13-20 corporate venture capital soars, as funding hits record … · 2018-03-28 · corporate...

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Putting Strategic Investors and Their Partners on the Cusp of Innovation

PREMIERE ISSUE Vol. I, Issue 1

Continued on page 22

�� NEWS, 3-7AOL: CV powerhouse, 3EDS to invest $1.5 billion, 4How to keep employees, 4Intel goes abroad, 6Excite backs incubator, 9

�� PROFILES, 8-12Battery likes corporations, 8Novell boosts program, 10Trans Cosmos: Bridge to Japan, 12Corporate Venturing Deals, 13-20

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Venture HoldingsMay Boost ValueOf Company StockWhen Wall Street analystAlkesh Shah told clients last No-vember that shares of ADC Tele-communications Inc. shouldtrade at $63, rather than his $50prior estimate, the revision wasn’tfor the usual reasons.

ADC hadn’t announced a newproduct, an acquisition, or strongfinancial results. In fact, theMinnetonka, Minn., supplier ofcommunication equipment hadn’tdone anything new at all.

But, ADC owned 8 percent ofSiara Systems Inc., a MountainView, Calif., telecommunicationsstart-up. And, that morning, pub-licly traded Redback NetworksInc. had agreed to acquire Siarafor $4.3 billion.

Suddenly, ADC’s $3 millioncorporate venturing investmentin Siara was worth over $400million. And that, realized Mr.Shah, an analyst at MorganStanley Dean Witter & Co.,boosted ADC’s book value by$1.80 a share.

It isn’t yet common for stockanalysts to price the venture capi-tal holdings of corporations into

Corporate InvestorsFlock to FinancingFor Internet ExchangesWhen it comes to attracting corporateinvestors, Equinix Inc. appears to havethe Midas touch.

In a second round equity financing, theRedwood City, Calif., company landed$80 million from a syndicate featuring adozen corporations, including AmericaOnline Inc., Dulles, Va.; Cisco SystemsInc., San Jose; Dell Computer Corp.,Round Rock, Texas; and Microsoft Corp.,Redmond, Wash.

Equinix, which also raised $200 mil-lion in debt, is aiming to make electroniccommerce more efficient by developingso-called Internet Business Exchanges

around the globe.These “exchanges” essentially are stra-

tegically placed buildings in which tele-communication carriers, Internet serviceproviders, content companies and Webservers can securely connect with one an-other.

“It’s really a real estate play in theInternet space,” says James P. Labe, aMenlo Park-based managing director ofComdisco Ventures, which invested inEquinix on behalf of its parent, ComdiscoInc., Rosemont, Ill.

All of Equinix’s corporate backers arewell aware that the Internet’s infrastruc-ture has not kept pace with the medium’sgrowth.

“The structure of the Internet needs toevolve if subscribers are to truly partici-pate in the benefits of broadband,” says

Corporate Venture Capital Soars,As Funding Hits Record $6.3 BillionCorporate venturing exploded in 1999. Driven by the need to ensure long-term competitiveness, corporations last year announced the formation ofventure capital programs totaling $6.3 billion. That was up from $1.7 billionin 1998, and $1.3 billion in 1997.

But the rise in corporate venturing is even more significant than thosenumbers show. The $6.3 billion represents the combined capital only of the 28corporations that announced the sizes of their corporations.

Another 42 corporations began venturing programs last year, but did notdisclose the sizes of their programs. In the latter category, for example, areChevron Corp., San Francisco; Dell Computer Corp., Red Rock, Texas;

www.corporateventuring.com

The Corporate Venturing Report � PREMIERE ISSUE 3

NEWSBRIEFS

AOL Time Warner PositionedTo Become Major Venture InvestorIn addition to forming a mediabehemoth, the proposed $350 bil-lion merger of America OnlineInc. and Time Warner Inc. islikely to lead to the creation of amajor corporate venturing opera-tion.

AOL, the Dulles, Va., Inter-net service provider, already in-vests heavily in Internet-relatedcompanies, while Time Warner,the New York publishing andentertainment company, in De-cember announced the formationof a $500 million venture fund.

However, The Corporate Ven-turing Report has learned that theventure capital activities of thecombined company—to be calledAOL Time Warner Inc.—areamong the items that a specialfour-person committee will con-sider in the coming months.

The committee consists ofAOL President Robert W.Pittman, AOL Vice ChairmanKenneth J. Novak, Time WarnerPresident Richard D. Parsons, andRichard J. Bressler, chairman andCEO of Time Warner DigitalMedia.

They, in turn, will make rec-ommendations to Stephen M.Case and Gerald M. Levin, therespective chairmen and CEOs ofAOL and Time Warner.

The president of AOL’s ven-ture arm, AOL Investments, isLennert J. Leader, who previouslywas AOL’s chief financial of-ficer.

Robert Marcus, executive vicepresident, business developmentat Time Warner Digital Media,was picked in December to over-see Time Warner’s venture capi-tal fund.

Oddly enough, since October,AOL and Time Warner have co-invested in at least two start-upcompanies: Bolt Inc., New York,

which operates a Web site forteens; and OpenTV Inc., Moun-tain View, Calif., which developssoftware for digital interactivetelevision.

OpenTV went public in No-vember, and has a market capi-talization of about $3.6 billion.Bolt has filed to go public.

Assuming the merger is com-pleted, AOL Time Warner wouldbe extremely well-positioned tobecome a major corporate ven-ture capital investor.

Formed in 1998, AOL Invest-ments invested in at least 15 In-ternet-related companies in 1999,according to The Corporate Ven-turing Directory & Yearbook. Inaddition to OpenTV, two of thosecompanies have gone public:China.com Inc., a provider of In-ternet content to Asia, and TivoInc., a developer of a personal-ized television service.

Another company backed in1999, Sandpiper Networks Inc., aprovider of content delivery ser-vices, was acquired by publiclytraded Digital Island Inc.

Other companies backed re-cently by AOL include e-SIM,Jerusalem, Israel, which devel-ops simulation technology forconsumer electronics; LoudeyeTechnologies Inc., Seattle, a cre-ator of digital media solutions;Respond.com Inc., RedwoodCity, Calif., a shopping service,and Riffage.com Inc., Los Ange-les, a Web site showcasing un-signed pop music bands.

Until the merger announce-ment, Time Warner was intend-ing to increase its ventureinvesting through the formationof the Time Warner DigitalMedia Investment Fund, whichthe company said would have“$500 million in assets.”

According to published re-

ports, those investment assetswere to consist of $250 million incash and an equal amount in pro-motional time on Time Warner’smedia outlets.

The fund was to make invest-ments of $5 million to $20 mil-lion to acquire non-controllingstakes in companies engaged inelectronic commerce, vertical andinteractive content, technology,infrastructure and other digitalmedia-related activities.

The fund was intended to giveTime Warner’s venturing invest-ing “a new degree of efficiencyand strategic direction by taking acoordinated, portfolio approachto our digital media investments,”according to a company state-ment in December.

In recent months, Time Warneralso has made venture investmentsthrough its CNN News Groupsubsidiary in Atlanta.

A Newsletter for the TimesWelcome to the premier issue of The Corpo-rate Venturing Report—the latest newsletterfrom Asset Alternatives Inc., Wellesley, Mass.

The Corporate Venturing Report each monthwill tell you which corporations are starting orexpanding venturing programs, where they areinvesting, and how they are partnering withindependent venture capital firms and otherorganizations.

You also will get useful insights, such ashow corporations recruit and compensate theircorporate venturing teams. And you will getunique analysis of how venturing programs arecontributing to the corporate bottom line—bothfinancially and strategically.

Whether you’re the CEO or CFO of a For-tune 1000 company, an EVP of a newly publiccompany, the head of a corporate venture group,an investment banker, analyst, or independentventure capitalist, The Corporate VenturingReport will bring you timely, useful and conciseinformation that you can use.

The Corporate Venturing Report is a com-panion to The Corporate Venturing Directory& Yearbook, also published by Asset Alterna-tives. (Get details on the directory atwww.corporateventuring.com.)

4 The Corporate Venturing Report � PREMIERE ISSUE

NEWSBRIEFSContinued

EDS Plans FundOf $1.5 BillionTo Finance Clients

Electronic Data Systems Corp.,the Plano, Texas, computer ser-vice company, plans to contrib-ute as much as $750 million overthe next five years to an Internet-oriented venture fund that couldbe as large as $1.5 billion.

Called EDS-A.T. KearneyVentures, the fund will seek totake equity positions in EDS’sInternet-related clients. A.T.Kearney is EDS’s managementconsulting arm.

The remaining capital willcome from EDS consultants andselect private equity funds.

Co-heading the fund are RickdeNey, an EDS senior vice presi-dent of corporate strategy anddevelopment, and David Asper,an A.T. Kearney vice president.

So far, the fund has made twoinvestments: CoNext and TradexTechnologies Inc., both of whichmake software that allow busi-nesses to buy supplies online.

Atlanta-based Tradex hasagreed to be acquired by AribaInc., a publicly traded provider ofbusiness-to-business electroniccommerce services.

In conjunction with the acqui-sition, EDS agreed to take part ina $60 million financing of Tradex.

Others participating in the fi-nancing include American Ex-press Co., New York; ChemdexCorp., Mountain View, Calif.;and J.D. Edwards & Co., Den-ver.

If the $1.5 billion figure isreached, the fund would becomeone of the largest investment ve-hicles established by a corpora-tion. To invest the capital,EDS-A.T. Kearney will have of-fices in New York, London,Menlo Park and Plano.

Mr. Asper said the size of thefund “reflects the scale of theopportunities and the scale ofEDS.”

EDS is no stranger to the pri-vate equity industry. It made com-mitments between 1992 and 1997to diversified buyout funds as partof its strategy to win information-systems consulting contracts fromthe firms’ portfolio companies.

Early last year, EDS agreed tosell the 16 partnerships to Cross-roads Group, a Dallas invest-ment management company, for$525 million.

Reach Mr. DeNey at (972)605-9753 in Dallas, and Mr. Asperat (312) 223-6100 in Chicago.

Consulting FirmEyes Venture ProfitsTo Keep Employees

Cambridge Technology Part-ners Inc. has come up with a newreason to back young companies:employee retention.

In an initiative worth watch-ing, the Cambridge, Mass., man-agement consulting firm isvowing to share up to 20 percentof the value created by a newincubator unit with its 4,400 em-ployees worldwide.

Cambridge Technology cur-rently has about $100 million incash and investments, which itcan use to fund the incubator’sactivities, said company spokes-woman Fran Kelly.

Overseeing the fund will beRalph Linsalata, formerly a se-nior vice president with Hill Holi-day, a Boston advertising firm.Earlier, Mr. Linsalata was a part-ner of Weiss, Peck & Greer Ven-ture Partners, San Francisco.

Cambridge Technology willtarget application service provid-ers and electronic service compa-nies, among other segments.

Cambridge Technology willconsider backing startups createdby its own employees, or by man-agement teams from outside thecompany.

Employee retention is a bigissue for Cambridge Technology,which suffered 20 percent turn-over last year.

The company’s profits havebeen dropping, and its share priceis down approximately 50 per-cent in the past year.

Cambridge Technology isn’talone in trying to use its ventureprogram to keep employees.

Two other companies that re-cently established venture pro-grams, Infospace.com Inc.,Seattle, and Breakaway Solu-tions Inc., Boston, also are evalu-ating how to use venture profitsto reward employees.

