Report: Google developing VC arm

Search giant works to create a venture capital arm, in order to join the ranks of Intel, Hewlett-Packard, and Motorola in the role of seeding start-ups.

Google is revisiting efforts to create a venture capital arm, according to a report on The Wall Street Journal site Wednesday night.

David Drummond, a Google senior vice president, is expected to lead the effort, according to those who were briefed on the discussions. The group has also hired William Maris, a 33-year-old who has worked as an investor and entrepreneur, to help set up the venture, the newspaper reported.

The search engine has played with the idea of a venture capital arm in the past, and the plans could still fall through.

If successful, the new venture would put Google--a company better known for buying companies than investing in them--in the more-formal role of helping get start-ups off the ground. Other Silicon Valley companies with extensive VC track records include Intel, Hewlett-Packard, and Motorola.

The move comes at a tough time for overall venture capital investing. A report from Dow Jones VentureSource earlier this month stated that VC investments dropped 12 percent in the second quarter compared with the same period a year ago, with $6.64 billion put into 602 deals--the lowest quarterly deal count in three years.

More venture firms have found themselves funneling money to support later-stage companies at the expense of companies seeking first-time funding. The amount of money sunk into start-ups seeking first-round funds dropped by 12 percent to $1.6 billion in the second quarter. Meanwhile, later-stage deals grew by 14 percent to $3.1 billion because those companies in particular had fewer opportunities to go public. No venture-backed company went public in the second quarter.

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About the author

Steven Musil is the night news editor at CNET News. Before joining CNET News in 2000, Steven spent 10 years at various Bay Area newspapers.

 

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