Google Ventures Invests in HomeAway
Google Ventures, the investment fund that Google started last year, is getting into vacation rentals. — Google has invested in HomeAway, the vacation rental site that has already raised nearly half a billion dollars in venture capital.
Context & Ripple Effects
HomeAway has been on a heavy fundraising arc: after raising $250 million in late 2008, the vacation rental site had pulled in nearly half a billion dollars in venture capital by the time of this deal. Google Ventures' investment puts a corporate fund on that cap table.
The fund itself is young — Google only formalized its move into venture capital with its own announcement of the new vehicle in 2009, following years of speculation dating to Business Week's 2007 report on Google's VC ambitions. A stake in a late-stage consumer internet company is a notable test of what the arm is for.
First-order effects
- HomeAway gains Google as a shareholder at a point where it has already absorbed nearly half a billion in VC funding, adding a deep-pocketed strategic backer alongside its traditional investors.
Second-order effects
- With Google's quarterly filing showing at least $1.6 billion spent acquiring 40 companies in the first nine months of 2010, rivals in online travel have to read any Google Ventures stake as a potential scouting position for outright acquisition.
Third-order effects
- If corporate funds keep taking positions in companies their parent could buy, the line between venture investing and M&A pipeline-building blurs — startups gain a funding source whose exit logic differs from a traditional VC's.
The trend: Corporate venture arms are evolving from financial side bets into strategic scouts embedded in the deal flow of their parents' acquisition programs.