If this is anything like every other corporate venture arm that has ever existed, this will be a political (interally) and financial mess. This may also mean that the acquire-to-hire era is coming to an end at Google, which would be a negative situation for seed investors such as Y-Combinator. Overall, I'm not seeing the value equation here -- it's not as though Google and its employees didn't already have a birds'-eye-view of the startup scene.
It might not be like every other corporate venture arm, though. A lot of the things Google does, they do differently from other corporations. I've met these guys and I'd tend to give them the benefit of the doubt.
I agree that it might not be like every other corporate venture arm. Although, if I had to speculate, I think Google is doing this because it needs to diversify its business outside of generating cash through advertising. By investing in ventures, Google should be able to supplement its income nicely, keep its stock price high, and not have in increase operating expenses too much should anything that they invest in takes off.
If I were a shareholder, I'd much rather have them pay me a dividend than enter the distracting world of venture capital. These types of moves inevitably risk turning the company into yet another bloated enterprise, even if they are successful in their investments.
Google has always had a significant amount of cash. They used to use that capital to do really interesting, strategically smart things, like buying dark fiber. This was similar to Apple's philosophy - you don't see Apple distracting themselves with some sort of "Apple Ventures" play; instead, they will take advantage of their cash position to do things like cornering the market for miniature hard disks, which leads to a direct benefit to the bottom line.
I think that their motivations are different too. Wanting to build companies that might one day compete with Google is unthinkable; so one must assume these are ventures that either do something totally different from Google's current businesses; or are somehow attractive as "experiments" Google doesn't have the focus to perform itself (the last obvious category is "companies Google wishes to acquire"; but smart founders who happen to have such an idea would not use Google Ventures simply because of the conflict of interest).
Btw, is this typical of corporate venture funds or is Google trying something new?
Wanting to build companies that might one day compete with Google is unthinkable
I don't see why that would be true. Nearly any web company might one day "compete with Google", which would rule out a lot of potential startups. Investing in or buying out a competitor is a long-established strategy used by many companies.
