Sunday, September 16, 2007

On Google's new VC role

Making judicious investments in early stage next-gen plays is a great way to understand emerging uncertainties for a firm in a rapidly changing market. These investments act as real options, providing the firm with leverage in case any of the opportunities bloom. In the high-tech internet & media markets, this clearly seems to be the way.

Its interesting to see Google (and its brethren) take on a VC role - particularly in relation to its investments in India.

From Google's New Role: Venture Capitalist:

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.

...invested more than $1 million in a Mumbai-based investment firm called Seedfund to gain access to technology such as automatic translation software

Among the reasons for the corporate-investing comeback: an upswing in research-and-development spending after the tech-stock crash; the need to spot promising startups in China, India, and Russia; and increased shareholder willingness to tolerate the quarterly vicissitudes of venture investing in order to create long-term value.

And according to ET's September article by Arun Natarajan:

Google has invested into three early-stage VC funds - VentureEast TeNet Fund, Seed Fund and Erasmic Fund. And if that wasn't enough, it has also joined the India Angel Network - a group of successful entrepreneurs who invest in start-ups - as an institutional member.

Skoda - the true Volkswagen?

From Skoda: Volkswagen's Hot Growth Engine:

Lower-priced and higher-quality than similar models built by Volkswagen, Skoda's automobiles are driving a global growth jag, with sales up 13.2% in the first half of 2006. "Skoda has become the true Volkswagen (people's car)"

...and is considering a lower-priced model that could go head-to-head with Renault's (RENA) no-frills Logan

Analysts say over time VW's management may consider letting Skoda become the larger-volume brand, while making Volkswagen's cars more upmarket to defend its margins...

Skoda has now become synonymous with high quality. In the 2007 European consumer satisfaction and quality studies by market researcher J.D. Power & Associates (which, like BusinessWeek, is a unit of The McGraw-Hill Companies (MHP)), Skoda ranks among the top 10 in France and Germany; and in Britain it ranked No. 2 (tied with Honda), scoring just a fraction below Lexus.

... "Skoda already outperforms Toyota, relatively," says Wittig. "Our return on capital is 19% to 20%—Toyota's is 15% to 16%."