Search engine giant Google buys companies for what they can do in the future, not for achievements in the past, according to Megan Smith, Google’s vice president of new business development.
Smith, who is also general manager of Google.org, the company’s charitable arm that aims to tackle poverty, disease and global warming through technology, says the talent and ideas within a business are the main attractions for investment.
She tells GrowthBusiness: ‘One of the things that you don’t always think about in an acquisition, which of course you are actually doing, is you are trying to buy a company for what it is going to do in the future, not so much for what it has done in the past.’
‘The past is an indication of an incredible idea and top talent but you want to know about its plans.’
In her role at Google, where she has worked since June 2003, Smith manages early-stage partnerships, explorations and technology licensing, and has led many of Google’s major acquisitions including Keyhole (Google Earth), Where2Tech (Google Maps), and Picasa.
She says there are two types of acquisitions Google targets: the talent acquisition, where a company is bought for the people behind the business or the business idea; and, the strategic acquisition such as $3.1 billion purchase of digital marketer Double Click in 2007.
She continues: ‘In a lot of acquisitions, the talent leaves – at some point entrepreneurial people will leave, which is very normal – but you want them to stay for a year or two, some amount of time so they influence the direction of the company.
‘The founders, or the early people of a company, get what they are doing. I sometimes think of it almost at a genetic level: they are predisposed to do their thing, and so you want them to come to your company and do whatever the vision is.’
Smith rejects recent criticism of Google, most notably from New York-based venture capitalist Fred Wilson, that accuses the company of failing to innovate and relying too heavily on acquisitions rather than in-house development to grow.
She says: ‘That statement is probably not accurate. The reality is through the whole history of our company we’re a blend of things people think of internally and things we have acquired. As a small company we were probably doing less acquisitions per year [compared with now] but they were still there from the very beginning.’
Smith points to Google Street View and the self-powered car – an early-stage project now underway by Google and Toyota that aims to develop an autonomous car – as projects that demonstrate the company’s internal innovativeness.
She says: ‘Everyone is still coming up ideas. In google.org, we are coming up with some cool ideas. We have ten pilots going, five major projects, one of them is something called Earth Engine where we are trying to use Google Earth for deforestation monitoring at a global level. You just have to keep pushing the envelope.’
Smith refuses to say whether Google is planning to buy into the UK soon but she recommends that for businesses to develop, or gain Google’s attention, owner-managers should consider talent acquisitions or partnerships with people who have ‘similar ideas’.
She explains: ‘Be open to growing your company, both through hiring top talent as well as acquiring top talent. That is what we have come to find for our own company.’
‘There is a small number of companies that we or other companies would buy in a year and that might be an option [for growth] … but there is also a tremendous amount of partnership opportunities available.’
Smith backs the push by Prime Minister David Cameron to create a rival to Silicon Valley in London’s East End, saying: ‘There is no reason why the UK shouldn’t be one of the main anchors of Europe to drive innovation around technology, given this is a huge hub for mobile and for all kinds of security software with banking here.’
‘Some building blocks need to be edited a little bit – I don’t think there’s a need for massive changes – but there’s a couple of fundamentals that need a little bit of change to make sure that the environment for entrepreneurs is here.
‘Clearly, there are many companies being founded and growing, but how do you get to the high flyers, that is the question? And the UK easily has the potential to have the high flyers.’