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THE CORPORATE VENTURING REPORT ispublished 12 times a year by Asset Al-ternatives Inc. The Corporate VenturingReport is a trademark of Asset Alterna-tives Inc., 170 Linden Street, SecondFloor, Wellesley, MA 02482-7919. Tel:(781) 304-1400. Fax: (781) 304-1440.Subscriptions $795 a year in the U.S.and Canada. Overseas subscribers add$60. Single issue price $75. Entire con-tents copyright ©2000 by Asset Alterna-tives Inc. Photocopying of The Corpo-rate Venturing Report, in whole or inpart, without permission of the publisheris a violation of federal and internationalcopyright law.

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Though it is forming a newincubator, Cambridge Technol-ogy Partners will continue to workwith its associated venture arm,Cambridge Technology Capi-tal Fund, San Diego, said Ms.Kelly, the spokeswoman.

Cambridge Technology Capi-tal, which invests in companiesthat can benefit from a partner-ship with Cambridge Technol-ogy Partners, is raising a fundwith a target of $75 million.

The venture affiliate raised a$25 million fund in 1997, with $6million coming from CambridgeTechnology Partners.

Cambridge Technology Capi-tal has funded 18 companies sofar, of which eight have gone pub-lic; a ninth is in registration.

Cambridge Technology Part-ners reported $44 million capitalgain from its venture investmentsin the third quarter.

Reach Mr. Linsalata at (617)914-9800.

Andersen CreatesVenture DivisionWith Internet Focus

Andersen Consulting, the $8.3billion technology consultingcompany, has formed a venturecapital division, which is aimingto invest up to $1 billion over thenext five years to create new elec-tronic businesses.

Called Andersen ConsultingVentures, the Palo Alto, Calif.,division is receiving more than$500 million from Andersen, plusaccess to intellectual property.

Heading the division will beJackson L. Wilson, previouslyAndersen Consulting’s managingpartner, global markets. In thatrole, Mr. Wilson oversawAndersen’s strategic alliances,equity investments and e-com-merce initiatives.

Andersen has made more than

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Recent Andersen ConsultingInvestments

�� Blue Martini Software San Mateo, Calif.Provides e-commerce softwareSize of round: $12.5 million (September 1999)Co-investors: U.S. Venture Partners; MatrixPartners

�� Calico Commerce Inc. San JoseDevelops e-commerce softwareSize of investment: Undisclosed (Sept. 1999)

�� ChemConnect Inc. San FranciscoOnline chemical exchangeSize of investment: Undisclosed (Sept. 1999)

�� Covation Inc. Brentwood, Tenn.Producing electronic payment and informationpayment system for the health care industry.Size of round: Undisclosed (1999)Co-investors: Bank of America Corp.

�� Qpass Inc. SeattleOnline transaction and customer networkSize of round: $15 million (March 1999)Co-investors: RRE Investors; Integral CapitalPartners; HNC Software; Venrock Associates;Oak Investment Partners; TTC Ventures

Copyright ©2000 Asset Alternatives Inc.


NEWSBRIEFSContinued

140 investments and alliances withInternet companies. (See table onprevious page for examples.)

Mr. Wilson will seek to estab-lish relationships with venturecapital firms, investment banksand e-commerce providers. Theventure unit will invest in the U.S.,Europe and Asia.

Reach Mr. Wilson at (650)213.2000

Intel Put FocusOn InvestmentsOutside U.S. in ’99

Intel Capital, the venture capitalarm of Intel Corp., Santa Clara,Calif., put a strong emphasis oninvesting outside the United Statesin 1999.

The semiconductor maker in-vested about $1 billion in ventureinvestments last year, and about a

third of it went overseas, saidspokesman Robert Manetta.

That’s up from as little as 5percent just a few years ago, Mr.Manetta said.

Asia figured heavily in Intel’sinternational strategy, particularlyIndia and China. The companyalso invested in Europe and Aus-tralia.

A key goal of Intel’s interna-tional investors is “to grow theInternet economy worldwide, andhelp speed the Internet’s adapta-tion overseas,” Mr. Manetta said.

In its first investment in Po-land, for example, Intel backedWirtualna Polska, which oper-ates a Polish Internet portal.

Intel puts an investment teamin each overseas market it wantsto enter. Those dealmakers reportto Stephen Nachtscheim andLeslie Vadasz, who overseeIntel’s business development ac-tivities.

At year’s end, Intel Capitalvalued its portfolio at $8 billion,including $7.1 billion in market-able securities.

Mr. Natchtscheim and Mr.Valdasz are at (408) 765-8080.

Pillar Joins CBSTo Be Point ManOn Internet Deals

Keep an eye on CBS Corp.With the hiring of Russ Pillar

as president and CEO of CBSInternet Group, the New Yorkbroadcasting company for the firsttime has someone dedicated toInternet investing.

Until now, President and CEOMel Karmazin and Chief Finan-cial Officer Fredric Reynoldsshared responsibility for thecompany’s Internet investments.

Mr. Pillar, formerly presidentand CEO of Virgin EntertainmentGroup, will report to Mr.Reynolds.

Since 1997, CBS has gainedstakes in 16 Internet-related com-

panies by trading nearly $1 bil-lion in advertising and promo-tional spots.

Last year alone, CBS struckdeals with 14 companies, includ-ing three that have gone public.

Industry observers havespeculated that CBS will followthe lead of NBC and create aseparate, publicly traded Internetunit that would likely include theinvestments CBS has made.

A CBS spokesman would onlysay that the formation of such aunit is “a strong possibility.”

Among the companies inwhich CBS recently has takenstakes are MVP.com Inc., Chi-cago, an online seller of sportinggoods, and Loudeye Technolo-gies Inc., Seattle., which is devel-oping digital media applications.

Reach Mr. Pillar through CBSat (212) 975-4321.

E*Trade PreparesTo Raise New FundWith Higher Target

E*Trade Group Inc., which qui-etly closed a $100 million ven-ture fund in October, will be backin the coming months to raise anew fund from outside investors.

Thomas A. Bevilacqua, chiefcorporate development and stra-tegic investment officer of theonline brokerage firm, said thesize of the new partnership hasnot been determined, but that it isexpected to be “substantially”larger than the first fund.

Menlo Park-based E*Tradeprovided a quarter of the capitalin the first investment pool,E*Trade E-Commerce Fund.

The remainder came from in-stitutional investors, including a“large media company and a largeinsurance company,” Mr.Bevilacqua said.

E*Trade assembled the fundto invest in e-commerce compa-nies beyond the financial servicesarea, Mr. Bevilacqua said.

• Heidrick & Struggles International Inc., Chi-cago, created a venture unit, H&S Capital, which itexpects to capitalize with $25 million in corporatefunds. H&S Capital will invest in early-stage technol-ogy companies for which its parent conducts execu-tive searches. Details from Charles Polachi, a Heidrick& Struggles managing partner in Lexington, Mass., at(781) 862-3370

• Central Newspapers Inc., publisher of the Ari-zona Republic, Indianapolis Star and other newspa-pers, created CNI Ventures. Heading the venture unitis Howard I. Finberg, director of technology & infor-mation strategy for the Phoenix publisher. CNI Ven-tures will invest in companies developing new methodsof delivering news and other information. Reach Mr.Finberg at (602) 444-1100.

• First Consulting Group Inc., Long Beach, Calif.,a publicly traded provider of health care consultingand management services, established a $15 millionventure subsidiary. It will make investments of $1million to $3 million in information technology com-panies serving health care service providers, drug andbiotech companies, and medical device makers. De-tails from Managing Director Thomas A. Olenzak at(610) 989-7080 in Wayne, Penn.

�� Corporate Venturing Briefs


Mr. Bevilacqua manages thefund, along with Christos M.Cotsakos, E*Trade’s chairmanand CEO.

Through early January, thefund had invested in seven com-panies, including three that havegone public: WebVan Group Inc.,an online grocery store;PlanetRx.com Inc., an onlinepharmacy; and Official PaymentsCorp., a provider of electronicpayment options to governmententities.

Two more investments are inthe pipeline, Mr. Bevilacqua said.The fund is averaging investmentsof about $6 million per company.

E*Trade recently participatedin a financing of Equinix Inc.,the Redwood City, operator ofInternet business exchange facili-ties (see story on page 1); as wellas of Financial Engines Inc., PaloAlto, Calif., and Loan City.comInc., San Jose. (See page 15 of theThe Corporate Venturing ReportDeals section).

Mr. Bevilacqua said E*Tradeis searching for additional invest-ment professionals to help man-age the new fund.

Reach him at (650) 331-6027.

InfoSpace SelectsPresident to RunNew Venture Fund

InfoSpace.com Inc., the high-flying provider of Internet infra-structure services, has formed aventure capital fund and chosenits former president, Bernee D.L.Strom, to run it.

InfoSpace, Redmond, Wash.,has contributed $30 million ini-tially to the investment vehicle,named InfoSpace.com VentureCapital Fund.

The fund will invest in Inter-net start-ups that complementInfoSpace’s business.

InfoSpace provides technolo-gies and Internet services to con-sumers and merchants. Its affiliate

network consists of more than1,800 Web sites, including thoseof America Online Inc., MicrosoftCorp., Lycos Inc. and Dow Jones& Co.

Ms. Strom said InfoSpace es-tablished the fund to formalize itsinvesting activities.

Last month, for instance, thecompany invested $9 million inpublicly traded e-Sim, Jerusalem,Israel, along with InfoSpace CEONaveen Jain and America OnlineInc., Dulles, Va.

The new fund will allowInfoSpace to boost its averageinvestment to about $5 millionfrom the current maximum of $1.5million, Ms. Strom said.

Though Ms. Strom has relin-quished her titles as president andchief operating officer, she willstay on InfoSpace’s board.

Reach Ms. Strom at (425) 882-1602.

Corporate FundsQueue Up to FinanceLinux Companies

Like magnets to metal, corporateinvestors continue to be drawn tocompanies utilizing Linux.

An open-source computeroperating system, Linux is seenas competition for Microsoft Win-dows and various versions ofUnix.

Within the past month alone,corporations have invested in atleast four Linux-related compa-nies.

Linxucare Inc., a San Fran-cisco provider of Linux services,attracted investments from DellComputer Corp., Red Rock,Texas; Oracle Corp., RedwoodShores, Calif.; Motorola Inc.,Schaumburg, Ill.; and SunMicrosystems Inc., MountainView.

Linuxcare raised $32 millionin a round led by Patricof & Co.Ventures Inc., New York.Kleiner, Perkins, Caufield &

Byers, Menlo Park, also partici-pated.

Caldera Systems Inc., anOrem, Utah, provider of Linuxbusiness solutions, received $30million from a group that includedSun Microsystems; Novell Inc.,Orem; Citrix Systems Inc., FortLauderdale, Fla., a developer ofapplication-server software; andSanta Cruz Operation Inc., aUnix-based developer of open-system software.

In addition, Corel Corp., theOttawa, Ontario, business soft-ware developer, took one-thirdinterests in both LinuxForce, aPhiladelphia-based provider ofLinux services, and NewlixCorp., an Ontario-based Linuxdeveloper.

Thomson Team Spins OutWith Publisher’s BlessingThomson Corp., the Toronto publishing gi-ant, has ceased making direct investments inyoung technology companies, and instead hasbecome a limited partner of newly created ven-ture firm NeoCarta Ventures.

Thomson made the change after D. JarrettCollins and Karin Kissane, who ran TTC Ven-tures, Thomson’s venture arm, left to formNeoCarta.

