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What Happens When Google Wants To Buy A Google Ventures Portfolio Company?

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What Happens When Google Wants To Buy A Google Ventures Portfolio Company?
Alexia Tsotsis@alexia / 6:08 PM PST•January 14, 2014
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Screen Shot 2014-01-14 at five.24.57 PM
Yesterday’s Nest acquisition was specific within the appreciate that considered one of Nest’s 4 board contributors, Bill Maris, changed into a accomplice at the corporate VC arm of the acquirer, Google Ventures.

The other investor board member, Randy Komisar, become a accomplice at a KPCB, the Silicon Valley venture company helmed via John Doerr, who was on the board of the acquirer, Google. The closing two board spots had been filled with the aid of the Nest co-founders, Tony Fadell and Matt Rogers.

Holy warfare of interest Batman! What a completely awkward state of affairs for both Maris and Doerr. As an investor you want to maximize returns, but as a part of Google, wouldn’t you need to hold the rate down on your discern enterprise?

Google has been the acquirer of a Google Ventures funded agency four instances since the VC firm released in 2009: Makani Power, Milk and Bufferbox. Nest will be the fourth in case you count Bufferbox, which turned into so small that Google Ventures didn’t even know it turned into in M&A talks because it become grandfathered in as a non-public Kevin Rose funding. Nest is one of the largest, if not the most important, Google Ventures Google go out thus far.

 

In each case above, Google Ventures companions have recused themselves from M&A discussions, because of apparent conflicts of interest, and that turned into especially acute within the Nest acquisition due to the scale of the deal (A whole Snapchat!).

With Nest, Google’s Maris took himself out of the sport and left Kleiner’s Komisar to negotiate for the investor’s facet while talks were given severe over a month ago. KPCB held the majority of the buyers’ proportion in Nest, and noticed an over 20x return in this deal.

Back at Kleiner, John Doerr also excused himself from speakme to Komisar approximately the talks, due to his Google board struggle (observe: Kleiner owns no Google shares). So Komisar was a lonely pup for a while.

According to co-founder Fadell, Google were interested by nabbing Nest as a long way lower back as Google Ventures’ investment in 2011, however the discussions have been by no means serious until this wintry weather. We at TechCrunch had heard Apple was also seeking to feather its nest with Nest round a month in the past, whether or not that purpose became “critical” or not.

For what it’s worth, Fadell informed Fortune’s Dan Primack the day prior to this that he couldn’t speak whether or not or now not he had entertained an Apple purchase, which possibly method that he had, even supposing informally. I suggest, he’s the daddy of the iPod. He’s not going to talk up his former colleagues?

But whilst it came time to sign away the enterprise, Google was surely a higher healthy from a statistics point of view. “Excitement from Sergey and Larry brought a touch greater confidence,” stated one individual familiar with the matter, bringing up that the deal become of the eBay “Buy It Now” type instead of an all-out bidding war.

As Google Ventures is now finishing to a few new investments in step with week and could have a emblem-spanking-new $three hundred million fund as of this month, Google acquisitions of portfolio corporations are simply going to keep on happening. And the companions try their first-rate to preserve the mindset of a Sand Hill Road firm in place of one which resembles traditional company VCs like Intel Capital. “We get paid while we maximize returns,” one character stated.

But there’s the query of the way tons revenue Google sees from a massive Google Ventures go back. Let’s say hypothetically that this deal again a few hundred million for Google Ventures (if Google were given 12.Five% that could suggest a ~$400M go back minus bring). One should argue that if Google gets profit from Google Ventures, then Google sold Nest for a discount as it additionally sees the returns at the deal, a price of ~$3 billion in place of $3.2 billion, again hypothetically.

And not like a Sand Hill VC, Google Ventures does put it on the market “Google access” as a portfolio employer perk. According to a properly-knowledgeable supply, a Google Ventures investment will no longer make or destroy a capability acquisition, however yeah it might assist — like the original intro that finally brought about the Nest buy: “Google is a part of our DNA,” they said, “I think that’s attractive.”

Image through Frank Gruber.

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What Happens When Google Wants To Buy A Google Ventures Portfolio Company?
Alexia Tsotsis
6:08 PM PST•January 14, 2014
Yesterday’s Nest acquisition become specific in the respect that certainly one of Nest’s 4 board individuals, Bill Maris, become a associate at the corporate VC arm of the acquirer, Google Ventures. …

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