Google's Gifts Keep on Giving -- to Google

Its philanthropic efforts are a page out of the old playbook.
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It's philanthropy,

Google

(GOOG) - Get Report

-style. But it's also another page out of the venture capital playbook.

On Thursday, the company's philanthropic arm, Google.org, said it plans to make grants and investments totaling more than $25 million aimed at nonprofits and private businesses with causes that are in line with the organization's mission.

That mission includes three new areas of focus: predict and prevent the outbreak of natural disasters and diseases, distribute information technology to public service sectors, and spur the creation of small businesses in developing countries by plugging information gaps.

Even Google's Giving Rooted in VC

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Google sees information -- the field it believes it knows best -- as the binding theme between all of the initiatives. The company also pledged technical resources and the time of its employees to the initiatives.

Of course, $25 million is a pittance to a company like Google, which has $13 billion in cash on hand, according to Yahoo! Finance. Indeed, in the conference call announcing the move, one caller went as far as to ask whether it was merely a publicity stunt.

But the announcement is instead deeply revealing about Google. The company may be a corporate behemoth with 16,000 employees and a market cap of $191 billion, but Google was funded initially by Sequoia Capital and Kleiner, Perkins, Caufield and Beyers, Silicon Valley's top two venture capital firms.

Legendary Silicon Valley VCs John Doerr and, until recently, Mike Moritz served on Google's board since the company was founded. And the company continues to operate with a venture capital mindset in its for-profit and nonprofit endeavors.

Beginning by doling out just $30 million resembles what venture capitalists might call a first round of funding. Rather than invest all the capital in a project upfront, VCs prefer to stage their investments in rounds. This gives them a chance to learn along the way, see what's working, and decide where to cut funding.

"An amount like $30 million is a great start, but it is really nothing to Google," says Mario Morino, chairman of Venture Philanthropy Partners, a philanthropic investment organization. "But it will give them the chance to learn from the investments and see what is working and what is not."

Whether in Google's constant tweaks to its search product or in modifications to its application suite based on user behavior, Morino sees similarities to the company's approach to nonprofit efforts. "In designing software, you see how the market is reacting and customers are responding, and ultimately it's that reaction that matters."

Venture capitalists also tend to invest only in the fields where they have deep expertise. They stress that their insights and connections are often far more valuable than their capital. In choosing to tackle problems united by the field of information -- where Google sees its expertise -- the company is again employing a similar approach.

Indeed, Google is using its expertise to forge new paths in each of the new arenas it's entering. By tapping its Google News service, it's able to track reports of the outbreak of pandemics and provide early warnings on its Google Maps products, says Larry Brilliant, executive director of Google.org.

And in developing countries, Google blames a lack of capital for entrepreneurs for the dearth of small businesses there. Brilliant says that while two-thirds of employment in the developed world is driven by small and medium businesses, the figure is only about 20% in Africa.

In developed countries, when entrepreneurs apply for funding, banks can turn to credit histories to help them make decisions, but these records don't exist in developing countries, says Aleem Walji, a member of the Global Development Team at Google.org.

But Walji says new technology like mobile payments can help solve this problem. "As people use mobile phones to make payments, could this not become a credit history of sorts?" he says. "We are interested in investing in ideas, tools, and technologies that will bring down transaction costs and create a one-size-fits-most model for financing small and medium enterprises."

In this regard, even the much bigger sums of money to come from Google may pale in comparison to the thinking that's being brought to the table.