There is a catchy headline that can be formed about the latest partner, Tyson Clark, to join Google Ventures, but what is often lost in corporate venture capital (CVC) is the need to retain teams.
Here Google Ventures has found a formula that seems to work given that of its 2010 team post-launch, as almost all the partners still seem to be there.
When Bill Maris, then sole managing partner at Google Ventures, unveiled in May 2010 its plans for the group to invest $100m per year (it was subsequently increased to $300m) he had 10 deals booked and a team of 16.
Being venture investing in Silicon Valley, Maris, the founder of website hosting company Burlee.com who joined Google in 2008, and Rich Miner, a co-founder of Android, its phone operating system who also helped set up Google Ventures, initially picked a team of male investors. (Jessica Verrilli and Avid Larizadeh Duggan joined in the past 12 months.)
The other professionals in its 2010 expansion were: Joe Kraus (partner), a serial entrepreneur who sold JotSpot to Google in 2006; Karim Faris (partner), a former venture capitalist at Atlas Venture who joined Google’s corporate development team in 2008; Braden Kowitz (design partner), a lead designer at Google who led design for Google Buzz, Gmail, Google Apps for Business, Google Spreadsheets, OpenSocial and Google Trends; David Krane (now managing partner), Google’s long-time head of communications; Krishna Yeshwant (Boston-based partner), who first joined Google as part of the new business development team; Scott Davis (venture partner), who initially contributed to Google Ventures on a part-time basis while he completed a post-doctoral fellowship at Dartmouth College to develop new optically-based cancer imaging techniques; Graham Spencer (venture now engineering partner), an engineering director at Google Ventures who was one of the original founders of Excite.com and its former chief technology officer until its sale to @Home and also a co-founder of JotSpot with Kraus.
The exception to this retained talent has been Wesley Chan, an early employee responsible for Google Analytics and Google Voice and then general partner at Google Ventures, who left in December to become a managing director at VC firm Felicis Ventures, where he has continued an impressive run of deal making.
By inmail*, Chan said: “Kevin Rose also left so there were two of us that were partners. [Rose was a partner from 2012 to February 2015 before becoming an adviser to Google Ventures so fell outside the initial team expansion cohort. Similarly, Shanna Tellerman, a GV partner from May 2013 left to found a startup in March this year.]
“As an early partner at GV, I have huge respect for what the fund has one so far and built, and am happy to have been part of such an amazing team. I’m at Felicis Ventures now, which is more early stage focused and thus better suited for my investment focus.”
From his LinkedIn profile, Chan’s board or observer seats at Google included: Angelist, Crittercism, iPerian (exited to Bristol Myers-Squibb), Cool Planet Energy Systems, Switch Communications/Uberconference, RocketLawyer, and Transphorm. He also led or sourced investments in Optimizely, Vungle, DataPad (exited to Cloudera), Freshplum (exited to TellApart/Twitter), Namo Media (exited to Twitter), Parse (exited to Facebook), Astrid (exited to Yahoo!), Milk (exited to Google), and PrimaTable (exited to HotelTonight).
This is a pretty good strike rate – eight exits out of 16 disclosed deals – in just more than four years at the group.
By comparison, just looking at the deals struck by the overall team by mid-2012 and just more than a quarter have been exited, according to Global Corporate Venturing.
Given that venture investors often would like a three to five-year hold period for deals but in reality often end up holding about seven years (for more recent US data this post is good) if they can get an exit, Chan and Google Ventures overall have delivered relatively quick returns to its parent.
This is good going and, as with Chan’s recent departure, there could be question marks about whether others in the team will be tempted away.
Venture is a long-term business with persistence of returns (the top and bottom performers tend to stay that way).
The best firms, such as Reed Elsevier Ventures, Naspers and International Data Group, often are those with consistent teams able to reap the benefits of initial successes.
In Google’s case, by tracking deals done each year as one so-called vintage it is able to give performance-related payments to the teams that worked on them.
Although true carried interest is relatively rare in corporate venturing, according to the annual survey carried out by J Thelander in partnership with Global Corporate Venturing, it has been useful in cases where sectors or markets have been growing quickly and whole teams can be attracted away.
But performance fees are a delicate issue. Given the transferral of Google Ventures (and its sister Google Capital) to the new holding company, Alphabet, which is seemingly more like an investment vehicle, then shareholders in Alphabet might look askance if these fees are structured like a classic VC firms’ 2% of assets under management and 20% carried interest (profits).
As Berkshire Hathaway’s longer-term performance shows, the compounding effect of the 2and20 is significant.
One, however, doubts whether Alphabet will mess with Google Ventures’ model too much as long as it is gaining the broader returns from the group from acquiring its portfolio companies to seeing the ideas of the future that interest the parent’s co-founders, Larry Page and Sergey Brin.
*Chan’s inmail came in after the post was uploaded on 19 August 2015.
Table: Google Ventures’ deals by July 2012: (bold undisclosed on website in mid-2012, red exit as at 19 August 2015)
23andMe Adimab Airtime Airy Labs AppStack Astrid (acq by Yahoo) AVOS Systems Backplane Bionic Panda Games Clean Power Finance ClearStory Data CliQr Technologies CoolPlanetBioFuels Copious Corduro Crittercism CustomMade Dasient(acq by Twitter) DNAnexus Duo Security Echoecho English Central Enterproid Firespotter Labs Foundation Medicine Freshplum Hipster (acq by AOL) HomeAway (IPO) HubSpot (IPO) Humanoid iPierian Just.me Kabam Kibits LawPivot Luminate(formerly Pixazza) Milk (acq by Google) Miso Media (acq by Dijit) MobileDay Nest (acq by Google)Next Autoworks ngmoco(acq by DeNA) Nimble Objective Logistics Optimizely Ordr.in Parse PrimaTable (acq by HotelTonight) Pocket (formerly read it later) Pocket Change Puppet Labs Rally Recorded Future RelayRides Rocket Lawyer Roqbot Rumble Scan Schematic Labs (acq by Rhapsody) SCVNGR Shopobot Signpost Silver Spring Networks (IPO) Smarterer (acq by PluralSight) Stamped (acq by Yahoo) Stickery Subtext (acq by Renaissance Learning) SweetLabs tenXer (acq by Twitter) The Climate Corporation (acq by Monsanto) ThinkNear (acq by TeleNav) Tracelytics (acq by AppNeta) Trada Transphorm Triptrotting VigLink VungleWhaleShark Media Wingu (acq by PerkinElmer) Wittlebee Yesware Zencoder (acq by BrightCove)