Google VC arm to expand, will scout deals in Asia

Google Ventures, the corporate venture arm of Google Inc., plans to pick up the pace in 2010, as the $100-million-a year-fund marks its first anniversary with a bigger team and the intention to look for deals outside of North America.

Such was the message last week, when the organization came out of semi-stealth mode during a roundtable for journalists at its Mountain View, Calif.-based campus.

Google Ventures says it’s out to partner more than compete with other venture firms. It also thinks it can do far better than it venture peers at their own game, thanks to the know-how and connections of Google’s 20,000 employees.

One year after launching Google Ventures with two partners, the in-house investment group—which counts Google as the sole LP—has grown to 16 full-time investing professional and has invested in 11 companies, including an investment in mobile payment technology company Corduro Inc.

Google Ventures didn’t disclose the amount of the financing, which it revealed during the roundtable.

Other companies in Google Ventures’ portfolio include EnglishCentral, an online English language learning service that has raised $3.48 million over two rounds from Google and Atlas Ventures; the monetization platform OpenCandy, which has raised $8.5 million over two rounds, including from Bessemer Venture Partners, O’Reilly AlphaTech Ventures and numerous individual investors; and Silver Spring Networks, which has raised roughly $220 million over five rounds, including from Kleiner Perkins Caufield & Byers, Foundation Capital and Northgate Capital.

Google Ventures had a $100 million budget in 2009, and Managing Partner Bill Maris said last week that the fund would aim to invest $100 million in 2010 by continuing to fund startups involved from Internet technology to biotech.

Maris expected the fund to participate in more deals and invest more money than in 2009, but he would not say how much of the fund was invested to date. Maris told Reuters after the briefing that Google Ventures would consider opening overseas outposts as it looks for opportunities in tech regions, such as India and other parts of Asia. Until now, the fund has only invested in North America.

Maris said that its investments in companies is limited only by the size of the yearly funds it will be “raising” from Google.

“We’ve invested as little as $500,000 in a company, and we’ve put tens of millions of dollars into another,” Maris said.

Google CEO Eric Schmidt, who was also at the press briefing last week, said Google Ventures is completely separate from Google’s mergers and acquisitions team and serves a different purpose. However, the expansion of Google Ventures comes as Google has been on an acquisition spree.

In 2009, Google acquired six companies in 2009—AdMob, AppJet, Gizmo5, On2, reCaptcha and Teracent—following a relative dry spell in 2008 in which it bought only two companies. To date in 2010, the company has announced acquisitions of five companies, including Aardvark, DocVerse, Episodic, Picnik and reMail.

In September, Schmidt told Reuters that the worst of the recession is behind the company, and he expects the company to start doing about one acquisition a month.

Last week, Schmidt insisted that unlike the corporate ventures arms of Intel Corp., Cisco Systems, IBM and Walt Disney Co., Google Ventures is not a strategic investment arm. He called it an effort to keep Google firmly entrenched in the world of startups.

“This is not a stalking horse for acquiring companies,” he said.

Schmidt said he did not personally get involved in any of the investment decisions Google Ventures makes, limiting his role to setting the budget and helping to shape the group’s general practices.

Schmidt hoped Google Ventures would pick successful companies to invest in at a better than average rate, which he said historically has delivered one “huge hit” for every 10 investments. But he stressed Google Ventures was designed to take a long-term view.

“Venture investing is a long-term game,” he said. “It’s years, it’s not quarters. It might be a decade,” Schmidt added.

The Google Ventures team is comprised of mostly former Google employees. Partner David Krane, for example, joined Google as its global communications director in the late ‘90s. Partner Joe Kraus is a well-known serial entrepreneur who co-founded Excite.com in 1993 and JotSpot in 2004, a wiki company that was sold to Google in 2006 for an undisclosed amount.

Maris said that 25% of Google Ventures’ deal flow comes from Google employees, and that it has so far hired internally because of the glut of talent, and relationships, within the Internet search company.

“You know someone, you trust them, you like their work style,” said Maris, who added that Google Ventures will continue to add members to its team.

The biggest benefit that Google Ventures can confer on startups, according to Krane, is the brain trust that is Google’s 20,000 employee base.

“The minute we start parachuting experts in, startups understand how we’re different,” he told reporters.

Krane highlighted the startup Pixazza as an example, describing how Google Ventures, which participated in a $5.75 million Series A for the company in March 2009, provided the startup with unfettered access to Partner Braden Kowitz, who formerly helped lead design for Google Buzz, Gmail, and other applications at Google.

Krane said that Kowitz, rejiggered the interfaces of Pixazza, which allows Web publishers to turn static images into lucrative links, heightening response times.

Kowitz has apparently done similar analytics work across half of Google Ventures’ portfolio thus far.

Alexei Oreskovic contributed to this report.