The venture firm, which has offices in Cam-bridge, Mass., and San Francisco, has raised a$300 million fund, NeoCarta Ventures, L.P.

Mr. Collins, who started TTC Ventures in1995, described the transition as amicable. Hesaid he and Ms. Kissane wanted to be part of aprogram with “long-term stability.” Corporateventure programs, he said, historically have had“short half-lives” for a variety of reasons, in-cluding corporate politics.

Also on NeoCarta’s team are ThomasNaughton and Tony Pantuso, both formerlyvice presidents of GE Equity, the investmentarm of General Electric Corp., Stamford, Conn.

NeoCarta intends to make investments of $1million to $10 million in Internet commercecompanies exclusively.

Mr. Collins and Mr. Naughton are in Cam-bridge at (617) 528-3820; Mr. Pantuso and Ms.Kissane are in San Francisco at (415) 217-8617.


When Battery Ventures courts technology entre-preneurs, the firm’s partners cites their strong trackrecords, technology prowess and abundant invest-ment capital—but so do many other successful ven-ture capitalists.

Now, partners of the Wellesley, Mass., firm canadvertise a stronger distinction: their ability to linkyoung companies with potent corporate partners, likeBell Atlantic Corp., New York; Nortel NetworksCorp., Brampton, Ontario, and Novell Inc., Orem,Utah.

Recognizing that corporate partners can acceler-ate the growth of telecommunications and Internetstartups, Battery last year raised a $40 million venturefund exclusively from strategic limited partners.

Convergence Fund, L.P., invests alongside the$400 million institutional fund, Battery Ventures V,L.P., that Battery formed last year.

Corporate InvestorsBesides Bell Atlantic, Nortel and Novell, the

corporate limited partners in the Convergence Fundinclude Corning Inc., Corning, N.Y., which makesoptical communications products; Williams Com-munications Group, Tulsa, Okla., which developscommunication networks; Ameritech Corp., theChicago telecom company acquired last fall by SBCCommunications Corp.; and Pilot House Associates,Boston, the investment firm of Amos B. Hostetter Jr.,founder of Continental Cablevision.

The Convergence Fund was designed to investexclusively in companies that are finding new ways toexploit telecom, data communications, media andInternet opportunities.

Battery expected such companies would consti-tute about 70 percent of its new portfolio holdings,says General Partner Todd A. Dagres. Battery hasbecome so focused on communications, however,that the Convergence Fund has invested in all 30companies Battery has financed with Battery Ven-tures V, Mr. Dagres says.

More Than MoneyAs a result, the Convergence Fund has contributed

about 9 percent of the capital that Battery has investedin new companies in the past year.

More than capital, though, the Convergence Fundgives Battery a structured way of helping portfoliocompanies gain product distribution.

Recently, for instance, in an event billed as “Bat-tery Day at Bell Atlantic,” seven portfolio companiespresented to Bell Atlantic’s technical and operationsstaff. After the meeting, Bell Atlantic decided to talkfurther with six of those companies, Mr. Dagres says.(The telecom company already had a relationshipwith the seventh company.)

Help With Due DiligenceBattery also occasionally calls on its corporate

partners for help when doing due diligence on poten-tial investments.

Battery’s cooperation with corporations, how-ever, extends beyond the investors in the Conver-gence Fund.

For example, as a backer of Akamai Technolo-gies Inc., Cambridge, Mass., Battery co-investedwith Apple Computer Corp., Cupertino, Calif.; CiscoSystems Inc., San Jose; and Microsoft Corp.,Redmond, Wash.—none of which is in the Conver-gence Fund.

To be sure, Battery must be careful about manag-ing relationships with its corporate partners to avoidconflicts.

For example, the corporate LPs in the Conver-gence Fund cannot invest individually in an initialfinancing round, though they can come in directly insubsequent rounds.

For the same reason, corporate investors in thefund cannot veto participation in a deal by any othercorporation—even a competitor—that isn’t a fundinvestor.

“Our first and last rule is that we have to do what’sbest for the portfolio company,” Mr. Dagres says.“That is the fiduciary responsibility we have to our(institutional) investors.”

Stategic Partners Add to Battery’s CloutCorporate Ties Help Firm Land Deals, Assist Portfolio Companies

PARTNERINSIGHTS

Key PersonnelTodd A. Dagres, General PartnerOliver D. Curme, General Partner

Capital$800 million

Industry PreferencesCommunications,Telecommunication, Internet

Source: Galante’s Venture Capital & Private Equity Directory

AT A GLANCE

Battery VenturesMain Office20 William StreetSuite 200Wellesley, MA 02481Phone: (781) 577-1000Fax: (781) 577-1001Web site: www.battery.com


Accel Taps Six CorporationsFor Fund Focused on Internet

Six technology and media corporations contributed atotal of $30 million to a $120 million Internet fundformed by Accel Partners, Palo Alto.

The six are Dell Computer Corp., MicrosoftCorp., Nortel Networks Inc., Novell Inc., SunMicrosystems Inc. and Walt Disney Co.

The remaining $90 million of the fund came fromexecutives and entrepreneurs.

Accel will invest the Internet fund alongside itslatest institutional partnership, the $480 million AccelVII, L.P.

Two years ago, Accel organized a $35 millionfund with capital from Microsoft, Nortel, CompaqComputer Corp., CSK Corp. and Lucent Tech-nologies Inc.

Last year, 11 of Accel’s portfolio companies wentpublic, creating $40 billion of market value.

Reach Accel Managing General Partner James W.Breyer at (650) 614-4800.

Excite@Home Takes StakeIn Internet Incubator Firm

Excite@Home Corp., boosting its corporate ventur-ing activities, took a step toward getting an earlierlook at promising young companies.

The Redwood City, Calif., Internet company tooka minority stake in iBelay.com, a newly formed Inter-net accelerator firm.

Based in Boulder, Colo., iBelay was founded byPeter Estler, the founder and former CEO ofMatchLogic Inc. Excite@Home acquired MatchLogicin 1998 for $90 million.

iBelay has 32 technology, engineering and busi-ness specialists to assist Internet start-ups. The firmaims to help venture capital firms maximize theirreturns by reducing the time that it takes portfoliocompanies to bring products to market.

iBelay’s own portfolio already includesnetLibrary Inc., also of Boulder, and EpidemicMarketing Inc., Denver.

To nurture its Internet creations, iBelay is raisinga $100 million venture fund. It has closed on $50million so far, Mr. Estler said.

The size of Excite@Home’s commitment was notdisclosed. However, George Bell, the president andCEO of Excite@Home, will serve on iBelay’s advi-sory board.

In a prepared statement, Mr. Bell said, “We antici-pate iBelay.com to be a window for us into the world

of emerging companies, and a pulse for the industryon the future of Web-based direct marketing and e-commerce.”

Excite@Home has made at least eight direct in-vestments since May 1999. Two of those companies,E-Stamp Corp. and Quokka Sports Inc., have gonepublic, and a third, WebMD Inc., merged last yearwith publicly traded Healtheon Corp.

Excite@Home most recently participated in a$100 million financing for Vstream Corp., a Boul-der, Colo., communications service provider. Otherinvestors in the round included Highland CapitalPartners, Boston, Softbank Technology Venture,San Jose; and GE Equity, Stamford, Conn.

Excite@Home was formed last year through themerger of Excite Corp. and @Home Corp.

Mark Stevens, Excite@Home’s executive vicepresident of business development, oversees Excite’sdirect investing program. He is at (650) 569-5000.

Media Technology ExpandsList of Corporate Investors

Media Technology Ventures, San Francisco, whichraises capital solely from corporations, closed its thirdfund at $165 million.

Corporations investing with MTV for the firsttime are Best Buy Co., Inc., Eden Prairie, Minn.;Rogers Communications Inc., Toronto; Marks &Spencer plc and Diageo plc, both of London; and J.P.Morgan & Co., Dow Jones & Co. and A&E Televi-sion Networks, all of New York.

Returning investors are Comcast Corp., Phila-delphia; Freedom Communications Inc., Irvine,Calif.; Fujitsu Ltd., Tokyo; GIMV, the Netherlands;Hallmark Cards Inc., Kansas City, Mo.; MotorolaInc., Schaumburg, Ill.; Sun Microsystems Inc., PaloAlto, Calif.; WPP Group plc, London; Hearst NewMedia and NBC Corp., both of New York; and GEEquity and GE Financial Assurance, both units ofGeneral Electric Co., Stamford, Conn.

MTV will use the fund to make seed and early-stage investments, ranging from $500,000 to $4 mil-lion. The new fund has the same focus as MTV’s $71million first limited partnership, formed in 1997.

The firm also manages a $150 million fund forearly- and mid-stage investments, which it raised lastyear and is still investing.

MTV’s investments include Medscape Inc.,Quokka Sports Inc. and Talk City Inc., all of whichwent public in 1999. The firm also was an investor inSandpiper Networks Inc., which merged with pub-licly traded Digital Island Inc. last year.

Reach MTV General Partner Robert R. AckermanJr. at (415) 977-0500.

PARTNERINSIGHTS


The directors of Novell Inc. recently gave the soft-ware company’s venture capital activities a big voteof confidence.

The board voted to nearly double Novell’s alloca-tion for direct and partnership venture investments to$170 million from $95 million.

The new allocation earmarks $80 million for di-rect investments, which the Orem, Utah, companymakes through its in-house venture arm, Novell Ven-tures, and $90 million for investments in venturecapital limited partnerships.

Novell Ventures was formed in 1997 with a $50million allocation. The firm invests primarily in com-panies that can strengthen demand for Novell’s direc-tory-based networking technology.

Novell, which currently has more than $1 billionin cash on its books, has a market capitalization ofapproximately $11.5 billion.

Through December, Novell Ventures had madedirect investments in 15 companies. Among them isRed Hat Inc., the high-flying Linux company whoseshares ended the year at around $225 a share aftergoing public last August at $14.

On the partnership side, Novell is an investor inthe funds of, among others, Kleiner, Perkins, Caufield& Byers, Menlo Park; Oak Investment Partners,Westport, Conn.; Advent International Corp., Bos-ton; Hummer Winblad Venture Partners, San Fran-cisco; Broadview, Fort Lee, N.J.; and TechnologyCrossover Ventures and Accel Partners, both ofPalo Alto, Calif.

Last December, Novell put $20 million intoRedleaf Group LLC, Saratoga, Calif., making Novellthe second-largest shareholder of the newly formedInternet operating company.

Initially capitalized at $150 million, Redleaf in-tends to develop business-to-business e-commercecompanies, starting at the seed stage and nurturing

them until they become category leaders.Novell uses its relationships with venture firms

to identify direct investment opportunities, says BlakeModersitzki, the managing director of Novell Ven-tures. For instance, Novell Ventures invested along-side Kleiner, Perkins, Caufield & Byers in OblixInc., a Mountain View, Calif., automation softwarecompany.

“In our mind, coupling a venture capital firm witha corporation is the right model,” Mr. Modersitzkisays.

Novell Ventures generally invests $1 million to $5million per round, and prefers to keep its ownershipstake below 20 percent, he says.

The venture unit, he says, prefers that financialinvestors—i.e., venture capitalists—determine thevaluations of portfolio companies, rather than corpo-rations, which tend to base their judgements on stra-tegic value.

“I want to keep the product guys out of the discus-sion in determining the value of the company,” Mr.Modersitzki says. “Like any other venture capitalist,I want the best price I can get.”

