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Google's Newest Role: Venture Capitalist

September 4, 2007, 12:01AM EST

The tech giant's startup investments are narrowing opportunities for VCs. Other corporations are upping their venture investing, too

by Aaron Ricadela

Just as it has done to companies in the software, publishing, and advertising industries, Google is becoming a thorn in the side of venture capitalists. The owner of the world's largest Web search engine is scooping up young tech outfits for a relative pittance, giving itself first dibs on hot-growth technologies and in some cases boxing VC funds out of potential big-bang acquisitions and initial public offerings.

Google (GOOG) has begun making VC-style investments to the tune of about $500,000 or less in promising startups, often buying those companies afterward, according to partners at Silicon Valley VC firms who spoke on condition of anonymity. In an effort to keep spotting promising deals, Google has been hiring a stable of finance pros. And it has invested more than $1 million in a Mumbai-based investment firm called Seedfund to gain access to technology such as automatic translation software that could help spur growth in India.

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Electronics buyers have price limits

By Michelle Kessler, USA TODAY

Despite record sales, electronics makers are discovering limits to what consumers will pay for the latest tech gadget.

Apple (AAPL) last week slashed the price of its iPhone cellphone to $399 from $599 just two months after it was released. That's a sign sales were sluggish, says equity analyst Ashok Kumar at CRT Capital Holdings. Apple has not released recent sales numbers. It said it cut the price because it wants bigger holiday sales and is on track to ship 1 million iPhones by the end of the month.

Most consumers will only pay about $399 for a typical electronic item, no matter how cool, says tech analyst Tim Bajarin with researcher Creative Strategies. Although there will always be some willing to spend top dollar, "that is pretty much the highest you can get and still have large volumes," he says.

That may be why several recent cutting-edge devices have struggled to find buyers. Among them:

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How social can we get?

What evolutionary psychology says about social networking

By Michael Rogers / Columnist / Special to MSNBC

Updated: 7:55 a.m. PT Sept 10, 2007

The Internet world is relentlessly enthusiastic in its embrace of the latest and greatest, and this year’s new flavor has been social networking. Between MySpace, Facebook, LinkedIn, Twitter, Bebo and scores of lesser start-ups, social networking seems poised to take over the Internet. Indeed, some digerati have suggested that Facebook, by allowing developers to write mini-applications called widgets, might become the new Internet.

However, from push technology to Pets.com, the former Information Superhighway is littered with the digital corpses of the next big thing. The Internet is the early adopters’ ultimate paradise, an all-you-can-eat buffet table of novel software gadgets, and it’s dangerous to rely on the enthusiasms of the blogosphere to determine the longevity of any new Web phenomenon. But social networking may be in a class by itself—for reasons that go back long even before human memory.

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Google's Newest Role: Venture Capitalist

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