Google Ventures Shifts Focus to Health Care

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• The Wall Street Journal

Google's venture-capital arm is moving strongly into health care and life-sciences startups, mirroring shifts at the Internet giant.

More than one-third of the money Google Ventures invested in 2014 went to health care and life-sciences companies, up from 9% each of the prior two years. The venture group plans to continue investing in the area, looking to capitalize on an explosion of health data and new ways to analyze it, said Bill Maris, head of Google Ventures.

“Barring some huge calamity we’ll see more interesting things in life sciences in 2015,” Maris said.

By contrast, Google has curbed investments in consumer Internet startups. They received 8% of Google’s venture investments in 2014, down from 66% in 2013, when Google placed a $258 million bet on taxi-hailing app Uber.

Google sees opportunity in health care, but Maris said it is also moving against the grain, as valuations of some consumer-Internet companies soar. “If you are at the buffet and everyone is picking the entrée, try the dessert,” he said.

Google Ventures doesn’t disclose investment totals, but Maris said Google allocated $425 million to venture investing in 2014, up from $300 million in each of the prior two years. That reflected the creation of a new fund to invest in Europe, to which Google allocated $125 million. Next year, the unit will get roughly $425 million again, split in a similar way, he said. Google can invest more or less than it allocates in a given year.

After health care, Google’s second-biggest focus for venture investing was in mobile, which received 27% of the investments; Google’s Android is the world’s most widely used mobile-operating system. Enterprise and data startups, which offer products for companies such as online security, data storage and analysis software, received 24%.

In the last three years, consumer startups went from Google Ventures’ top sector to one of the firm’s least favorite. Health and life-sciences companies received the smallest share in 2012 and the largest this year.

Over that period, other venture investors maintained steady interest in these sectors. About 20% of VC money flowed to consumer-services companies, a similar share to health care startups, in the U.S. in each of the past three years according to Dow Jones VentureSource.

Google’s shift into healthcare investing reflects the company’s growing interest in the topic. Maris helped recruit Andrew Conrad, a genetics expert, to Google in early 2013 to run a Life Sciences team at Google X, the company’s research lab. Conrad’s group is analyzing genetic and molecular information from thousands of people to create what Google hopes will be a more-complete picture of a healthy human being.

“Google’s mission is to make the world’s information useful,” Conrad said in a July interview. “We shouldn’t put a slash through that and say ‘but not health care.’”

Conrad helped persuade Google Ventures to invest more than $100 million in Flatiron Health, which collects and crunches cancer-patient data for doctors and hospitals, said Flatiron CEO Nat Turner. Flatiron is Google’s second-biggest venture investment, after Uber.

Turner and co-founder Zach Weinberg sold a previous company, Invite Media, to Google in 2010. That startup built an auction system that let advertisers and agencies bid on digital ad space across multiple ad exchanges. Flatiron is building a similar system now, to handle health data rather than marketing information, Turner said.

Turner’s switch from advertising to health mimics Google’s broader ambitions. “Google is trying to buy into technology that’s changing older industries and suits its big data expertise,” Turner said. “Health care is one of the only industries that haven’t been disrupted a lot by technology yet.”

Maris sees numerous health care areas as ripe for investment, including oncology, spinal-cord regeneration, brain function and repairing cognitive problems. He said new technologies are taking some of the guesswork out of medical development.

Dr. Krishna Yeshwant, a Google Ventures general partner who leads the firm’s health investments, is looking to hire another doctor for the team and is advising Harvard Medical School Dean Jeff Flier on entrepreneurship.

New information about the genetic and molecular structure of tumors is helping develop better ways of treating cancer, Dr. Flier said. New data-analysis techniques can help identify molecules to attack specific enzymes in tumor cells, he said.

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