The CapitalG Advantage, Much More than Deep Pockets

Lyft, Snap, Airbnb, SurveyMonkey, Glassdoor, and Duolingo are a sampling of Capital G’s great picks.  The investment firm began in 2013 in Mountain View, California, as Google Capital, a growth equity fund backed by Alphabet, Google’s parent company. It changed its name to CapitalG in 2016, after Google created Alphabet to serve as its parent.

The Relationship—A Deep Bench that Delivers

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The Google connection—the synergy between CapitalG, its companies, and Google—is the company’s exclusive edge and most critical asset. An investment from CapitalG comes with Google’s expertise in artificial intelligence, machine learning, and digital marketing, which are key growth areas for the software-as-a-service and fintech industries. This unique relationship enables CapitalG to call upon Google experts anywhere, any time. The company’s strategy is to identify where it can add value for its portfolio companies, then engage the right Google experts to support each one. Google’s strategic and tactical advice can take many forms including mentorship programs, thought leadership events, and one-to-one problem-solving sessions. Whatever the format, the content is tailored to address a portfolio company’s specific business and operational needs wherever they occur: engineering, product, operations, sales and marketing, and so on.

How Does the Goggle Connection Work?

The Googlers draw upon knowledge from their everyday roles to advise the portfolio companies—from scaling architecture, to transitioning to the cloud, to mobile development, to cybersecurity, and much more. In tandem with Google’s guidance, CapitalG’s functional expertise enables its companies to discover and leverage fundamental revenue drivers and cost savings as they accelerate their growth. Take Applied Systems for example, the cloud-based SaaS company for the insurance industry. According to an article in The SaaS Report (TSR, October 2018), Applied Systems announced that it had received a cash infusion from CapitalG (for an undisclosed amount). Although that in itself is good news, Applied Systems gets more than just cash. It, as with all of CapitalG’s companies, gets access to cutting-edge technology—Google technology. And, it gets a relationship—the Google connection.

Enter Stripe

Yet another fast-growing SaaS startup is Stripe, which according to a recent Bloomberg article (September, 2018) has received $245 million in funding from CapitalG, which ups Stripe’s value from $9 billion to $20 billion. Stripe offers a platform that developers use to build and run internet businesses. Whether it’s a subscription service, an on-demand marketplace, an e-commerce store, or a crowdfunding platform, Stripe’s meticulously designed application programming interfaces and unmatched functionality are the most powerful tools you can get to create the best possible end-user product.

Millions of the world’s most innovative technology companies are scaling faster and more efficiently by building their businesses on Stripe platforms—to securely accept payments, expand globally, and create new revenue streams, among other functions. Because it lurks in the background, Stripe hasn’t become a household name. But online shoppers use its service quite often. In fact, approximately 84 percent of American adults who shop online bought something via Stripe—albeit unknowingly—in the last year. And that figure will only increase thanks to Stripe’s deals with CapitalG and Uber, as well as a number of other new key customers, including Spotify Technology SA.

Stripe was founded in 2010 by Patrick and John Collison, Irish brothers who immigrated to Silicon Valley to pursue software careers. The Collisons came up with the idea of making it easier for fledgling companies to launch their online billing and payment systems. Instead of dealing with a morass of banking protocol, companies could simply inject a few lines of code from Stripe onto their websites and gain instant access to its payment infrastructure. The technology proved an immediate hit with young companies and rising tech powerhouses like InstacartLyft Inc., and DoorDash, Inc. And, as these companies processed millions of transactions, Stripe charged a small service fee on each one.

Stripe plans to use its new round of investment to ramp up business overseas. Its goal is to enable companies to move money across countries and currencies easily as they transact business internationally. As such, Stripe has signed Didi Chuxing Technology Co., the Chinese ride-sharing and transportation company, and GrabTaxi Holdings Pte. Ltd., a similar startup out of Singapore. Collison conceded, however, that the current political landscape is making it harder to chase Stripe’s ambition of simplifying cross-border transactions. “The Trump administration reversed the policy on opening up Cuba,” he said. “We were excited to go there and sadly we can’t.” More broadly, heavier regulations in Europe along with China’s already closed Internet have balkanized e-commerce. “The promise of the Internet was that borders would become less relevant,” Collison said. “Over the last two years, that promise has receded. The general tide is that it is becoming harder to operate globally. I believe as strongly as I ever did—to some degree more strongly—in the value of making a global payment system happen.”