Google plans venture arm -- conflict of interest?

Back in the day when internet companies ruled the rolls of the Nasdaq, a number of online and tech companies had venture capital arms. Intel (NASDAQ: INTC) has kept its to this day. The tech collapse of 2000 and 2001 eliminated most of those funds.

Now Google (NASDAQ: GOOG) has decided to revive the tradition of big tech companies spreading money around. According to The Wall Street Journal, "The group will be lead by David Drummond, Google's senior vice president of corporate development and chief legal officer."

The move is a bad idea because it could alienate current and future Google partners. There is still an abundance of venture capital, so it is not as if the search company is filling a hole in the market.

The trouble is that Google could put money into a wireless broadband company only to find down the road it wants to form a partnership with one of that company's competitors. Should a firm risk doing business with Google when the giant internet company owns a piece of its nemesis?

Google may like the idea of supporting startups that are aligned with its goals. But it is cutting off the option of doing business with companies that don't have Google backing but do have services Google wants.

Douglas A. McIntyre is an editor at 24/7 Wall St.