Novell Directors Boost Venture ProgramNetwork Software Maker Uses Direct, Fund Investments to Further Strategic Goals

CORPORATEPROFILE

Source: The Corporate Venturing Directory & Yearbook

AT A GLANCE

Novell VenturesMain Office1555 N. Technology WayOrem, UT 84097Phone: 801 861-7000Fax: 801 222-4474

Key PersonnelMr. Blake Modersitzki, ManagingDirector ([email protected])Ms. Stacy Kresge, InvestmentCoordinator ([email protected])

Recent Novell Investments

�� Caldera Systems Inc. Orem, UtahDevelops Linux-based business solutionsSize of round: $30 million (January)Co-investors: Chicago Venture Partners; CitrixSystems Inc.; Egan-Managed Capital; SantaCruz Operation Inc.; Sun Microsystems Inc.

� � � � � Edgix Corp. New YorkInternet content deliverySize of round: Undisclosed (June 1999)

�� Indus River Networks Inc. Acton, Mass.Provides Internet access for employees to theiroffice networksSize of round: $14 million (July 1999)Co-investors: Ascent Venture Partners;Comdisco Ventures; MCI WorldCom Fund; NewEnterprise Associates; OneLiberty Ventures

�� Oblix Inc. Mountain View, Calif.Develops automation softwareSize of round: $24 million (October 1999)Co-investors: CSK Venture Capital; CiscoSystems Inc.; Intel 64 Fund; Kleiner, Perkins,Caufield & Byers; Lehman Brothers; Patricof &Co. Ventures Inc.; Presidio Venture Partners;Robertson Stephens Bayview 99; SiemensMustang Ventures; Sumitomo Corp.



Trans Cosmos USA Inc., a Bellevue, Wash., sub-sidiary of Trans Cosmo Inc. of Tokyo, has stepped upits investment pace—welcome news for U.S. Internetcompanies seeking to do business in Japan.

After investing just $15 million in 17 transactionsin 1997 and 1998, Trans Cosmos USA put about $45million into 35 companies in 1999. This year, the firmexpects to invest between $100 million and $300million in perhaps as many as 60 companies, saysSteve Clemons, a Trans Cosmos USA managingdirector.

Trans Cosmos USA recently received $150 mil-lion in fresh investment capital from its Japaneseparent, which specializes in information systems con-sulting. That is half of the $300 million that the parentraised in a secondary stock offering in October.

(The Tokyo parent is using another $50 millionfrom the offering to create an early-stage venturecapital fund in Japan, in partnership with NikkoSecurities Corp., Tokyo.)

Formed in 1966, Trans Cosmos is Japan’s oldestand largest provider of outsourced customer serviceand information technology support solutions. Thecompany set up shop in the U.S. in 1989, initially toidentify technology that it could apply in Japan.

As Internet technology advanced in the 1990s,

however, Trans Cosmos USA evolved into a strategicinvestment arm of the parent company. It has fundedits investments with periodic infusions of capital fromits parent, and by recycling gains from prior invest-ments.

The technology-transfer aspect of its original mis-sion is still evident in the way Trans Cosmos USAinvests, however. Its core strategy is to back Internetstartups in the U.S. that it can help obtain business inJapan by using the contacts of its Tokyo parent.

International Focus“We are very focused on international expan-

sion,” Mr. Clemons says. “You cannot be a dominantplayer without world leadership. And, with the Inter-net, that has become even more important.”

For example, after investing in Seattle softwaremaker Primus Knowledge Solutions Inc., Trans Cos-mos USA introduced Primus’ Internet-based cus-tomer support systems into Japan. Now, Japan accountsfor a quarter of Primus’ sales, a point that stock marketanalysts haven’t missed.

Trans Cosmos USA’s portfolio also includes suchhigh-flyers as DoubleClick Inc., New York, andRealNetworks Inc., Seattle.

RealNetworks, which develops products and ser-vices to enable the delivery of so-called “streamingmedia” over the Internet, boasts a market capitaliza-tion of approximately $9 billion.

Trans Cosmos USA invests primarily in youngcompanies involved in customer service, e-commerce,Internet marketing and new media––the same fourareas that its parent pursues in Japan.

Shifting to Late-Stage DealsWith its new capital, Trans Cosmos USA intends

to pursue more late-stage opportunities than it has inthe past.

The company is making the switch, Mr. Clemonssays, partly because it is easier to take late-stage suchcompanies to Japan.

Additionally, Mr. Clemons says, he and the firm’stwo other managing directors, James J. Geddes Jr. andMark Kalow, are reaching their practical limits fortaking board seats.

However, Trans Cosmos USA is recruiting moreinvestment professionals, Mr. Clemons says, so thecapacity constraint may be only temporary.

Reach Mr. Clemons at (425) 468-3930, Mr. Kalowat (650) 631-0051, or Mr. Geddes at (703) 698-0080.The web address is www.transcosmos.com.

Trans Cosmos Builds Bridges to JapanTokyo Parent Gives U.S. Unit $150 Million to Boost Internet Investing

CORPORATEPROFILE

Recent Trans Cosmos USA Investments

�� Acadio SeattleOnline site for professional educationSize of round: $3 million (November 1999)Co-investors: Founder Steven Sperry and individuals

�� AtomFilms SeattleFocused on creating mass market for short films, animationsand digtial mediaSize of round: $20 million (December 1999)Co-investors: Chase Capital Entertainment Partners, ChaseCapital Partners, Arts Alliance, Intel Corp.

�� Riffage.com Los AngelesWeb site showcasing unsigned bandsSize of round: $21 million (December 1999)Co-investors: America Online Inc.; BMG, BertelsmannVentures; Mayfield Fund

�� Total Sports Inc. Raleigh, N.C.Online provider of sports coverageSize of round: $35.5 million (November 1999)Co-investors: Technology Crossover Ventures; ZilkhaCapital Partners; EGL Holdings; Sycamore Venture;Access Technlogy;l WinStar New Media; InterBrew/Labatt;Asdale Ltd.


The Corporate Venturing Report � PREMIERE ISSUE 13The Corporate Venturing Report � PREMIERE ISSUE 13

�� ADC Telecommunications Inc.The Minnetonka, Minn., supplier of communicationsystems and supplies invests in Ensemble Commu-nications Inc., San Diego. (See item under DigitalMicrowave Corp. for details.)

�� Adobe Systems Inc.The San Jose software company, through its venturearm Adobe Ventures, makes new investments in:

�� Cascade Systems Inc., Acton, Mass., whichprovides electronic merchandising services enablingbusiness to create targeted advertising campaigns.Tudor Investment, San Francisco, leads the $12million round, with participation from H&Q Ven-ture Associates LLC, San Francisco.

�� Covalent Technologies Inc., Lincoln, Neb.,which provides Apache Web server e-commerce so-lutions. Other investors in the $5 million first-roundfinancing are H&Q Venture Associates LLC and TIVentures, both of San Francisco.

�� Virage Inc., San Mateo, Calif. (See item underReuters Group plc for details.)

�� America Online Inc.The Dulles, Va., Internet company adds three compa-nies to its corporate venture capital portfolio:

� Bolt Inc., New York, which operates an onlinesite for teens (www.bolt.com). Bolt raises more than$40 million in the round, and immediately files to gopublic. Other investors include Comcast InteractiveCapital Group, Philadelphia; Ford Motor Co.,Dearborn, Mich.; Entercom Communications Corp.,Bala Cynwyd, Penn.; Bechtel Enterprises, San Fran-cisco; Highland Capital Partners, Boston; OakInvestment Partners, Westport, Conn.; and MooreCapital, Sandler Capital Management and TimeWarner Inc., all of New York.

�� Loudeye Technologies Inc., Seattle, which isdeveloping digital media applications. The companyraises $48 million, and then files to go public. Alsoinvesting in the round are Barksdale Group, MenloPark; Creative Artist Associates, Los Angeles; IntelCorp., Santa Clara, Calif.; Encompass Group andOlympic Venture Partners, both of Kirkland, Wash.;entities affiliated with Hambrecht & Quist andRobertson Stephens, both of San Francisco; andRRE Venture Partners, CBS Corp., NBC Corp.,Wasserstein Adelson Ventures, Allen & Co. andWaterview Partners, all of New York.

�� Riffage.com Inc., Los Angeles, which oper-ates a Web site showcasing unsigned bands. Others

ADC Telecommunications Inc., 13Adobe Systems Inc., 13America Online Inc., 13American Express Co., 13American International Group Inc., 14BMG Entertainment, 14Bechtel Group, 14Bertelsmann AG, 14CBS Corp., 14CNET Inc., 14Chemdex Corp., 14Cisco Systems Inc., 14Columbia/HCA Healthcare Corp., 15Comcast Corp., 15Comdisco Inc., 15Digital Microwave Corp., 15E.I. Dupont De Nemours & Co., 15E*Trade Group Inc., 15Electronic Arts Inc., 15Excite@Home Corp., 15Ford Motor Co., 16General Instrument Corp., 16General Electric Co., 16Global Crossing Ltd., 16Hikari Tsushin Inc., 16Inktomi Corp., 16Itochu Corp., 16Intel Corp., 16International Data Group, 17ITurf Inc., 17J.D. Edwards & Co., 17Kingston Technology Corp., 17LVMH Moet Hennessy Louis Vuitton, 17MapInfo Corp., 17

In This IssueMarriott International Inc., 17Microsoft Corp., 17Mitsubishi Corp., 18Mitsui & Co., 18NBC Corp., 18Nissho Electronics Corp., 18Nokia Corp., 18NTT Communications Corp., 18Office Depot Inc., 18Pacific Century Cyberworks, 18PSINet Inc., 18Purchasepro.Com Inc., 18Qualcomm Inc., 18Reckson Service Industries, 18Reuters Group plc, 18SAP AG, 19Samsung Corp., 19Sara Lee Corp., 19Siemens AG, 19Singapore Technologies Group, 19Sony Corp. of America, 19St. Paul Companies Inc., 19Starbucks Coffee Co., 19Sun Microsystems Inc., 19Tenet Healthcare Corp., 20Texas Instruments Inc., 203Com Corp., 20Time Warner Inc., 20United Parcel Service of America Inc., 20U.S. Office Products Co., 20Valuevision International Inc., 20Williams Communications, 20Wi-LAN Inc., 20ZDNet, 20

investing in the $21 million round includeBertelsmann Ventures, Santa Barbara, Calif.;Mayfield Fund, Menlo Park; Trans Cosmos USA,Kirkland, Wash; and BMG Entertainment, NewYork.

�� American Express Co.The New York financial services company adds twocompanies to its portfolio:

�� Paytrust.com Inc., Princeton, N.J., which pro-vides an online service for receiving and paying bills.Joining Amex in the $30 million round are SoftbankVenture Capital, San Jose; GE Equity, Stamford,Conn.; Goldman Sachs Group Inc., New York; andThomas Weisel Partners, San Francisco.

�� Tradex Technologies Inc., Atlanta. (See itemunder Chemdex Corp. for details.)

Corporate Venturing Deals


Corporate Deals Continued


�� American International GroupThe New York insurance company invests in Finan-cial Engines Inc., Palo Alto, Calif. (See item underE*Trade Group Inc. for details.)

�� BMG EntertainmentThe New York record company, which is owned byBertelsmann AG, invests in Riffage.com Inc., LosAngeles. (See item under America Online for details.)

�� Bechtel GroupThrough its financing arm, Bechtel Enterprises Hold-ings Inc., the San Francisco engineering companyinvests in:

�� Bolt Inc., New York. (See item under AmericaOnline Inc. for details.)

