Google vs. the venture capitalists
VCs looking to fund startups and flip them to Google are facing an unlikely rival: Google.
By Om Malik


(Business 2.0) - VCs looking to fund startups and flip them to Google are facing an unlikely rival -- Google. The Mountain View, Calif., search giant has started buying companies on the cheap, before they even make the pilgrimage to Sand Hill Road.

By encouraging entrepreneurs to pitch Google first, the company can shell out a nominal amount of cash for cutting-edge technologies and top-notch people. "These acquisitions are about talent," says Christopher Sacca, a principal for new business development at Google. "We want the people who are building the products." Google's sales pitch to the startups is simple: Come work for us, score some Google shares, and see your big idea rolled out to more than half a billion users. Sacca, for his part, says Google isn't trying to compete with VCs. "If your product is really a small feature, and if you are eventually going to be acquired, come to us early," he says.

Yet since it started the practice in 2003, Google has snatched up 12 companies, many of which had raised only small amounts of funding and sometimes no venture capital. And lately its pace of acquisitions has quickened. In the past six months, the company has purchased five microscopic startups.

Some didn't even make it beyond their campus digs. Kaltix, founded by three Stanford University students in June 2003, developed a prototype for a new personalized-search technology; Google nabbed the technology--and the founders--three months later. Google Local grew out of the acquisition of a startup called Where2 in March. Within weeks of the buyout, the four co-founders were rolling out their technology as part of Google's local search efforts.

Now even tech veterans are taking advantage of the strategy. Google's most recent acquisition, in September, was a wireless software company called Android, founded by the co-creator of Danger's Hiptop device, Andy Rubin, along with WebTV veteran Andy McFadden. The pair could have easily won millions in VC cash; now they're working for Google. Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.