Corporate Venture Capital (argument against Google VC) | Hacker News Reader

Corporate Venture Capital (argument against Google VC)

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21 pointsterpua6 comments

I watched "corporate VC" totally fuck over a bizdev strategy at one of my last jobs. In my case, it wasn't even a real investment --- just a "strategic" chit from a syndicated A round. Unfortunately, that chit went to an 800lb gorilla in our space. As a result:

* It was hard to get the investor's competitors to take us seriously in OEM and acquisition discussions, because the 800lb gorilla was seen as having "first refusal".

* It was hard to get the 800lb gorilla to take acquisition seriously; in fact, they expected favors in return for having "invested".

The company did OK in the long run, so all I have here is an anecdote.

I agree with what Fred says, but I'm surprised he hasn't shown up urging us to post on his blog via Discus instead of HN.

Another pretty big factor is the Corporate Arm's potential unwillingness to invest in startups that compete directly with Google.

I'm kinda sold... Does anyone have any disagreements?

There are a lot of smart people at Google who are surely aware of these issues, and they are keeping them in mind as they go forward with this?

Maybe Google will give 50% of profits on investment to the those who manage the funds, or maybe 100%, and seek to benefit from the "externalities" of running a corporate VC - dibs on buyouts, control of promising startups.

The motivation behind this, I think, is not getting screwed by external VC's like they have been when they want to buy a company.

The only argument I buy here is Jessica's. I agree that corporate vc could limit exit options.

However, I think Fred's general arguments against corporate vc don't fully apply to Google. First, Google probably does have the talent in-house to identify and nurture young businesses. Google has a perspective on what kind of web businesses can create long-term value that few VC's can match. That business insight is paired with a huge amount of technical expertise and infrastructure that would be invaluable for a young startup.

As for the argument about corporations having misaligned incentives, that almost certainly depends on how the investment entity is structured. Fred is right that a single exit is not a recurring revenue stream, but I assume that like any VC, Google would want to show regular long-term returns. VC is an industry where performance is already spotty. I believe that Google has as good a chance as any firm to deliver better than market returns.

Overall, I think it's premature to make a blanket statement without understanding how the investment arm at Google is structured or staffed. I personally would be excited to get Goog investment.

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