XG Ventures May Be the Best-Connected Firm You’ve Never Read About

Some investors aggressively court media attention, while others avoid it like a bacterial infection. As for low-flying XG Ventures in Palo Alto, its founders say they’ve got nothing against some press; they’ve just been a bit busy over the past four years.

It’s easy to believe. Andrea Zurek and Pietro Dova are ex-Googlers who made their fortunes at the search giant and who decided to team up after repeatedly running into each other while looking at the same and similar deals. “It was a little uncanny,” laughs Zurek, who was an ad sales executive at Google from 2000 to 2007 and began angel investing as soon as she left.

“We liked working together at Google,” adds Dova, who was Google’s finance director from 2001 to 2007. “And we thought it made sense to try and create efficiencies by working more closely together and combining our networks.”

They’ve certainly been active as a team. Since 2008, they’ve written out personal checks to roughly 40 companies, investing in nearly one consumer Web or mobile-focused startup a month. “We tend to look where we can add value and open up our ecosystem, our network,” offers Zurek.

Their network approach appears to be serving XG well, too. Among the firm’s many exits is social search engine Aardvark, which sold for $50 million to Google in 2010 (it raised $6 million); real-time document editor Appjet, which sold to Google in 2009 for a sum that was reportedly in the “low eight figures” (it raised less than $1 million); e-commerce data firm Adku, which sold to Groupon earlier this year for an undisclosed amount rumored to be in the $10 million range (it raised an undisclosed amount of seed funding); and the mobile apps startup Tapulous, which raised just $2.8 million before selling for an undisclosed amount to Disney in 2010.

The pair’s apparent candor may be another selling point. For example, XG also backed the blogging platform Posterous, which raised $10.1 million before selling to Twitter in a deal that was widely characterized as an “acqui-hire,” meaning Twitter was less interested in splurging on the company’s technology than in absorbing its engineering talent.

When I ask Zurek about the deal, rather than spin the exit as widely successful, as many other investors might, she tells me: “We’re very happy for the entrepreneurs; they worked really hard and they’re more than happy at Twitter from what we understand.”

Similarly, when I ask Dova about the much-hyped startup incubator Y Combinator, which raised $8.5 million in May 2010, including from Sequoia Capital, SV Angel, and XG Ventures – all of which now get an early peek at the companies coming out of the program – he hardly talks boastingly about XG’s access to the program.

“It’s too early to tell whether that [investment] will be a huge win or not,” he says. “Time will tell, and we’re not there yet. But [being an LP] certainly gives us access to that deal flow, other than going to [Y Combinator] events.”

What XG isn’t yet willing to discuss publicly is whether the firm is now operating in the black, with Dova instead saying that of the “micro VC funds that have been formed in recent years, we’re in the [same] ballpark in the way of returns. We’re happy with where we are today.”

He also demurs when I ask if XG, which typically invests in the  “low six figures” in mostly California companies, will eventually seek outside funding.  Then again, he says enough that institutional LPs may want to keep tabs on the firm. “We have discussions on and off about whether we should take outside money,” says Dova. “It’s not off the table. It’s an ongoing discussion.”

Other things to know about XG Ventures:

1.) On new trends, Zurek says: “One trend we’re seeing a lot of, particularly in the gaming space, are multiplatform technologies. You know — you can start playing a game on your iPhone while standing in line for coffee, and if you can’t finish it there, you can continue playing it later on your desktop or iPad or tablet. Multiplatform solutions are appearing more and more on our radar.”

2.) On the firm’s newest investment, Zurek says, “We just two days ago closed on Kamcord, which happens to be one of the companies that came out of the latest Y Combinator batch. It’s a mobile gaming solution [that helps users record and share how well they’ve played a game with others, including via Facebook or Twitter] and [cofounder and CEO Matt Zitzmann] is also an ex Googler and we found him to be extremely savvy in this space.”

3.) On whether XG is seeing a growing number of ex-Facebook employees in their deal flow (or whether, like Google, its former employees tend to stick together when it comes to investing), Dova tells me: “We certainly come across early FB employees…I think it’s early to tell if the groups will form out of Facebook like they did out of Google, though. I think a system will build around them over time, but I don’t think it has formed yet.”

4.) On whether XG usually invests with ex-Googlers by design, Dova adds: “We always invest as part of a syndicate, and most often [the group] includes well-known angels and seed investors and some are ex-Google and some are not. We’re not necessarily seeking just ex Googlers to fund a company, but if they happen to be there, we generally know who they are.”

Logo courtesy of XG Ventures