Alphabet Inc., the parent company of Google, oversees vast venture capital investments from its headquarters in California. A change in accounting rules has prompted Alphabet to disclose the fair value of its stock holdings on earnings reports. Currently, the estimated value of the company’s startup investments equal $11 billion.
Investments are made by multiple Alphabet-controlled entities, like the private equity fund CapitalG, Google, GV and Gradient Ventures. The high value of its investments arises from the major companies that Alphabet owns a stake in, such as Stripe Inc., Airbnb Inc. and Uber Technologies Inc. GV made the initial investment in Uber in 2013 when it spent $258 million on shares in the ride-hailing startup. At that time, Uber had a value of $4 billion. Now its value exceeds $50 billion.
Under the old accounting rules, Alphabet used the price that it paid for stock shares as the value of its holdings. This previous approach placed the worth of the investments at $7.81 billion. By using the current value of the shares, the figure jumped to $11 billion and added $3.40 to the company’s earnings per share.
Venture capital often plays a role in funding startup companies. A person building a new company not only has to look for investors but will likely want access to legal advice. An attorney knowledgeable about business formation and planning could help someone or a group of partners determine how to structure a company. Legal insights about tax obligations and protection from liabilities could help someone make decisions about the company’s organization.
Source: Bloomberg, “Alphabet Is Sitting on About $11 Billion in Startup Investments“, April 23, 2018