�� iAsiaWorks, San Mateo, Calif., which is work-ing to provide Internet solutions in Asia. The $85 millionround also includes Enterprise Partners, San Diego;Institutional Venture Partners, Menlo Park; SamsungCorp., Seoul, Korea; BT/Alex Brown and New Enter-prise Associates, both of Baltimore; Newbridge Asia,Walden Group of Funds and Hambrecht & QuistLLC, all of San Francisco; and Sprout Group, SalomonBrothers and Morgan Stanley Dean Witter VenturePartners, all of New York.

�� Bertelsmann AGThrough Bertelsmann Ventures, its venture arm, theGerman publishing and music company providesfinancing for:

�� Expertcity.com Inc., Santa Barbara, Calif. (Seeitem under Sun Microsystems Inc. for details.)

�� Riffage.com Inc., Los Angeles. (See item un-der America Online Inc. for details.)

�� CBS Corp.The New York broadcasting company adds the fol-lowing companies to its portfolio:

�� Loudeye Technologies Inc., Seattle. (See itemunder America Online Inc. for details.)

�� MVP.com Inc., Chicago, which sells sportinggoods online. CBS receives a stake of undisclosedsize in exchange for providing $85 million in adver-tising time and other considerations over the next fouryears. (SportsLine.com Inc., Ft. Lauderdale, Fla.,also strikes an equity-for-marketing exchange.) Join-ing CBS are Benchmark Capital, Menlo Park, andFreeman Spogli & Co., Los Angeles, which invest$65 million in MVP.com.

�� CNET Inc.The San Francisco computer information companyadds three holdings to its portfolio:

�� FloNetwork Inc., Greenwich, Conn., whichraises $15 million from a group that includes Sy-camore Ventures, Lawrenceville, N.J.; OntarioTeachers Pension Fund, North York, Ontario; Bankof Montreal Capital Corp, Montreal; McLeanWatson Capital Inc., Toronto; and Ventures WestManagement Inc., Vancouver, British Columbia.FloNetwork, formerly known as Media Synergy, pro-vides e-mail marketing and delivery services.

�� Multitude Inc., South San Francisco, Calif.,which is developing products for delivering voicecommunication over the Internet. Investors in the $35million financing include VantagePoint VenturePartners, San Bruno, Calif.; Amerindo InvestmentAdvisors, San Francisco; Essex Investment Man-agement, Boston; and iTurf Inc. and J&W Seligman,New York.

�� Niku Corp., Redwood City, Calif., which pro-vides software and business portals that enable busi-nesses to manage and deliver professional servicesusing the Internet. CNET contributes $5 million to a$40 million round in a group that includes AmerindoInvestment Advisors Inc., San Francisco; CharterGrowth Capital, Palo Alto; Essex Investment Man-agement, Boston; TATA Consulting, India; J.H.Whitney & Co., Stamford, Conn.; and VenrockAssociates, New York.

�� Chemdex Corp.The Mountain View, Calif., company, which sellslaboratory supplies online, invests $10 million inTradex Technologies Inc., Atlanta. Tradex, set to beacquired by publicly traded Ariba Inc., provides aplatform for buyers and sellers to exchange goods,services and information in online trading communi-ties. Other investors in the $60 million financing areAmerican Express Co., New York; Electronic DataSystems Corp., Plano, Texas; and J.D. Edwards &Co., Denver.

�� Cisco Systems Inc.The San Jose networking company invests in thefollowing companies:

�� Asera Inc., Redwood City, Calif., which de-velops targeted internal corporate Web sites. Leadingthe $47.4 million financing is Bowman Capital Man-agement, San Mateo, Calif. Other investors includeIntel Corp., Santa Clara, Calif.; General ElectricCapital Services, Stamford, Conn.; Hambrecht &Quist LLC, San Francisco; Crescendo VentureManagement, Minneapolis; Itochu Corp., Tokyo;and Kleiner, Perkins, Caufield & Byers and Inte-gral Capital Partners, both of Menlo Park.


�� Belle Systems A/S, Holbaek, Denmark, whichproduces software for advanced information process-ing management systems. Cisco is a return investor inthe $36 million round, which is led by GeneralAtlantic Partners, Greenwich, Conn. Other inves-tors include Index Ventures, Geneva, Switzerland,and Vertex Management Inc., Redwood City, Calif.

�� Enterprise Networking Systems Inc., Red-wood City, Calif., which provides network consultingand professional services. Cisco leads the $90 millionround, which includes participation from returninginvestors Benchmark Capital and Trinity Ven-tures, both of Menlo Park.

�� Columbia/HCA Healthcare Corp.The Nashville, Tenn., owner and operator of hospitalscommits up to $40 million to empactHealth.com Inc.,also of Nashville. Using the Internet to link health careproviders and suppliers, empactHealth.com aims tolower purchasing costs for health care companies.

�� Comcast Corp.The Philadelphia operator of broadband cable net-works invests through its Comcast Interactive CapitalGroup in:

�� Bolt Inc., New York (See item under AmericaOnline Inc. for details.)

�� PlanSoft Corp., Cleveland, an Internet-basedbusiness-to-business solution provider for the meet-ing and convention industry. Comcast Interactive co-leads the $24 million round with CornerstoneEquity Investors, New York. Other investors arePatricof & Co. Ventures Inc. and WassersteinAdelson Ventures, both of New York; IDG Ven-tures, San Francisco; Key Mezzanine Capital, Cleve-land Pacific Equity Partners, M.H.M & Co. andPrimus Venture Partners, all of Cleveland.

�� Comdisco Inc.Through its venture arm, Comdisco Ventures, thisRosemont, Ill., provider of technology managementprovides equity financing for Telocity Inc., Cupertino,Calif. (See item under NBC Corp. for details.)

�� Digital Microwave Corp.The San Jose supplier of radio equipment leads a $25million round for Ensemble Communications Inc.,San Diego, which supplies next-generation broad-band wireless access equipment. Others investinginclude Intel Corp., Santa Clara, Calif.; KoreaTelecom Bank Venture Capital; Enterprise Part-ners, San Diego; ADC Telecommunications Inc.,Minnetonka, Minn.; Crescendo Ventures, Minne-apolis; and Trinity Ventures and Institutional Ven-ture Partners, both of Menlo Park.

�� E.I. Dupont De Nemours & Co.The Wilmington, Del., science company participatesin a $66 million financing of E-Steel Corp., whichoperates an online business-to-business exchange forthe metals industry. Goldman Sachs Group Inc.,New York, leads the financing. Other investors in-clude Bessemer Venture Partners, Wellesley Hills,Mass.; Kleiner, Perkins, Caufield & Byers, MenloPark; Greylock Management Corp., Boston; VulcanVentures, Bellevue, Wash.; GE Equity, Stamford,Conn.; Amerindo Investment Advisors, San Fran-cisco; Mitsubishi Corp., Tokyo; and MSD Capital,Mitsui & Co. USA and Generation Partners, all ofNew York.

�� E*Trade Group Inc.The Menlo Park, Calif., online personal finance com-pany invests in:

�� Financial Engines Inc., Palo Alto, Calif., whichprovides online investment advice for individual in-vestors and Fortune 500 companies. Oak Hill Part-ners, New York, leads the $85 million round. Otherinvestors are Intel Corp., Santa Clara, Calif.; StateStreet Global Advisors, Boston; New EnterpriseAssociates, Baltimore; Foundation Capital, MenloPark; Charter Venture Capital, Palo Alto; ThomasWeisel Partners and Hambrecht & Quist LLC,both of San Francisco; and American InternationalGroup Inc., Chase Manhattan Corp., GoldmanSachs Group Inc. and Merrill Lynch & Co., all ofNew York.

�� LoanCity.com Inc., San Jose, an online sourceof residential mortgage loans. Joining in the $38.4million round are Century Capital ManagementInc., Boston; InterWest Partners, Menlo Park; NewEnterprise Associates, Baltimore; RobertsonStephens, San Francisco; Marsh & McLennan Capi-tal Inc., Greenwich, Conn.; and Insight CapitalPartners and Morgan Stanley Dean Witter EquityFunding Inc., New York. Tom Bevilacqua, E*Trade’sexecutive vice president for corporate development,joins LoanCity’s board.

�� Electronic Arts Inc.The Redwood City, Calif., game developer makes aminority investment in Bottle Rocket Inc., NewYork, which develops and distributes online interac-tive entertainment.

�� Excite@Home Corp.The Redwood City, Calif., provider of Internet ser-vices invests in Vstream Inc., Boulder, Colo. (Seeitem under General Electric Co. for details.)




�� Ford Motor Co.The Dearborn, Mich. auto maker invests in Bolt Inc.,New York. (See item under America Online for de-tails.)

�� General Instrument Corp..The Horsham, Pa., provider of broadband accesssolutions invests $7 million in Diva Inc., Los Ange-les, which develops video-on-demand products forthe cable television industry.

�� General Electric Co.The Stamford, Conn., diversified service, technologyand manufacturing company invests through its ven-ture arm, GE Equity, in:

�� E-Steel Corp., New York. (See item under E.I.DuPont de Nemours & Co. for details.)

�� Evoke Software Corp., San Francisco, whichprovides data profiling and mapping services to re-duce the time required for information technologyprojects. Other investors include Axiom VenturePartners, Hartford, Conn., and Wheatley Partnersand RRE Investors, both of New York.

�� InfoLibria Inc., Waltham, Mass., which pro-vides Internet content delivery and managementsystems. Sandler Capital Management, NewYork, leads the $50 million equity financing. Oth-ers taking part in the financing include MadisonDearborn Partners, Chicago; Boston MillenniaPartners, Boston; Adams Capital ManagementInc., Sewickley, Pa.; TeleSoft Partners, San Fran-cisco; NTT Communications Corp., Tokyo;PSINet Inc., Herndon, Va.; and Patricof & Co.Ventures Inc. and CIBC Capital Partners, bothof New York.

�� Paytrust.com, Princeton, N.J. (See item underAmerican Express Co. for details.)

�� Pink Dot Inc., Camarillo, Calif. (See itemunder St. Paul Companies Inc. for details.)

�� Telocity Inc., Cupertino, Calif. (See item un-der NBC Corp. for details.)

�� Vstream, Boulder, Colo., which provides com-munication services. Other investors in the $100million round include Excite@Home Corp., Red-wood City, Calif.; Nexus Group LLC, San Fran-cisco; Softbank Venture Capital, San Jose, HighlandCapital Partners, Boston; Centennial Funds, Den-ver; Matsushita Electric Industrial Co. Ltd., Osaka,Japan; Viventures Capital, San Mateo, Calif.; andPequot Capital, Westport, Conn.

�� Global Crossing Ltd.Through its venture arm, Global Crossing Ventures,the Bermuda telecommunications company invests inSonus Networks Inc., Westford, Mass., which pro-vides carrier-class packet telephony equipment andservices. Other investors in the $23 million roundinclude Williams Communications, Tulsa, OK.; Bed-rock Ventures, San Francisco; Bessemer VenturePartners, Wellesley Hills, Mass.; Samsung Corp.,Seoul, South Korea; Mitsubishi Corp. and NisshoElectronics Corp., both of Tokyo; and Charles RiverVentures, Matrix Partners and North Bridge Ven-ture Partners, all of Waltham, Mass.

�� Hikari Tsushin Inc.The Tokyo information and telecommunication ser-vice distributor invests in:

�� Medsite.com Inc., New York. (See item underReuters Group plc for details.)

