Wednesday, April 01, 2009

Google Launches VC Arm

This has been all over teh interwebs. It's not actually that unusual for a large, cash-rich technology firm to have its own VC arm: Intel and Cisco are notable players in the Corporate VC space already, and Microsoft used to be.

Large tech firms do this for a number of reasons:

  • To find a use for the mountains of cash they accumulate and never distribute back to shareholders
  • To fund firms that employees want to leave to start, to keep them in the corporate fold (and potentially compensate the founders better than they could as employees)
  • To fund technologies they want outside the stultifying corporate culture that stops true innovation (Cisco is famous for this)
  • To ensure that there are new firms using their technology and thus growing their revenue base

I'd say probably that the biggest common factor in those is a recognition that once you reach a certain size and scale you've reached the innovator's dilemma (in that you can't work on things that would cannibalize your existing revenue base), but also that big firms are terrible at doing pure innovation (more management, more rules, less innovation). In that, it's a sign that you're no longer a young, hip, cool company, but a big one. If I were a Google employee or investor, I'd take that as the main message here: Google accepting that they're a Big Company, with all that entails.

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