CapitalG, a private investment arm of Google parent Alphabet Inc.. has been in all the right places lately, generating billions of dollars in gains. The success is raising questions about the company’s strategy and sprawling influence over the technology industry.
In the last year and a half, four of CapitalG’s 36 portfolio companies have gone public, including Lyft Inc. and Crowdstrike Holdings Inc. Airbnb Inc.plans to do the same. Another four have been acquired. One of them, cloud analytics provider Looker, was bought by Google itself for $2.6 billion. At the end of June, Alphabet’s stakes in privately held companies were worth almost $11 billion, with unrealized gains of almost $3 billion.
The company’s private investing arms have done more deals in the past two years than any other corporate venture investor, according to industry tracker CB Insights. Last year, CapitalG made a record nine “unicorn” investments in companies worth more than $1 billion. In second place? GV, Alphabet’s venture-capital unit, which bought stakes in three unicorns among its industry-leading 70-plus deals.
Google struggles to make big acquisitions in its main areas of business, partly due to concern over antitrust regulation. The last huge deal was Motorola almost a decade ago. If the company can’t buy promising tech firms outright, the next best thing is investing in them. This helps Google keep tabs on the latest innovations bubbling up in Silicon Valley, and means Alphabet shareholders benefit if the creations turn out to be hits.
Still, there’s so much scrutiny of large technology companies that even this strategy sows suspicion in Silicon Valley and could come under the regulatory microscope.
“Deal flow gives you a lot of insight into what other people are doing in the market,” said Matt Stoller, a fellow at the Open Markets Institute, which studies and recommends competition policies. “It’s just one more tool that they have to exert power.”