�� Global Sight Corp., San Jose, which providese-commerce services. Others participating in the $12.9million round include J.H. Whitney, Stamford, Conn.;Draper Fisher Jurvestson, Redwood City, Calif.;and 3i Group plc, London.

�� Inktomi Corp.The Foster City, Calif., developer of Internet softwareinvests $6 million in Digital Island Inc., San Fran-cisco. (See item under Sun Microsystems Inc. fordetails.)

�� Itochu Corp.The Tokyo manufacturer invests in Asera Inc., Red-wood City, Calif. (See item under Cisco Systems Inc.for details.)

�� Intel Corp.The Santa Clara, Calif., semiconductor company hasadded the following companies to its portfolio:

�� Asera Inc., Redwood City, Calif. (See itemunder Cisco Systems Inc. for details.)

�� Colorado MicroDisplay Inc., Boulder, Co.,which manufactures and supplies microdisplays. 3iTechnology Partners, Palo Alto, Calif., co-invests inthe $5 million financing.

�� Connected Corp., Framingham, Mass., whichuses the Internet to deliver automatic repairs andrecovery solutions to PCs. Investors in the $23.5million round are Fidelity Ventures, Boston;Hambrecht & Quist LLC, San Francisco; SoftbankTechnology Ventures, San Jose; Baker CapitalCorp., New York; and Applied Technology, Lex-ington, Mass.

�� CopperCom Inc. ., Santa Clara, Calif., which


is developing equipment to carry voice and high-speed data over DSL lines. CopperCom raises $30million from a group that includes Technology Cross-over Ventures, Palo Alto, Calif.; Crescendo Ven-tures, Minneapolis; Hambrecht & Quist LLC, SanFrancisco; Advent International Corp., Boston;Morgan Stanley Dean Witter Venture Partners,C.E. Unterberg Tobin and Patricof & Co. Ven-tures Inc., all of New York; and JK&B Capital andKettle Partners, both of Chicago.

�� Cronos Integrated Microsystems Inc., Re-search Triangle, N.C., which designs and fabricatesso-called MEMS components. MEMS, which standsfor micro-electro-mechanical systems, uses estab-lished semiconductor fabrication techniques to buildmechanical structures on the surface of a microchip.SpaceVest Management Group Inc., Reston, Va.,leads the $8 million round, which includesKnickerbocker LLC, Gladstone, N.J.

�� Cyber India Online Ltd., Bangalore, India,which operates a Web site providing news and infor-mation for information technology professionals. Theamount was not disclosed.

�� Ensemble Communications Inc., San Diego.(See item under Digital Microwave Corp. for details.)

�� Financial Engines Inc., Palo Alto, Calif. (Seeitem under E*Trade Group Inc. for details.)

�� Giganet Inc., Concord, Mass., which developsand markets switching equipment that links serversand allows the capacity of server farms to be increasedas needed. Investors in the $19 million round includeHambrecht & Quist Ventures, San Francisco,Merrill Lynch & Co., New York, and TelesystemSoftware Ventures, Montreal, Quebec.

�� iPass Inc., Mountain View, Calif., which pro-vides remote Internet access. iPass raised $21 millionfrom a group that includes Crosspoint Venture Part-ners, Woodside, Calif., and Accel Partners andMeritech, both of Palo Alto.

�� Loudeye Technologies Inc., Seattle, (See itemunder America Online Inc. for details.)

�� Microcosm Technologies Inc., Cary, N.C.,which provides MEMS development solutions forautomotive, telecommunication, biomedical and con-sumer electronic products. Financial terms were notdisclosed.

�� mySimon Inc., Santa Clara, Calif., which op-erates an e-commerce hub for comparison shopping.The e-Citi unit of Citigroup also invests in the round.The size of the financing was not disclosed.

�� Orchestream, London, which develops policy-based service management software.

�� PacketVideo Corp., San Diego. (See itemunder Reuters Group plc for details.)

�� STSN, Salt Lake City, which provides high-speed technology and services for vertical markets.The company raised $55 million in debt and equity

from a group that includes APV Technology Part-ners, Menlo Park; VantagePoint Venture Partners,Palo Alto; Marriott International Inc., Washing-ton, D.C.; and Third Coast Capital and BankOneCorp., Chicago.

�� International Data GroupThrough its venture arm, IDG Ventures, theFramingham, Mass., information company invests inPlanSoft Corp., Cleveland. (See item under ComcastCorp. for details.)

�� ITurf Inc.The New York provider of online sites for peopleaged 10 to 24 invests in Multitude Inc., South SanFrancisco, Calif. (See item under CNET for details.)

�� J.D. Edwards & Co.The Denver software company invests in TradexTechnologies Inc., Atlanta. (See item under ChemdexCorp. for details.)

�� Kingston Technology Corp.The Fountain Valley, Calif., manufacturer of memoryproducts invests in Amplify.net Inc., Fremont, Calif.(See item under 3Com Corp. for details.)

�� LVMH Moet Hennessy LouisVuitton

The Paris seller of luxury goods teams up withEurop@web, also of Paris, to put $122 million intoOxygen Media Inc., New York, which is developingbrand content for women on the Internet and cabletelevision. Europ@web was established by GroupArnault, the private holding company that controlsLVMH.

�� Mapinfo Corp.The Troy, N.Y., provider of business intelligencesolutions invests in NearMe, also of Troy, N.Y.,which uses MapInfo technology to help consumersfind goods, services and events near them.

�� Marriott International Inc.The Washington, D.C., hospitality company takespart in the funding of STSN, Salt Lake City. (See itemunder Intel Corp. for details.)

�� Microsoft Corp.The Redmond, Wash., software company invests inLoudeye Technologies Inc., Seattle. (See item underAmerica Online Inc. for details.)




�� Mitsubishi Corp.The Tokyo trading company invests in:

�� E-steel Corp., New York. (See item underDuPont for details.)

�� Kinzan.com, Carlsbad, Calif., which providese-commerce services for deploying and managingvery large networks of Web sites. The $15.5 million,mezzanine round is led by Menlo Ventures, MenloPark, and includes participation from Vital Process-ing Services, Tempe, Ariz.; Pulsar Internacionalgroup of companies, Mexico; and ARES Interna-tional, Taiwan.

�� Sonus Networks Inc., Westford, Mass. (Seeitem under Global Crossing Ltd. for details.)

�� Mitsui & Co.The Tokyo trading company, through its U.S. affili-ate, Mitsui & Co. USA, invests in E-Steel Corp.,New York. (See item under DuPont for details.)

�� NBC Corp.The New York broadcasting company invests in:

�� Loudeye Technologies Inc., Seattle. (See itemunder America Online Inc. for details.)

�� Telocity Inc., Cupertino, Calif., which pro-vides high-velocity broadband Internet services forresidential markets. The company raises $127.5 mil-lion in a funding that includes GE Equity, Stamford,Conn.; ValueVision International Inc., Eden Prarie,Minn.; Bessemer Venture Partners, WellesleyHills, Mass.; Comdisco Inc., Rosemont, Ill.;Stanford University, Stanford, Calif.; August Capi-tal and Mohr, Davidow Ventures, both of MenloPark; and RRE Investors, Bessemer Holdings,L.P. and Soros Private Equity Partners LLC, allof New York.

�� Nissho Electronics Corp.The Tokyo technology company invests in SonusNetworks Inc., Westford, Mass. (See item underGlobal Crossing Ltd. for details.)

�� Nokia Corp.The Finnish mobile communication company throughits venture arm, Nokia Ventures, invests in:

�� Informative Inc., South San Francisco, Calif.which provides online information services. The sizeof the financing is not disclosed.

�� NetSanity Inc., Redwood City, Calif., whichcreates software to deliver, notify and manage Web-

based information. Peter Buhl, a partner with NokiaVentures, joins NetSanity’s board.

�� NTT Communications Corp.The Tokyo phone carrier invests in InfoLibria Inc.,Waltham, Mass. (See item under General ElectricCo. for details.)

�� Office Depot Inc.The Delray Beach, Fla., office product retailerparticipates in the $32 million financing ofDigitalWork.com Inc., Chicago, an online agencygeared toward assisting the small office/home of-fice market. Attractor Investment Management,Burlingame, Calif., leads the round. Other inves-tors include Draper Fisher Jurvetson, RedwoodCity, Calif.; TL Ventures, Wayne, Pa.; Informa-tion Technology Ventures, Menlo Park; MailBoxes Etc., San Diego; PurchasePro.com Inc.,Las Vegas; and Reckson Service Industries, NewYork.

�� Pacific Century CyberworksThe Hong Kong provider of broadband Internet ser-vices invests in NetCel360 Ltd., Hong Kong. (Seeitem under United Parcel Service of America Inc. fordetails.)

�� PSINet Inc.The Herndon, Va., provider of Internet access investsin InfoLibria Inc., Waltham, Mass. (See item underGeneral Electric Co. for details.)

�� Purchasepro.Com Inc.The Las Vegas provider of business-to-business e-commerce services participates in the financing ofDigitalWork.com Inc., Chicago. (See item underOffice Depot Inc. for details.)

�� Qualcomm Inc.The San Diego developer of products for wirelesssystems invests in PacketVideo, San Diego. (Seeitem under Reuters Group plc for details.)

�� Reckson Service IndustriesThe New York business service provider invests inDigitalWorks.com Inc., Chicago. (See item underOffice Depot Inc. for details.)

�� Reuters Group plcThrough its venture arm, Reuters Greenhouse Fund,the London-based provider of information invests in:

�� Medsite.com Inc., New York, which sell medi-


cal books, journals and supplies, as well as providesmedical news and physician credentialing. Other in-vestors in the $55.7 million round include GoldmanSachs Group Inc.; Morgan Stanley Dean WitterVenture Partners; Chase Capital Partners andWeiss, Peck & Greer LLC, all of New York; BainCapital Inc., Boston; Tenet Healthcare Corp., SantaBarbara, Calif.; and Hikari Tsushin Inc., Tokyo.

�� PacketVideo Corp., San Diego, which devel-ops wireless multimedia software and services formultiple applications. Other investors in the $21 mil-lion round are Credit Suisse First Boston and SonyCorp. of America, both of New York; Intel Corp.and Siemens Mustang Ventures, both of Santa Clara,Calif.; Nexus Group LLC, San Francisco; andQualcomm Inc., San Diego.

�� Virage Inc., San Mateo, Calif., which hasdeveloped an Internet video search engine. Reutersleads the $20 million round, which includes WestonPresidio Capital, Boston; Adobe Ventures, SanFrancisco; Neocarta Ventures, Cambridge, Mass.;Media Technology Ventures, Los Altos, Calif.; andSutter Hill Ventures and Trinity Ventures, both ofMenlo Park.

�� SAP AGThrough SAP Ventures, the Walldorf, Germany,software company makes equity investments in:

�� BlindGift.com Inc., San Francisco, an onlinegift service. The round totals $2.5 million.

�� iD2 Technologies, Stockholm, Sweden, whichdevelops and sells products to increase security on theInternet.

�� Sequencia Corp., Phoenix, which develops au-tomation and integration solutions for manufacturers.

�� Samsung Corp.The Seoul, South Korea, electronics conglomeratetakes stakes in:

�� iAsiaWorks, San Mateo, Calif. (See item un-der Bechtel Group for details.)

�� Sonus Networks Inc., Westford, Mass. (Seeitem under Global Crossing Ltd. for details.)

�� Sara Lee Corp.The Chicago manufacturer and marketer of consumerproducts takes part in a $12 million round raised byMadeToOrder.com Inc., Redwood City, Calif., anonline source of logo merchandise. Other investors inthe round are Alloy Ventures, Palo Alto, Calif., andAlpine Technology Ventures, Cupertino, Calif.

