money than last year, but he would not say how much of the fund was invested to date. Maris told Reuters after the briefing that Google Ventures would consider opening overseas outposts as it looks for opportunities in tech regions, such as India and other parts of Asia. Until now, the fund has only invested in North America.

Maris said that the fund’s investments in companies are limited only by the size of the annual capital it will be “raising” from Google.

We’ve invested as little as $500,000 in a company, and we’ve put tens of millions of dollars into another.”

Bill Maris

“We’ve invested as little as $500,000 in a company, and we’ve put tens of millions of dollars into another,” Maris said.

Google CEO Eric Schmidt, who was also at the early May press briefing, said Google Ventures is completely separate from Google’s mergers and acquisitions team and serves a different purpose. However, the expansion of Google Ventures comes as Google has been on an acquisition spree.

Google acquired six companies in 2009—AdMob, AppJet, Gizmo5, On2, reCaptcha and Teracent—following a relative dry spell in 2008, in which it bought two companies. As of mid-May, the search company had announced acquisitions of five companies: Aardvark, DocVerse, Episodic, Picnik and reMail.

In September, Schmidt told Reuters that the worst of the recession was behind the company and that he expected the company to start doing about one acquisition a month.

Last month, Schmidt insisted that unlike the corporate ventures arms of Intel Corp., Cisco Systems, IBM and Walt Disney Co., Google Ventures is not a strategic investment arm. He called it an effort to keep Google firmly entrenched in the world of startups.

“This is not a stalking horse for acquiring companies,” he said. Schmidt noted that he did not personally get involved in any of the investment decisions Google Ventures makes, limiting his role to setting the budget and helping to shape the group’s general practices.

Schmidt said he hopes Google Ventures would pick successful companies to invest in at a better-than-average rate, which he said historically has delivered one “huge hit” for every 10 investments. But he stressed Google Ventures was designed to take a long-term view.

“Venture investing is a long-term game,” he said. “It’s years, it’s not quarters. It might be a decade.”

The minute we start parachuting experts in, startups understand how we’re different.”

David Krane

The Google Ventures team is comprised of mostly former Google employees. Partner David Krane, for example, joined Google as its global communications director in the late ‘90s. Partner Joe Kraus is a well-known serial entrepreneur who co-founded and JotSpot, a wiki company that was sold to Google in 2006 for an undisclosed amount.

Maris said that 25% of Google Ventures’ deal flow comes from Google employees, and that it has so far hired internally because of the glut of talent, and relationships, within the Internet search company.

“You know someone, you trust them, you like their work style,” said Maris, who added that Google Ventures will continue to add members to its team.

The biggest benefit that Google Ventures can confer on startups, according to Krane, is the brain trust that is Google’s 20,000-employee base.

“The minute we start parachuting experts in, startups understand how we’re different,” he said.

Krane highlighted the startup Pixazza, describing how Google Ventures, which participated in a $5.75 million Series A for the company in March 2009, provided the startup with unfettered access to Google Ventures Partner Braden Kowitz, who formerly helped lead design for Google Buzz, Gmail, and other applications at Google.

Krane said that Kowitz rejiggered the interfaces of Pixazza, which allows Web publishers to turn static images into lucrative links, heightening response times.

Kowitz has apparently done similar analytics work across half of Google Ventures’ portfolio thus far. —Constance LoizosAlexei Oreskovic contributed to this report.