GV and Google Capital had great year, last year. But don’t tell anyone; you are not supposed to know. To try to confuse you, Google became Alphabet and Ruth Porat became Alphabet’s new CFO. She dazzled most everyone about Alphabet’s so called other bets, but not you.
You saw the truth. It was right there in the Alphabet 10-K. While scribes, reporters, analysts, and bloggers, focused on the segmented information, you saw, for the first time, the grand performance of the “other” other bets: GV and Google Capital.
Corporate VCs. GV and Google Capital were Google’s search results for venture capital. Instead of institutional investors, Google and now Alphabet, are the sole limited partner. Alphabet began making early stage investments in 2009 with GV and later-stage ones in 2013 with Google Capital.
Fair Value. Alphabet disclosed its investments in private-companies under the non-marketable equity investments section of the 10-K, page 72. As of 2015, the total investments were $2.6 billion. The amount is assumed to represent both GV and Google Capital investments.
The fair value of the private-company investments for 2015 was $7.5 billion. Since there is no market value, Alphabet used private market transactions. Per a review of annual reports since 2009, this is appears the first time Google, now Alphabet, has disclosed fair value amount of the portfolio.
Impairment. Alphabet’s $7.5 billion fair value may indicate the skill of the GV and Google Capital teams. It could also represent the excess in the current valuations. Fair values can go the other way, then a corporation would show the decrease as an impairments in the portfolio. During the Internet Bust of 2000–2001, Intel wrote down the cost of its investment by approximately $500 million.
Capital flows with the natural world; there are seasons, cycles, peaks and valleys, on and then….off. We may see some corporations leaving the venture capital space if losses are too great in the next down turn; but maybe not Alphabet.
The better bet is this: the GV and Google Capital teams have not only a lot cash, but also wisdom to continue investing for the long-term. But knowing Google, now Alphabet, you already knew that, too.
Thanks for reading and please share. For more, follow me on Twitter.