Wednesday, September 12, 2007

Can Corporate VCs Compete?

Techcrunch just reported that Google will be investing $10 million in 'green' startups. This set me on a whole train of thought about corporate VC and under what conditions it can compete with standalone VCs. I was once a corporate VC, so this was a subject dear to my heart.

The best research I could find on this subject was done by Harvard professor Josh Lerner. My take away was corporate VCs can only compete when they invest in companies that are complementary to their existing lines of business. Oddly enough, almost no corporate venture capitalists follow this strategy. The reason: existing business units kick and scream when the company invests in start-ups that either take dollars away from their development programs or might one day grow up to be competitors. Corporate politics trumps common sense in most cases.

But, after that rumination and before I could take Google to task for making a rookie mistake (common as it may be), I read the press release. It's not Google spending the money, it's, their philanthropic entity.

Never mind!

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