Globe Staff / April 1, 2009
At a time when many venture capital firms are scaling back their investments in high-tech and life-sciences start-ups, Internet search giant Google Inc. yesterday formally launched its own venture arm, jointly based in Cambridge and Mountain View, Calif.
Google Ventures will scout for entrepreneurial opportunities in a broad range of fields, from search and advertising to mobile computing to medical records and personal genomics. Its target is to invest $100 million in the coming year, with the Boston area being one of its geographic areas of interest.
Unlike other corporations that work with start-ups, such as IBM Corp. and Microsoft Corp., the Google venture operation initially won’t confine itself to “strategic” relationships with companies Google might acquire. Instead, it will focus on financial return and technologies beyond its core business.
“The goal is to follow the best practices of a top-tier venture capital firm, but to do that inside Google, where we can leverage Google’s lens on what’s interesting,” said Rich Miner, a Cambridge-based managing partner of Google Ventures.
Miner, a Boston-area serial entrepreneur who played a key role in persuading Google to open a research center in Cambridge, will be stepping away from his role with Google’s mobile platform Android, which he helped develop, to comanage Google Ventures. The other managing partner, Bill Maris, who has a background in biotechnology and healthcare, will be based at Google’s corporate headquarters in Mountain View, Calif.
The new venture operation has a committed capital fund, but Google declined to disclose the amount. Its sole investor and limited partner is Google itself, not the pension funds and endowments that bankroll traditional venture firms. While it initially will focus on US investments, especially in the Silicon Valley and New England, it is expected to add partners elsewhere and eventually ex pand its reach globally.
“They’re going to cast a really wide net and try to plug into the pulse of the marketplace,” said Thomas Koulopoulos, chief executive of the Delphi Group, a technology and management think tank in Andover. “They really feel they want to reach out beyond the four walls of Google. This is a hedge bet for them. The $100 million may result in nothing, or they might find one or two opportunities.”
Don Dodge, director of business development for Google’s archrival Microsoft Corp. in Waltham, said his company – which once funded start-ups such as Groove Networks of Beverly – has been winding down its venture activity in recent years. But working with venture firms, it has ramped up acquisitions of compatible technology start-ups.
While he welcomed Google’s foray into venture investing, Dodge warned of the potential for complicating other business relationships. “You almost can’t win in this game,” he said. “You’re competing with venture capitalists. You’re playing ringleader for one company in any given segment and potentially alienating others. It’s a very difficult thing to do.”
Google, however, is undeterred. Its new venture arm already has invested in a pair of California start-ups: Silver Spring Networks Inc., an electric grid management company in Redwood City, and Pixazza Inc. in Mountain View, which seeks to earn money from photos on websites by enabling visitors to click on links and purchase products.
Google is open to funding biotechnology start-ups. “If we find an interesting therapeutics company, we’d be happy to put down a term sheet,” Maris said.
Miner, meanwhile, said he expects an important part of his new role will be backing technology start-ups in the Boston area. “There’s a reason why I’m one of the partners, because I’m in Boston,” said Miner. “We want to be bicoastal. I can add more value if I can have breakfast with the CEO of one of our portfolio companies.”
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