�� Siemens AGThrough its venture arm, Siemens Mustang Ven-tures, the German electronics company invests in

PacketVideo Corp., San Diego. (See item underReuters Group plc for details.)

�� Singapore Technologies GroupThrough its venture arm, Vertex Management Inc.,the conglomerate invests in Belle Systems A/S,Holbaek, Denmark. (See item under Cisco SystemsInc. for details.)

�� Sony Corp. of AmericaThe entertainment company invests in PacketVideoCorp., San Diego. (See item under Reuters Group plcfor details.)

�� St. Paul Companies Inc.Through its venture arm, St. Paul Venture CapitalInc., the Minneapolis insurer invests in:

�� Adaytum Software, Minneapolis, which sup-plies business planning applications. St. Paul VentureCapital leads the $6.1 million round, with additionalparticipation from Hambrecht & Quist LLC, SanFrancisco.

�� OfficeClick.com Inc., Palo Alto, which hasdeveloped an online workcenter for office adminis-trative professionals. Others participating in the $30.5million round are Spectrum Equity Investors, PaloAlto; Forrest Binkley & Brown, Newport Beach,Calif.; and Doll Capital Management, InterWestPartners and Sigma Partners, all of Menlo Park.

�� Pink Dot Inc., Camarillo, Calif., which pro-vides grocery and prepared food delivery service.Others involved in the $20 million financing includeGE Equity, Stamford, Conn.; William Blair CapitalPartners, Chicago; Graystone Venture Partners,Northfield, Ill.; Brand Equity Ventures, Green-wich, Conn.; and Corber Corp., Wayne, N.J.

�� Starbucks Coffee Co.The Seattle coffee retailer takes a stake of undisclosedsize in Cooking.com Inc., Santa Monica, Calif., anonline seller of cookware and specialty foods.

�� Sun Microsystems Inc.The Palo Alto, Calif., technology company invests in:

�� Digital Island Inc., a publicly traded, SanFrancisco-based provider of Internet hosting services.Sun invests $20 million, while Inktomi Corp., FosterCity, Calif., puts in $6 million.

�� ExpertCity.com Inc., Santa Barbara, Calif.,which has developed an online marketplace for ex-pert-assisted help and learning. Sun co-leads the $30million financing with ZDNet, San Francisco. Otherinvestors include Bertelsmann Ventures, Santa Bar-bara, Calif., and Dawntreader, L.P., New York.




�� Tenet Healthcare Corp.The Santa Barbara, Calif., hospital company investsin Medsite.com Inc., New York. (See item underReuters Group plc for details.)

�� Texas Instruments Inc.The Dallas semiconductor company, through its ven-ture arm, TI Ventures, invests in Covalent Tech-nologies Inc., Lincoln, Neb. (See item under AdobeSystems Inc. for details.)

�� 3com Corp.The Santa Clara, Calif., networking company,through its venture arm, 3Com Ventures Inc., in-vests in:

�� Amplify.net Inc., Fremont, Calif., which de-velops broadband access enabling services. Co-in-vestors in the $6.1 million round include Wi-LANInc., Calgary, Alberta; Kingston Technology Corp.,Fountain Valley, Calif.; Alpine Technology Ven-tures, Cupertino, Calif.; and Aspen Ventures, LosAltos, Calif.

�� Coactive Networks Inc., Sausalito, Calif.,which connects open control systems to Internet tech-nologies. Other investors in the $14 million financingare Chase Capital Partners, New York; CharterVenture Capital, Palo Alto, Calif.; and Techfarm,Mountain View, Calif. Janice Roberts, senior vicepresident of business development at 3Com and presi-dent of 3Com Ventures, joins Coactive’s board.

�� Time Warner Inc.The New York cable TV operator and publisherinvests in Bolt Inc. (See item under America OnlineInc. for details.)

�� United Parcel Service ofAmerica Inc.

Through its Strategic Enterprise Fund, the Atlantapackage delivery company takes an equity position inNetCel360 Ltd., Hong Kong, which provides Inter-net-based e-commerce outsourcing solutions. PacificCentury CyberWorks Ltd., Hong Kong, also invests.

�� U.S. Office Products Co.The Washington, D.C., seller of office and educa-tional products invests, through subsidiary Mail BoxesEtc., in DigitalWork.com Inc., Chicago. (See itemunder Office Depot Inc. for details.)

�� Valuevision International Inc.The Eden Prairie, Minn., operator of a home shoppingnetwork invests in Telocity Inc., Cupertino, Calif.(See item under NBC Corp. for details.)

�� Williams CommunicationsThe Tulsa, Okla., telecommunications company in-vests in Sonus Networks Inc., Westford, Mass. (Seeitem under Global Crossing Ltd. for details.)

�� Wi-LAN Inc.The Calgary, Alberta, developer of wireless net-working technologies invests in Amplify.net Inc.,Fremont, Calif. (See item under 3Com Corp. fordetails.)

�� ZDNetThe San Francisco provider of technology informa-tion to online users co-leads a $30 million round forExpertCity.com Inc., Santa Barbara. (See item un-der Sun Microsystems Inc. for details.)

XL Ventures to Stay ActiveAfter Big Flower Buyout

Big Flower Holdings Inc., the New York advertisingand marketing company, may no longer be publiclytraded, but its venture subsidiary, XL Ventures, willremain in full bloom.

Big Flower, formerly traded on the New YorkStock Exchange, was taken private in December ina $1.9 billion acquisition by its chairman, R.Theodore Ammon, and buyout firms Thomas H.Lee Co., Boston, and Evercore Partners L.P., NewYork.

The three parties will seek to “aggressively grow”all aspects of the company’s business, including XLVentures, said Anthony J. DiNovi, a managing direc-tor with Thomas H. Lee Co.

However, Mr. DiNovi said, XL now will get itscapital from the new shareholders, rather than fromBig Flower, to eliminate the impact on cash flow.

Since its formation in 1998, XL Ventures hasinvested approximately $40 million in companies thatuse the Internet to provide advertising, marketing andbusiness-to-business services.

XL invests at all stages, and uses its parent’scompany expertise to help portfolio companies withadvertising and marketing issues.

Reach XL Ventures Managing Director KristopherA. Wood at (212) 521-1600.


Investors Flock to EquinixContinued from page 1

Michael Malaga, chairman and CEO of NorthPointCommunications Inc., a San Francisco local ex-change carrier that invested in the latest round.

Indeed, it is still common for Internet users tosuffer long waits as information winds its way to theircomputers from servers thousands of miles away.Along the route—both coming and going—the datapasses through dozens of so-called network accesspoints, which are key connection points that often turninto bottlenecks.

By allowing Internet companies to cluster theirservers and data at points closer to end-users, Equinixintends to speed the flow of data. But such an efforttakes money and connections—two things that corpo-rations possess in abundance.

“We wanted to form partnerships around the worldthat would catapult our business,” says Albert M.Avery IV, Equinix’s CEO and president.

Capital and ConnectionsThe other corporate investors in the round in-

cluded Artemis S.A., a French holding company that,among other things, owns auction house ChristiesInternational plc; E*Trade Group Inc., Menlo Park;Enron Corp., the Houston energy and communica-tions company; News Corp., Sydney, Australia; Pa-cific Century CyberWorks Ltd., a Hong Kong-basedInternet company; and Reuters Group plc, London.

“The company did a superb job of getting out infront of the corporate investors and making their valueproposition and name known,” says Tom Bevilacqua,E*Trade’s executive vice president for corporate de-velopment.

Also participating in the financing were MarcAndreessen, the co-founder of Netscape Communi-cations Corp., which is now part of America Online;Carlyle Group, the Washington, D.C., private equityfirm; Benchmark Capital, the Menlo Park venturefirm; and Temasek Holdings, a Singapore institu-tional investor.

‘Neutral’ Meeting PlaceAccording to Cambridge, Mass.-based Forrester

Research, revenue from Internet-related hosting andco-location services will jump to an estimated $14.7billion by 2003 from $875 million in 1998. And, whileEquinix is not the only company building such cen-ters, it does have an edge over telecommunicationcarriers and Internet service providers in that it isproviding a “neutral” meeting place.

“For content or service providers such as our-selves, they allow us to connect to the Internet in sucha way that it minimizes or eliminates the number of

road blocks that could otherwise restrict our ability torapidly address our customer needs,” says E*Trade’sMr. Bevilacqua.

“In terms of our goals for speed and reliability,they are aligned with us from a philosophical stand-point,” he says. “And from a financial standpoint,they are already being well received, so it madeenormous sense” for E*Trade to invest.

A second plus was that the company’s founders—Mr. Avery and Jay S. Adelson—were responsible fordesigning, building and operating the Palo Alto Inter-net Exchange, which quickly became an active Inter-net traffic exchange point.

All told, Equinix now has raised $315 millionsince its founding in June 1998, making it one of themost heavily financed Internet infrastructure compa-nies ever.

Additional Capital NeededAccording to documents filed with the Securities

and Exchange Commission, Equinix expects to beable to build a total of eight Internet Business Ex-changes with the capital it has raised so far. However,it expects to need another $750 million over the nextfour years to carry out its plan of building 30 ex-changes.

The company currently has two exchanges, one inAshburn, Va., near Washington, D.C., and another inNewark, N.J. By April, it intends to open exchangesin San Jose and Los Angeles.

Equinix will generate revenue by leasing cabinetspace and by making direct interconnections betweencustomers. In addition, the company intends to offera variety of services, including equipment installationand maintenance.

Times Mirror Becomes LPIn Fund of Former Team

Times Mirror Co.’s direct-investment team has leftthe Los Angeles publishing giant to manage a $550million independent private equity fund backed byTimes Mirror and the Chandler Trusts.

The Chandler Trusts are the biggest shareholdersin Times Mirror, which publishes the Los AngelesTimes, the Baltimore Sun and other newspapers.

TMCT is managed by Rustic Canyon Group,also of Los Angeles. The managing general partner isTom Unterman, who until last month was TimesMirror’s chief financial officer.

TMCT intends to make investments of $3 million to$10 million in information technology and businessservices companies related to telecommunications, ITinfrastructure and the Internet in Southern California.

Reach TMCT at (213) 237-3881.


their share-price estimates. But that might be about tochange. A growing number of corporations hold ven-ture portfolios with potentially eye-popping valua-tions. And more and more of them are consideringways to call those holdings to Wall Street’s attention.Consider the following:

• Comdisco Inc., the Rosemont, Ill., provider oftechnology services, plans to create a so-called “track-ing stock” for its venture capital unit, ComdiscoVentures.

• CBS Corp., the New York broadcasting com-pany, has discussed setting up a separate, publiclytraded company that would include its Internet as-sets, including its direct investments. (See story onpage 6.)

• Tredegar Corp., the Richmond, Va., manufac-turer, is evaluating the spin-off of two of its businessunits and its venture arm, Tredegar Investments, intoan independent company.

• Apple Computer Inc., Cupertino, Calif., holdsa stake worth nearly $1 billion in newly public AkamaiTechnology Inc., Cambridge, Mass. Apple, whichposted net income of $601 million on revenue of $6.1billion in its last fiscal year, paid $15 million for theAkamai stake.

• Advanced Digital Information Corp., aRedmond, Wash., developer of networking products,owns a stake in publicly traded Crossroads SystemsInc. valued at nearly $200 million. ADIC, which paid

$4.1 million for the stake in the Austin, Texas, pro-vider of networking routers, itself earned just $15million on revenue of $223 million in the fiscal yearended last October.

