Google Ventures ditched Europe fund after stalling deals

Google reversed course and abandoned its high-profile separate European venture fund after tension developed between its continental and US teams on investment strategy and frustration grew over stalled deals.

People familiar with the matter say the London partners of Google Ventures Europe had trouble persuading Bill Maris, their California-based boss, to sign off on investments.

“Six to nine months in, the team got frustrated,” said one person close to the London partners. “They were seeing a lot of companies and ended up taking a lot of people quite close to the finish line, but ultimately they couldn’t get over it.”

When Google launched a $125m fund designed to invest in the region’s nascent start-ups in 2014, it was seen as a major endorsement of the local tech scene.

But this week the company abandoned the idea and said it plans to pool all of its investments into a single global vehicle, renamed GV. The company says the move will reduce costs and provide more flexibility when deciding where to invest. The European investments and partners are “coequal” to the US and will strengthen the global effort, Google adds.

The reversal comes only 14 months after the fund launched at a time when it was coming under huge political pressure in Europe. The fund was seen as part of a concerted campaign to woo British politicians, and came after UK Prime Minister David Cameron called on Google Chairman Eric Schmidt to do more to invest in the country’s tech industry.

To launch the fund, five London-based partners were hired following extensive headhunting and interviews over Hangout — Google’s video-chat feature. On the first week on the job, Mr Maris, the chief executive of GV, repeated what he had said in the interview process: he would make the final call on every investment decision.

“It was never on the table to have an autonomous geographic fund,” said Mr Maris. “I try to give as much latitude as possible for people to make decisions, but ultimately the buck stops with me.”

But people close to partners, investors who have worked with the group and others close to the situation told the Financial Times that the strict centralisation came as a surprise to some in the team. They had wrongly assumed that their geographic distance from Google’s Californian headquarters would enable more autonomy than their US peers to write the cheques to close deals.

I try to give as much latitude as possible for people to make decisions, but ultimately the buck stops with me

GV’s commitment to European tech, traditionally a backwater for American investment, was also questioned by the European team and other local investors. People close to the situation said Mr Maris spent three days in Europe in the first year that the European arm was launched — a day each in London, Paris and Berlin. He had not met many of the companies he rejected.

GV said many other partners have made trips to Europe in recent months, and American design, engineering and marketing executives have also travelled to advise European portfolio companies.

The disagreements on strategy led to the departure of one partner, Peter Read, the British angel investor. Mr Read declined to comment. Another partner, MG Siegler, formerly a tech blogger, had relocated to London for a temporary period, but returned to the US earlier than planned.

Three other partners remain; Eze Vidra, a longstanding executive who set up Google’s “Campus” workspace for start-ups in London; Tom Hulme, a serial entrepreneur, and Avid Larizadeh Duggan, the co-founder of Bottica.com. Google declined to make any of these partners available for interview.

Six to nine months in, the team got frustrated. They were seeing a lot of companies and ended up taking a lot of people quite close to the finish line, but ultimately they couldn’t get over it

Two people familiar with the matter say another point of tension was GV’s reliance on a secretive algorithm to analyse potential deals — although this should have been well-known to the London partners before they started. “You’re going to go work for the algo,” an investor told a European executive before joining GV.

GV’s dependence on machine-based algorithms, which had less access to data on European companies than US peers, caused problems for the London team because it repeatedly rejected their proposed deals. One of the few that survived was an investment in Secret Escapes, the holiday deals website.

Google’s European team secured fewer deals than initially hoped. Since GV’s creation six years ago, it has backed about 300 companies. Since the European fund’s creation 18 months ago, it has announced just six investments, with “two more in the pipeline”.

Mr Maris says the venture is a success. “After 14 months, the European team have invested 30 per cent more dollars over the same time period than the US fund [did from] its launch,” he said. “By all the metrics I have, the European team were ahead of what my expectations would be and are doing really great.”