I think this kind of thing is good for the industry. It may be a good way to avoid the innovator's dilemma.<p>Big companies often can't take risks developing a new business or product line internally. These startups take on the risk, and get the reward if they succeed -- just like any other startups. The acquiring company gets to innovate without taking risk, which the board of directors might be leery of taking on. It's a win-win for everyone. More innovation happens than would have happened otherwise.<p>Cisco and Adobe have been known for doing this.<p>I'm not sure why anyone would object to this. Even if one wants the tech industry to be a perfect meritocracy, one must recognize that even in a meritocracy, people make use of personal connections to get ahead, because connections can be earned through merit. Not all connections are just accidents of birth or other circumstances. If someone gets a job at Google through merit, and succeeds through merit, it is entirely reasonable and just for Google to enter into a spin-in arrangement with him or her.
Cisco's former CEO John Chambers, made famous a concept called the "spin-in".<p>The concept is similar to employee's leaving to start their own company but their former employer funds the endeavor and often has a right of first refusal for a sale.<p><a href="http://www.businessinsider.com/why-cisco-showered-three-men-with-billions-2014-9" rel="nofollow">http://www.businessinsider.com/why-cisco-showered-three-men-...</a><p>This acquisition driven R&D worked well for Cisco, it doesn't always, see former Canadian company Nortel for the down side of acquisition driven growth.<p>As a side note, check out John Chambers some time. Common wisdom is that the CEO of a tech company should be a technologist. He is the exception to this rule. He was an amazing CEO who didn't have a strong technical background. In my opinion, one of the more impressive tech CEO's of the 90's and 2000's.<p><a href="http://www.mckinsey.com/industries/high-tech/our-insights/ciscos-john-chambers-on-the-digital-era" rel="nofollow">http://www.mckinsey.com/industries/high-tech/our-insights/ci...</a>
It seems a really smart move to me.
At the stage they are investing, the quality of the people and their reputation is more important than the idea itself as a success predictor. Ex-Googlers have on average a good reputation and they know how they were performing. So it makes a lot of sense to put a small amount in convertible notes early on that could easily result in a lot of money down the road.<p>And if the idea doesn't work out, well, they are closer to them than any other company, much more easy to hire them with all the economical advantages of re-hiring someone you like and trust. I think that, from an economical point of view, there are few downsides and a lot of upsides...
Larry Ellison does this too. Netsuite (Nelson) and Salesforce (Benioff) are seen as two major cloud computing titans.<p>Both were Ellison proteges who were given enough money to safely work on growing the new generation of the same business.
Heaven forbid?<p>Many other VC firms want to invest in ex-Googlers and their startups, especially one with previous success. It seems reasonable that they'd continue to invest in people they have high confidence in.
> <i>It’s unlikely Google is deploying these funds to dig back into social media or generate massive returns. Instead, these deals seem mostly about Google’s ongoing attempt to keep familiar engineers close to the company fold.</i><p>It kind of looks like an expensive way to keep the expertise of these employees available and friendly to Google.