Bangalore: Google Inc., the world’s largest search engine company, said it invested in two early-stage venture capital funds, Seedfund and Erasmic. The investments mark the first time that Google has chosen to be a limited partner in any early-stage venture funds.
Seedfund, for instance, invests in very early-stage companies that use technology to address the domestic market.
Typically, in India, early-stage investment has been low in comparison with private equity flow into mature companies.
In 2006, out of a total private equity investment of Rs 33,250 crore, early-stage companies received Rs1,072 crore. It is this gap that Google aims to close.
Very little of the large amounts of venture capital money that flows into India trickles down to the really small firms and the early -stage start-ups, said Samir Sood, head of corporate development—south Asia at Google.
Erasmic, a one-year-old fund with an estimated corpus of Rs 45 crore, has invested in start-up companies such as Mu-Sigma, a statistical modelling company and Small Devices, a mobile application development company.
Google’s investment strategy is to seek out entrepreneurs in the product engineering space who can deliver innovative internet and mobile solutions.
Google did not disclose the quantum of investments in the two funds. But people familiar with the matter said it made an investment of about $2 million (Rs9 crore) in Seedfund, an early-stage venture capital company that was launched in November.
In December 2006, Seedfund invested around Rs2 crore in the automobile classifieds portal, carwale.com.
Based on the fund-of-funds model, Seedfund’s investors include other venture capital firms such as Mayfield Fund, Sierra Capital and Silicon Valley Bank, as well as Motorola Ventures and Reliance ADAG Capital.
To protect its independent investment charter, the early stage fund does not accept any investment above Rs9 crore to Rs10 crore from a single investor.
Seedfund, which also has Indian individual investors, plans to work closely with about 15 or 20 companies over a five-year period mostly in internet, media, mobile, retail sectors. In India, Google has two research and development facilities—in Hyderabad and Bangalore—that focus on the next generation of search engine technology.