GOOGLE STRATEGY TEARDOWN

GOOGLE STRATEGY TEARDOWN 

Analysis of acquisition, investment, patent, and research trends 

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ABOUT THE PRESENTER 

Kerry Wu 

Tech Industry Analyst, CB Insights 

Focuses on automotive, transportation, and logistics tech; 

additional topics include on-demand and macro VC trends 

Published research and data analysis has been featured in The New 

York Times, Financial Times, The Economist, and Bloomberg, 

among other major media outlets 

Previously worked as a management consultant at Simon-Kucher & 

Partners 

Graduate of Columbia University 

@kerrygwu 

kwu@cbinsights.com 



TABLE OF CONTENTS 

9 

13 

27 

34 

38 

43 

Introduction 

Investments: Google, GV, Google Capital 

Acquisition Activity 

Patent Data Analysis 

Initiatives By Sector 

Q&A 



INTRODUCTION 



REFRESHER ON 

ALPHABET’S STRUCTURE 

Even within Google 

proper, we are seeing an 

emphasis on corralling 

and centralizing related 

businesses (e.g. Cloud 

and Hardware). 

Note: list is nonexhaustive 

and subject to 

change. 

Hardware 

Infrastructure 

Home, Pixel, Chromecast, etc. 

Access & 

Energy 

Source: Alphabet 



89% 

of Alphabet revenue from 

Google search & ads 

SOME QUICK DATA 

POINTS 

Google’s decade-plus 

profit center remains 

strong as ever thanks to 

a successful push into 

mobile. 

80% 76% 

share of Google ad 

revenue from 

Google sites 

70% in 2011 

60% in 2006 

cost-per-click (CPC) 

vs. 2 years prior 

Alphabet leadership is 

keenly aware of the lack 

of diversity in its 

subsidiaries as it 

searches for growth in 

cloud & enterprise, AI, 

hardware, and beyond. 

Q2’16 figures shown. Sources: Alphabet quarterly results, Beyond Devices 



“I’ve commented many times 

that our focus on long-term 

revenue growth does not give 

us a pass on managing 

expenses.” 

Ruth Porat 

CFO, Alphabet 

Source: Reuters 



INVESTMENTS: 

GOOGLE, GV, AND GOOGLE CAPITAL 



NEW DEAL ACTIVITY 

ACROSS ALPHABET 

INVESTMENT UNITS 

GV’s new deal activity 

was already on the 

decline prior to the 

Alphabet reorg. 

Meanwhile, new deals 

through Google Capital 

and direct strategic 

investments from Google 

have ticked upwards in 

recent years. 

Source: CB Insights 



GOOGLE DIRECT 

INVESTMENTS 

Google takes a handful 

of direct positions, with 

several mega-deals in 

frontier areas such as 

space transport and 

satellite connective and 

augmented reality. 




GV OVERALL DEALS ALSO 

DECLINING 

GV’s pace has been 

trending downwards 

since a peak from late 

2013 to early 2014, 

which saw nearly 30 total 

deals per quarter. 

This aligns with GV’s 

declining new deal 

activity that we saw 

earlier. 




GV HAS WITHDRAWN 

FROM SEED MARKET 

The decline in deal pace 

coincides with GV’s neartotal 

withdrawal from the 

seed market, once its 

bread-and-butter. 

Over the past two years, 

its seed activity has 

fallen almost 85% on a 

year-over-year basis, with 

no new seed deals at all 

in the first half of 2016. 



“When you have a $2.5 

billion fund, a seed 

investment has to take time 

to move the needle.” 

Bill Maris 

Founder, GV 

Source: Recode 



GV NOW PARTICIPATING 

IN MUCH LARGER DEALS 

GV was founded with a 

$100M capital 

commitment in 2009, 

which has since swelled 

to $500M annually. 

As GV exits the seed 

market and its resources 

grow, it is participating in 

larger financings. 




GEOGRAPHIC FOCUS 

REMAINS US-CENTRIC 

The firm launched a 

$125M fund in 2014 

dedicated to Europe, with 

5 partners to lead the 

unit. 

However, post-Alphabet 

the fund was scrapped in 

December 2015 and 

absorbed back into the 

global vehicle with GV’s 

rebranding. 




GV’S AFFINITY FOR 

HEALTHCARE UNDER 

BILL MARIS 

GV has heavily 

committed to financing 

healthcare startups in 

recent years. 

etc. 

These range from digital 

health companies 

(Flatiron Health) to 

providers (One Medical), 

as well as startups in 

fields like genomics 

(Editas, Foundation 

Medicine, 23andMe). 




MARIS LEAVES GV 

WITH STRONG LEGACY, 

UNCERTAIN FUTURE 

Bill Maris departs with a 

number of $1B+ exits 

under his stewardship. 

However, as much of 

GV’s strategy was tied to 

its founder, it remains to 

be seen how GV’s 

investment style and 

philosophy will now 

change under David 

Krane. 




CAPITAL TYPICALLY 

COMMITS TO 1-3 

DEALS PER QUARTER 

The junior Google 

investment arm has 

generally maintained a 

lower profile than G V 

since its formation. 

The investment arm has 

typically participated in 1- 

3 deals per quarter, with 

a noticeable spike in 

Q3’15. 




GOOGLE CAPITAL NOT 

AVERSE TO LARGER 

DEALS 

Google Capital most 

often participates in 

rounds between $25M 

and $100M. 

However, given its 

mission it is not averse 

to larger deals, such as 

CloudFlare’s Series D 

($110M), FanDuel‘s 

Series E ($275M), or 

Oscar’s Series C 

($400M). 




