Google Buys Writely: Why this bothers the VCs a LOT more than Microsoft [or why it should]...

YAWN...there are about 14,011 blogs today about Google's purchase of Upstartle, the creators of web-based word processing tool Writely. This move was neither unexpected [kudos Om] nor particularly Earth-shattering.

To those who think this is a big deal vis-a-vis Microsoft, methinks you're missing the mark. Sure, this gives "evidence" in the argument that Google has its sights set on Microsoft. But since when is this illuminating? Hasn't that been plainly apparent to anyone remotely connected to the technology industry for some time? And this "battle" works both ways. Microsoft views Google as its main competition now, too...not IBM, not Oracle. Microsoft and Google are going to face off on many fronts, but it's going to take A LOT more than G.store and Writely to dethrone the Office profit engine. Don't kid yourselves.

The far more interesting aspect of this purchase, in my humble opinion, is yet another dagger in the collective hearts of the VC community. I spoke to several colleagues in the industry today and there was a consensus of disappointment in the current landscape. I'm hardly the only one who's been saying there's excess capital in the VC industry for some time [in fact, there's excess capital everywhere], but with entrepreneurs more willing [and able] to bootstrap their way to product launch and with GoogleYahooMicrosoft unafraid to throw fractional portions of their cash hoard at interesting startups, I'm not sure I see the light at the end of the 2005-2006 vintage VC tunnel.

Related Articles:

• VCs vs. Tech Juggernauts (Google, Yahoo!, Microsoft, et al...)
• Google Base: Why the Blogosphere Wants (or NEEDS) it to be Underwhelming
• To GYM or Not to GYM, An Entrepreneur's Dilemna
• Bill Burnham: Are VCs Getting Too Big?
• There's Excess Capital Everywhere
• VC Funding Up, but Capital Needs Down...Huh?

Note: At the time of this writing I and or funds I maintain discretionary control over maintained a long equity position in MSFT but did not maintain an equity position [long or short] in GOOG or YHOO.

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Comments

[prakash]

Will be interesting to know how much Google paid for Writely.

[Jason Wood]

Niel,

I don't, for a second, doubt that Google is both a) rounding out a suite of Office-like apps for the web and b) doing so with the intent of "competing" with Microsoft.

My main issue is that this shouldn't be surprising to anyone NOR should we overreact as to the significance of this "competition" anymore than people react when Microsoft "competes" in enterprise applications, or security, or database, etc...

Google has a wondrous franchise, that putting stock price aside, is going to be a money machine for a long, long time.

But so does Microsoft.

People really need to take a step back and understand the dynamics of who uses all those millions upon million of copies of Word, PPT, Excel...where they use them...how they use them...and what it would take to change that behavior on a massive level.

The best thing about Google's move to buy Writely is that it's compatible with Word. Cooperation, not competition, is the only way purchases like this are going to become revenue generators for GOOG long-term, in my opinion.

Cheers.

[Niel Robertson]

What i find interesting is that slowly people are building web based equivalents of the MS Office suite and getting picked off. While i forget the name, a company that basically built Outlook on the web got picked off as well not so long ago, and now a Word competitor. Who will be the first to create online PowerPoint (actually not a bad idea)?