Increased activity from the corporate investment arms of companies such as Google (NSDQ: GOOG), Intel (NSDQ: INTC), Motorola (NYSE: MOT), Cisco (NSDQ: CSCO) and more recently Yahoo (NSDQ: YHOO) are causing mainline venture capitalists a good deal of grief lately.  The chief complaint , says BusinessWeek, is that corporate venture dollars are crowding out other investors looking for opportunities in the race to spread money around to start-ups in India, China and Russia. So far, for the first six months of this year, corporate VCs invested $1.3 billion in 390 companies, a 30 percent rise from the previous year and the largest increase in six years, BW notes, citing a report by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thompson Financial. 

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While growth in those countries has attracted corporate investment, companies like Google have additional incentives to fund companies there as well, namely it is searching for businesses that will complement and extend its own offerings. For example, as our sister site ContentSutra has been tracking, Google has provided about $1 million in funding to India’s Seedfund, which is helping to connect the internet search giant to companies that translate webpages from English to Hindi. Ultimately, through Seedfund, Google hopes to create a smoother path to gaining greater reach within India. Other companies are employing Mumbai-based Seedfund for the same purposes, as the investment firm has raised a total of $15 million from the likes of Motorola.

Aside from increasing their presence in growing markets, corporate VC activity gives companies like Google another advantage: by funding early stage companies, corporate VCs tend to buy these companies outright for a cheaper price than they would otherwise pay regular VCs down the road.