STRONG SYNDICATE OF 

KNOWN TECH INVESTORS 

The fund’s investment 

syndicate reflects a 

pattern of following and 

co-investing with leading 

Silicon Valley VCs, as 

well as notable crossover 

tech investors. 

GV rarely invests ahead 

of Google Capital, but the 

two may see increasing 

overlap as GV moves into 

later-stage deals. 




“Care.com exemplifies the kind of 

company that we want to invest in. 

We’ve been focused on growth-stage 

companies, and really our only 

criteria is their having Google-sized 

aspirations.” 

Laela Sturdy 

Partner, Google Capital 

Source: NY Times 



ACQUISITION ACTIVITY 



QUARTERLY 

ACQUISITION ACTIVITY 

Alphabet established 

Google is famously one 

of tech’s most acquisitive 

companies, but activity 

slowed both leading up 

to and following its 

reorganization under 

Alphabet. 

Q3’16 has seen a 

resurgence in activity. 




Robotics 

acquisition spree 

Boston Dynamics 

robot video & 

reports of sale 

MIXED RESULTS FROM 

MARQUEE ACQUISITIONS 

Some of Google’s highprofile 

bets from earlier 

in the decade have met 

with mixed results. 

These include at least 7 

robotics acquisitions in 

late 2013 (which formed 

Replicant) and smart 

home purchases 

including Nest, Dropcam, 

and Revolv. 




DEEPMIND ACQUISITION HAS BORNE MORE FRUIT 

GOOGLE’S DEEPMIND ACHIEVES SPEECH- 

GENERATION BREAKTHROUGH 

Sep 9, 2016 

HOW THE COMPUTER BEAT THE GO 

MASTER 

Mar 19, 2016 

GOOGLE’S DEEPMIND AI PLATFORM CAN 

NOW LEARN WITHOUT HUMAN INPUT 

GOOGLE’S DEEPMIND GIVES AI MEMORY BOOST 

TO NAVIGATE LONDON UNDERGROUND 

Oct 17, 2016 

GOOGLE CUTS ITS GIANT ELECTRICITY BILL 

WITH DEEPMIND-POWERED AI 

Jul 19, 2016 

Oct 12, 2016 

Sources: Bloomberg, Scientific America, IEEE Spectrum, The Next Web 


30

“Machine learning is the engine that 

will drive our future… more than 100 

teams are currently using machine 

learning at Google, from Street View 

to Gmail to Voice Search and more.” 

Sundar Pichai 

CEO, Google 

Source: Alphabet Q2’16 earnings call 



ENTERPRISE FOCUS 

SHAPING CURRENT 

ACQUISITION STRATEGY 

Over the past year, 

inbound acquisition 

requests have come 

most frequently from 

Google’s cloud & 

enterprise unit. 

This a lucrative, proven 

sector where the 

company has room to 

catch up. 

Sources: CB Insights, Recode 



ACQUISITIONS FOCUSED 

ON VALUE-ADDED 

SERVICES 

According to Google CEO 

Sundar Pichai, their 

differentiation strategy 

will involve “value-added 

services on top of 

compute and storage” 

rather than competing on 

sheer scale. 

Many of its recent 

acquisitions fall into its 

category. 

Sources: CB Insights, SiliconANGLE 



PATENT DATA ANALYSIS 



PATENT DATA SHOWS 

REVERSAL FROM ANTI- 

PATENT STANCE 

In the past, company 

executives up to Larry 

Page and Sergey Brin 

opposed excessive 

patenting as a threat to 

innovation. 

However, as the threat of 

smartphone litigation 

intensified in the early 

2010s, Google began 

applying for patents at a 

blistering pace. 




KEYWORD FREQUENCY 

ANALYSIS HIGHLIGHTS 

MOONSHOT INITIATIVES 

Keyword data highlights 

patent activity related to 

bleeding-edge projects. 

These include the Glass 

eyewear device and other 

wearable research. 

“Balloon” also tops the 

list in 2016 to date as 

development of Project 

Loon continues. 




SELF-DRIVING CAR 

PROJECT ACCELERATES 

Rising frequency of 

“vehicle” also reflects 

Google’s concerted 

efforts in the self-driving 

vehicle space, where it 

has been expanding its 

test fleet and searching 

for automakers to 

partner with. 




INITIATIVES BY SECTOR 



AI BEING LEVERAGED 

ACROSS ALPHABET 

Graduated X projects like 

Google Brain and a host 

of acquisitions are being 

utilized enhance 

capabilities from search 

to cloud and voice 

assistance, and even 

improve power efficiency. 




TRANSPORT AND 

LOGISTICS 

Google Self-Driving Car 

Project has faced some 

employee attrition and 

increasing competition, 

but has made veteran 

industry hires and 

secured its first 

partnership. 

Other initiatives include 

delivery drones (Project 

Wing) and sameday/grocery 

delivery 

(Google Express). 




• Pioneering Google Glass project was 

ultimately unloved by consumers 

• Moved into low-end mobile VR with Cardboard 

• Reported in May that 5M Cardboards were in 

hands of consumers (distributed widely via 

partnership with NY Times); Cardboard App 

has hit 50M downloads in Play store 

• Auto 

• Just announced mobile VR platform 

Daydream, Lenovo also revealed first phone 

driven by AR platform Tango 

• Investor in well-funded AR startup Magic Leap 

• In addition to its low-end mobile VR initiative 

(and retooling Android OS to handle VR), 

Google is reportedly working on a standalone 

headset that would not require a tether to a 

PC or game console 

Sources: Wall Street Journal, TechCrunch, Fortune, Wall Street Journal 

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