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.

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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