Thanks for all the feedback and interest in our two Google posts last week – on its implications of creating the Alphabet holding company and staff retention. We have been asked to run some deeper analyses on its Google Ventures unit from the Global Corporate Venturing database and comparison with peers.
Using a hypothesis that most venture deals need at least a three-year holding period before an exit by acquisition or flotation, Global Corporate Venturing and its data analysis partner, Qbix Analytics, looked at corporate investors with at least 10 companies between 2010 (our launch) and August 2012.
Google is second by number of exits, 40, from its portfolio held by August 2012, behind Intel Capital’s 60 under the same timeframe. (Please check this data here to inform us of any improvements – note there are multiple tabs so preview needs to be scrolled or charts downloaded.)
Google Ventures, however, slips to tenth as a proportion of exits to investments made. However, with a 35.4% exit ratio it is still above the mean 26.2% of 315 exits out of 1,203 investments made by corporate investors with at least 10 companies between 2010 and August 2012, excluding financial services firms’ 32 exits from 160 deals. Intel capital is also above this mean figure with a 26.9% exit ratio.
Looking at returns on each dollar invested is harder. As Bill Maris, managing partner at Google Ventures, in this Quartz profile, said: “They are really good.”
Google Ventures has reportedly put out more than $2bn into more than 300 companies since its 2009 launch. However, just looking at the disclosed exit valuations and flotation market capitalisations of the 40 exits from the 2010 to 2012 vintages shows Google held stakes in companies sold and floated for at least $7.4bn compared to aggregate investment rounds by these companies of $6.1bn.
This is a 1.2 exit to investment ratio, which puts Google just into the top 30 of peers albeit the data can be easily skewed by disclosure limitations. (For people wanting to apply for an invitation to our beta test for our upgraded data visualisation platform, please email editor Toby Lewis.)
Using the GCV Analytics tool you can then see (Tableau-created chart PDF here) which groups Google Ventures and its peers like to coinvest with. Perhaps unsurprisingly for a firm itself backed by venture capital firms Kleiner Perkins Caufield & Byers (KPCB) and Sequoia Capital, these two groups rate highly in the list with 31 and seven coinvestments with Google Ventures, respectively.
That KPCB should be so high also reflects their strong continuing ties, with KPCB legendary partner John Doerr still on Google’scorporate board and he advised Google Ventures co-founder Bill Maris on setting up the venture fund. And, even closer, one of Brook Byers’s (the B in KPCB) two sons, Blake, is a partner in Google Ventures and specialising in healthcare deals as his father did.
But, reflecting Google’s interest in early-stage deals, the list of coinvestors is relatively high in angels, either individuals or through SV Angels network, as well as well-regarded seed investors First Round Capital and 500 Startups.
Going early and taking large positions that can be followed on is seen as a potential way of delivering the outsized returns, as Sequoia had with, well Google, or WhatsApp, or Accel had with social network Facebook.
Given the US, particularly Silicon Valley, has dominated venture capital globally, Google Ventures’ initial focus in its home country made sense. But its expansion last year to setting up a European operation puts it into line with a globalization trend in venture, led by peers, such as Intel Capital, Softbank and Samsung (see below or Tableau-created chart here). This shows deals outside investors’ home countries since the beginning of 2011, so deals by Intel in Canada, for example, will show up as North America.
It is this virtualised global venture ecosystem that offers interesting opportunities and is creating a few outstanding networked investors.
Google’s co-founder, Larry Page, has remarked there are only 50 investors with ambition – I would be interested in your thoughts on how to identify or select these groups so please drop me an email to help with my next article on this topic.
