What Do Google Deals Really Say?

Gary Price alerted me to the news about Google buying ReqWireless of Waterloo, Canada. I followed the news trail and ended up on Techfinance.ca, a website that has more details on the deal. Mark Evans has more details here.

google acquireThis led me this nugget of information… all told, Google spent about $22.5 million on three companies: Reqwireless, Akwan Information Technologies of Brazil, and Android. Not much from Google’s perspective – roughly speaking $7.5 million each.

Gary Will says that Reqwireless had about $400,000 in seed funding. These deals, and most of the companies Google has bought (of course with a few exceptions) did not get much venture capital. Google’s strategy is pretty clear, as I had reported in Business 2.0 recently.

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.

Some call this trend, “Acq-hire.” Why do I bring this up? I read recently that there was a new venture fund being set-up with the explicit intention of starting and flipping start-ups to The GYM Gang. (Sure throw in others for good measure!) That who scheme seems fraught with risk, despite whatever assertions the backers made.

Paul Kedrosky calls the silliness GYM put and explains: Every time a revenue-less del.icio.us, or equivalent, is taken out by Google-Yahoo-Microsoft (GYM), it emboldens venture investors, especially first-tier sorts, to think that the lower bound for the return on their investment is $25mm-ish. Paul might be too optimistic – its not $25 million-ish! Instead, it is about $7.5 million as per latest Google data.