Venture CapitalWhen mighty Google got into the venture capital business a year ago with "an aspirational goal" of investing $100 million a year in startups, the initiative was not universally welcomed by the Sand Hill Road crowd. Certainly, Google investors like Sequoia Capital and Kleiner, Perkins, Caufield & Byers and a few other firms were easy to work with, but "...
"There are other firms I won't name" that seemed suspicious, said Google Ventures managing partner Bill Maris. He summed up the vibe as: "How dare you. Are you going to steal deals from us?"
Suspicion, sour grapes — just type the phrase "success breeds" into your favorite search engine and see how quickly it comes up with "contempt." With venture capital growing scarce, Google Ventures was decidedly good news for entrepreneurs and Silicon Valley as a whole. But struggling VCs had a special case for resentment.
Even before the Great Recession hit, the venture industry was undergoing a painful shakeout — a kind of lingering hangover from the excesses of the dot-com boom. Many firms and individual partners were fighting for professional survival. Then along comes these Googley VCs who (a) didn't have to hustle up investments from limited partners like pension funds and university endowments and (b) weren't having to practice triage on their existing portfolios in a brutal economy.
As it happened, Maris offered a one-year progress report of Google Ventures this
week on the eve of the annual meeting of the National Venture Capital Association, a shrinking organization that serves as the industry's chief advocate in Washington.AdvertisementToday, the sense of crisis in the venture capital industry has largely passed, but the shakeout continues. Venture fundraising has plummeted and the recovery is expected to be slow.
Mark Heesen, the association's longtime CEO, said Tuesday that while mergers and acquisitions are generating returns for investors, the market for initial public stock offerings remains spotty. Looking ahead, he predicted that the number of funds won't decrease as much as some predicted, but that some will be run by two partners instead of three.
More than 700 members of the National Venture Capital Association registered for the two-day confab at the Hyatt San Francisco Airport Hotel in Burlingame, which ended Wednesday. Addressing the crowd, Heesen was generally upbeat about the Obama administration's role in promoting technology. He also emphasized that VCs are considered "the lowest-hanging fruit" to be taxed to fund health care reform. And he took a moment to remind members to send in their dues.
Over at Google's campus in Mountain View, money doesn't seem to be much of an issue. Google CEO Eric Schmidt told reporters this week that he expected the venture operation to branch into Europe and Asia.
Seeking "best of breed" opportunities in a wide range of fields, Google Ventures is now invested in 10 companies — seven involved in the Internet, two in cleantech and one in biotech. (Maris earned a degree in neuroscience before succeeding as a Web entrepreneur and a biotech and health care portfolio manager.)
The staff has grown to 15 partners and associates. Among the full-timers are such notable partners as Android co-founder Rich Miner and Excite founder Joe Kraus. Listed "advisers" include YouTube co-founders Chad Hurley and Steve Chen. Google Ventures, Maris emphasized, is able to also tap into "20,000 Googlers" as a resource. Recommendations from Google employees, he said, have generated about one-quarter of the "deal flow" — startups the venture team has considered. So if you happen to have a startup in the works, you might want to work your Google connections.
Funny thing is, while Google is hugely successful, it's too early to judge the Google Ventures investments. The best-known startup in its portfolio is smartgrid software maker Silver Spring Networks. Maris said he prefers to invest in companies like Silver Spring that already have earnings, but he demurred from commenting on rumors that Silver Spring is headed for an IPO.
Google Ventures, incidentally, is a member of the National Venture Capital Association. Paying the dues shouldn't be a problem.
Changing of the chairman
Kate Mitchell, co-founder and managing partner of Scale Venture Partners of Foster City, on Wednesday was named chairman of the association for 2010-11, succeeding Polaris Ventures' Terry McGuire. She is the third woman to hold that post in the mostly male industry.
Contact Scott Duke Harris at sdharris@mercurynews.com or 408-920-2704.
Google is taking their cash and helping start-up businesses. They help with what they know. Can the New North help with manufacturing? wouldn't that be great?
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