When Google (GOOG) in 2009 announced its own venture capital fund, some traditional VCs smirked. Today, not so much: With a portfolio highlighted by names like Uber, Airtime and AngelList, the search giant's venture arm is in the thick of the action. Having launched with the goal of investing $100 million a year, Google Ventures now invests at least three times that amount annually.
Karim Faris joined the firm a few months after its founding, but he didn't have to move far: He'd previously weighed investments and acquisitions as part of Google's corporate development team. Faris had held a similar role at telecom provider Level 3 after a stint as an Intel (INTC) product manager.
Q How'd you get into this racket?
A I first got a taste of the venture business through an internship in 1997, before I headed out to business school, and I was quickly drawn to the breadth of entrepreneurs I was exposed to.
I spent the next few years in various operating roles across engineering, product management and business development, then was later recruited back into the venture business in 2002 -- in the midst of the market turmoil that followed the tech bubble bursting. It was a very difficult period; funding was scarce and times were tough. But it turned out to be one the best environments to learn.
Q What do you like about venture capital?
A Part of my role is helping founders shape their companies, which is very gratifying. There's a remarkable sense of optimism here in Silicon Valley. Every day we get to meet people who want to change the world ... and create thousands of jobs in the process.
Q What kinds of pitches are you looking for now?
A We have broad interests across enterprise software and consumer services. I spend a lot of my time looking at enterprise innovation. The world is changing rapidly as data moves from on-site servers into the cloud. The entire technology stack is being rebuilt.
I'm interested in startups that will make this new world possible, whether through security, storage, processing power or better usability.
Q What's the biggest mistake entrepreneurs make?
A Not being decisive fast enough when it comes to hiring, dealing with poor performance, strategy turns and other key matters in the life of the company.
We tend to be conditioned to seek comfort in more data. In most cases, waiting for more information when time is precious does not yield better results. Good judgment can be executed from simplicity and scarcity of information.
The other mistake I see is entrepreneurs raising too much money. It's very seductive, particularly in this active market, to go on capital overload for various reasons. Frugality breeds creativity, and I've seen a number of situations where a company could have achieved better results with less capital.
Q What's the next big thing going to be?
A I believe the market will reward pragmatic, hybrid approaches that let companies leverage their existing infrastructure and extend it with the new capabilities of the cloud.
Mobility is a significant theme that's redefining requirements for the way we work. There's a growing expectation that data will be easily accessible from anywhere and through any device. The security perimeter around the enterprise as we know it will dissolve, giving way to more usable and accessible services while ensuring security through new encryption models.
Another big theme is mass analytics. We have devices and services all around us that have been producing large amounts of data for years, whether it's security firewalls, social media or thermostats. The challenge is that we haven't had the tools to efficiently mine this data to get meaningful business insights, unless you have heavy IT help. I'm particularly excited by the new crop of data analysis tools that are solving this issue in very elegant ways.
Q Before becoming a VC, you worked as a software engineer, a semiconductor product manager and in corporate M&A. How does corporate development differ from what you're doing now?
A I started out in software, and I've since been up and down the tech stack before jumping to the investment side. Working in corporate development allowed me a peek into the other side of the business, and I understand how tech buyers think about strategy and value.
Although venture capital and corporate development are different, there are more similarities than people might think when it comes to the M&A process at the top acquirers. In the diligence phase, both care about the quality of the team, the technology and the market opportunity. The end goal is different, of course: Corp dev is tasked to bring in assets that will add meaningful strategic value, whereas venture seeks to profit from building sustainable businesses.
Q A lot of entrepreneurs seem to want to work with Google -- you've got a lot of capital, and obviously a lot of products and markets to tap into. Does that give Google Ventures an "unfair advantage" when it comes to competing for deals?
A We've set out to create a new kind of venture firm from scratch, centered around the entrepreneur. We have a dedicated operating team to help our companies build their businesses, and we offer support in recruiting, marketing, design and engineering. These services are very popular with the portfolio, and we're finding that a lot of entrepreneurs very much appreciate an active co-pilot on their journey.
Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap.