Entrepreneurs, should you raise money from Google?

This is an interesting trend lately but big tech corps are getting into the VC business. Intel has been doing that for a while, Apple has created jointly with Kleiner Perkins a fund dedicated to iPhone apps (iFund), Facebook created with the founders fund a fund dedicated to Facebook apps (not really active from what i can observe).

Today Google announced they would enter that market (and at the same time Nokia declared they would pour an extra 150m USD in their current venture activity). So should you as an entrepreneur take money from Google?

First i thing this is a great news for the industry and it shows that there is no special sign of downturn coming ahead. It will provide entrepreneurs a new access to resources. A different paths in addition to angel money, small structures like Ycombinator that i am a big fan of (they just sold Omnisio to Google today), incubators, Very Early Stage VC structure like Lgilab.com that i am running for Gemini and LightSpeed and of course traditional VCs

But there are a few things an entrepreneur should be aware of before he takes funding from corporations. First in terms in terms of expectations. The goals here might not be the same for you and for the fund. For traditional investors the goal is to optimize a liquidity event. In Google's case the idea is to have access to better shopping options at a better price (in addition to have access to a better deal flow). You may want to sell big, but your investor might want to buy you or sell cheap.

Second you should bear in mind that once you are labelled "Google" you are closing yourself doors: at least on psychological point of view many companies that could partner with you may consider you as a non grata. Will you be able to get an agreement with Microsoft or Yahoo? And what is you want to sell later to a competitor? Will Google let that happen? on what terms?

Beyond the "prestige" is Google your best option for VC money? A good VC should be able to assist in many important decisions and options. For recruitement for example: you should be able to take anyone from any company if he wants to including from Google. Will Google VC intro you to its employees for recruitement? Will Google intro you to its competitors for distribution deals? Probably not, at least not directly. Will it be a Do-not-evil fund? They will look at their interest first.

So obviously there are many virtues also in taking money from a Corporate Venture Fund like Fred Wilson calls them, one of which is a clear access to valuable resources and distribution and a possibly of exit scenario. I can imagine they ll support startups in many ways a traditional VC can absolutely not specially for validating quickly a model with user exposure, technical validations and so on.

Some businesses will be a perfect fit for Google: search and search management, video of course, mobile apps(with android). I see a natural fit for consumer apps, but less for enterprise ventures or ecommerce type of things.

But you should make sure that your interests are aligned with theirs and finally that the personn in front of you understands totally your business. Not even mentionning the human chemistry that should take place. But at Google they have some damn good people. So i am not too worried about that part.


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