Corporate executives, with some justification, seea precedent for trying to unlock the value of theirventure holdings in publicly traded venture capitalcompanies like CMGI Inc. and Internet Capital GroupInc. The shares of those companies have soared asstock market investors conclude they offer a novelway to play the venture capital market, from whichthey normally are excluded.

“Two things are converging,” says Steve M.Johnson, president of Seattle-based Tredegar Invest-ments. “The first is that there are a lot of [corporationsinvesting]. And, if you do it long enough, there isvalue” in the portfolio.

“The other thing,” Mr. Johnson says, “is that thereare individual investors who can’t play effectively inthe institutional venture arena, but who are interestedin venture capital.”

Twin BenefitsAs a result, he says, corporations can benefit from

their venture investments not just strategically, butfinancially as well. The key, he says, is that they “mustcommunicate effectively what they are doing.”

That is clearly Comdisco’s goal in moving toestablish a tracking stock for Comdisco Ventures.Formed in 1987, the venture subsidiary has commit-ted over $1.7 billion to nearly 700 young companies.

Last year alone, Comdisco Ventures generated$71 million in pre-tax earnings and $229 million in

revenue. At year-end, the publiclytraded securities in Comdisco Ven-tures’ portfolio were worth more than$400 million.

“We didn’t think Wall Street orthe investing world was identifyingthe value of the venture division inthe stock price of Comdisco,” saysJames P. Labe, a managing directorwith Comdisco Ventures. “Thisseemed to be a great way to unlockthat value.”

Analysts who follow Comdiscoendorse the tracking stock idea. “It’sthe right move,” says Mark C. Jor-dan, a vice president at A.G. Edwards& Co. “There is tremendous valuethere.”

The tracking stock IPO processwill be “educational” for analysts,Mr. Jordan says, because it will helpthem understand the value in the port-folio.

The process is likely to be educa-

Venture Holdings Can Boost ValuationsContinued from page 1

Copyright © 2000 Asset Alternatives Inc.

Value Generated by Corporations Through 4th Quarter IPOs

0 $300 $600 $900 $1,200 $1,500

$1.3 billion Akamai

Data Return Corp.

Aether Systems

Crossroads Systems

Getthere.com

E-Stamp; Data Return Corp., Akamai

InterTrust Technologies; Aether Systems

Freemarkets

XM Satellite Radio

Getthere.com; Exactis

Akamai; Predictive Systems

Silicon Image; Crossroads System; Immersion �Corp.; Smarterkids.com; VA Linux Systems

$1.2 billion

$945$559

$373$367

$294$216

$183$143

$129

$100

Apple Computer

Cisco Systems

Intel Corp.

United Technologies

Reuters Ltd.

Microsoft

United Airlines

Advanced Digital

3Com

American Express

DirectTV

Level3 Comm.

($ in millions)

Based on value of shares held by corporations minus original equity investment. Calculated usingSEC filings and share price of company as of 12/31/99. Does not include stakes that corporationsacquired through spinoffs or transfers of technology or assets.


tional as well for other corporations, some of whichmay choose to follow Comdisco’s lead.

Others Follow LeadAlready, Creative Technology Ltd., a Singapore

multimedia firm, is considering a separate listing forits venture capital firm, according to published state-ments by Chairman Sim Wong Hoo. Creative, whichallocated $100 million to its venture unit in 1999, hasscored big with an investment in MediaRing.com Inc.

Likewise, Trans Cosmos Inc., a Tokyo informa-tion system consulting firm, is giving thought to atracking stock for its venture capital unit, says SteveClemons, a managing director of TransCosmos USAInc. in Bellevue, Wash.

One company that probably could issue a trackingstock for its venture holdings quite successfully isIntel Corp., Santa Clara, Calif.

Last year alone, the semiconductor producer mademore than $1 billion in venture investments. At year’send, Intel’s 350-company venture portfolio had avalue of $8 billion. Intel recognized $327 million ingains on the sale of securities in the fourth quarter,when it reported record revenue of $8.1 billion.

Yet, spokesman Robert Manetta says Intel has “nocurrent plans” to set up a tracking stock for its ventureactivity. “We aren’t looking for financial returns,”Mr. Manetta says. “Our key goals are to be a strategicinvestor, and to make investments in a lot of differentareas.”

Indeed, the long-held view of Wall Street is thatthe strategic value realized from corporate venturingis far more important than any financial gains. Addi-tionally, analysts consider such gains as meaninglessuntil they are realized. And then, they are considerednon-recurring items.

However, tracking stocks are not the only toolscorporations are considering to unlock the value oftheir venture investments. Some companies, such asCBS and Tredegar, are evaluating whether to spin offtheir venture investments into entirely separate com-panies.

Convincing the SkepticsTredegar’s Mr. Johnson says the company is con-

sidering such a move because analysts, in examiningthe company’s performance, all but ignore the ven-ture portfolio.

“There is a ‘show-me’ mentality,” he says. “Theysay, ‘Prove to me you can generate liquidity. Proveyou can do it on a regular basis.’”

Tredegar is seeking greater recognition for itsventure holdings because many of the portfolio com-panies are nearing an IPO or trade sale.

Last year, Tredegar Investments committed about$80 million to 18 companies.

To be sure, some corporations are seeking to gain

credit for their venture holdings just by calling themto analysts’ attention, usually in quarterly statementsbut also in conference calls.

Akamai Polishes AppleApple did so in its last annual report, trumpeting

its holdings in Akamai, which provides services foraccelerating the delivery of Internet content. Theholdings are particularly significant because theyrepresent close to 10 percent of Apple’s enterprisevalue, says Robert Chen, an analyst at ABN AMRO,San Francisco.

Likewise, analysts took note when Advanced Digi-tal Information drew attention in its latest quarterlyfinancial statements to its stake in Crossroads Sys-tems.

The Crosspoint stake effectively boosts the valueof Advanced Digital’s stock by as much as 10 percent,says Bill Lewis, an analyst with Chase H&Q, SanFrancisco. The stock recently was trading at $61.88,close to its 52-week high.

Mr. Lewis says he and other analysts will have tolook more closely at the investment portfolios of thecompanies they cover.

“The reason to get into a company is for strategicbenefits,” he says. “But, if along the way, you can getsomething that adds $200 million, that’s not too bad.”

By David G. Barry

Corporations with Multiple IPOs in Fourth Quarter

AT&T Corp.: E-Stamp Corp., Triton PCS Holdings Inc., Tritel Inc.

America Online Inc.: The Knot, E-Stamp Corp.

American Express Co.: GetThere.com Inc., Exactis.com Inc.

Cisco Systems Inc.: Akamai Technologies Inc., Predictive Systems Inc.

Comdisco Inc: Be Free Inc., Virata Corp.

Compaq Computer Corp.: Data Return Corp., E-Stamp Corp.

Dell Computer Corp.: Calico Commerce Inc., NaviSite Inc., ZapMe! Corp.

E*Trade Group Inc.: Official Payments Corp., PlanetRx.com Inc.,WebVan Group Inc.

Excite@Home Corp.: E-Stamp Corp., Harris Interactive Inc., Tickets.com Inc.

Intel Corp.: Crossroads System Inc., FogDog Inc., Immersion Corp.,Silicon Image Inc., Smarterkids.com Inc., VA Linux Systems Inc.

MediaOne Group Inc.: eCollege.com Inc., Women.com Networks Inc.

Microsoft Corp.: Akamai Technologies Inc., Data Return Corp.,E-Stamp Corp., Expedia Inc., NaviSite Inc.

Oracle Corp.: C-Bridge Internet, Virata Corp.

Reuters Ltd.: Aether Systems Inc., InterTrust Technologies Corp.

Singapore Technologies Inc.: Chartered Semiconductor Manufac-turing Inc., FogDog Inc., Gric Communications Inc., QuickLogic Corp.

Yahoo! Inc.: Deltathree.com Inc., WebVan Group Inc.



Corporate Venture Capital SoarsContinued from page 1

and EMC Corp., Hopkinton, Mass. When the invest-ment pools of all such companies are included, thetotal amount of money dedicated to new corporateventure capital programs last year is likely to ap-proach or exceed $10 billion.

Indeed, corporate venturing is no longer a noveltybut a necessity, according to some observers.

“It is part of the ticket to the dance these days,”says Samuel Schwartz, a managing director atComcast Interactive Capital Group, the venturearm of Comcast Corp., Philadelphia. “You need tocontinually understand product cycles and what’shappening with the Internet. A lot of companies arerealizing that it’s a basic part of doing business.”

In many respects, 1999 likely will be viewed as awatershed year for corporate venturing.

For starters, the sizes of new corporate venturingprograms grew noticeably. Of the 28 corporationsthat disclosed their fund sizes last year, 19 werecommitting at least $100 million. A year earlier, onlyfive of the 13 announced programs had such heft.

Indeed, 1999 saw Andersen Consulting and Elec-tronic Data Systems Corp. become the first corpo-rations to announce they intend to invest at least $1billion in venture transactions. (See stories on pages 5and 4.) MCI WorldCom Ltd., Clinton, Miss., an-nounced a $500 million program—a big fund by anymeasure.

Two other new corporate venturing trends alsoemerged in 1999.

Rather than simply looking for technology accessor similar strategic benefits, more corporations areusing their venturing programs to promote their ownservices and products.

For example, both Andersen Consulting and EDSintend to invest in clients that use their systemsintegration consulting services. Oracle Corp., Red-

wood Shores, Calif., formed a $100 million venturefund to invest primarily in companies that use Oracle’ssoftware.

The second notable trend is that long-establishedcorporate venture investors are seeking to leveragetheir expertise by raising capital from outside investors.

For example, Intel Corp., Santa Clara, Calif., put$50 million of its own capital into the $250 millionIntel 64 Fund LLC. Intel raised the balance fromDell; Ford Motor Co., Dearborn, Mich.; CompaqComputer Corp., Houston; General Electric Co.,Stamford, Conn., and other corporations.

This latter trend appears to be accelerating. This year,corporations that will court outside capital for theirventure capital funds will include EDS; E*Trade; S.R.One Ltd., the venture arm of Smith Kline BeechamCorp., and the venture arm of Comdisco Inc.

By David G. Barry

Corporate Venturing FundsFormed in 1999

Corporation Size ($ millions)

Electronic Data Systems Corp. $1,500Andersen Consulting $1,000Time Warner Inc. $500Intel Corp. $450*Hikari Tsushin $332News Corp. $300ValueVision International $300Comcast Corp. $250PECO Energy Co. $225Inktomi Corp. $200Sun Microsystems Inc. $200TransCosmos Inc. $150Cambridge Technology Partners Inc. $100Duchossois Enterprise Group $100E*Trade Group Inc. $100Global Crossing Ltd. $100Oracle Corp. $100Readers Digest Association $100Rare Medium Group Inc. $87Lycos Inc. $72InfoSpace.com Inc. $30Seagate Technology Inc. $25Broadvision Inc. $10Cognex Corp. $10Freedom Communications Inc. $10Venture Catalyst.com Inc. $10Fujisawa Pharmaceutical Co. $5Total Announced: $6,259

* Includes $250 million for Intel 64 Fund LLC and$200 million for Intel Communications Fund, whichare separately managed.

Source: The Corporate Venturing Directory & Yearbook

Corporations With Venturing Programs


0

25

50

75

100

125

150

175

200

225

1996

4970

108

203

1997 1998 1999

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