LAKE FOREST, Ill. – ELoyalty, a customer loyalty and relationship management firm, closed on the $30 million eLoyalty Ventures LLC in July, said Sarah Faux, the fund’s manager and a senior vice president at eLoyalty.
The fund, which launched in February, will target early-stage companies that develop electronic customer relationship management software. It will back about six to eight companies with investments ranging between $3 million and $5 million, Faux said.
ELoyalty, and the company’s senior management, contributed some $15 million to the fund, while investments by Bain Capital, Sutter Hill Ventures and Technology Crossover Ventures comprised the remainder, Faux said.
Now a 1,000-person company, eLoyalty was spun out of publicly traded Technology Solutions Co. in February. Seeking a disciplined approach for bringing new technologies to the market, eLoyalty decided to form a venture arm to formally encourage such innovation, Faux said.
ELoyalty believes the venture fund is a retention incentive for senior-level management of accredited investor status who were invited to invest in the fund. Further, eLoyalty expects all employees at the company to benefit from the fund’s returns, the extent to which will depend on the amount of capital the company’s board decides to allocate to the employee fund, Faux said.
The three VC firms investing in the fund, along with the more than 100 vice presidents at eLoyalty, will help generate deal flow. Additionally, the 70-person eLoyalty research and development group in Austin is responsible for generating new ideas and keeping on top of the customer relationship management sector.
Although the vehicle had not made any investments at press time, eLoyalty Ventures had looked at more than 50 potential investments, a subset of which it will continue to research, Faux said. ELoyalty, an international firm, is open to making investments worldwide but anticipates that this fund will mainly back U.S.-based companies, she said.
Faux will present potential investments to a four-person investment committee – Kelly Conway, eLoyalty president and chief executive officer, Ed Brakeman, a managing director at Bain Capital, Jay Hoag, a general partner at Technology Crossover Ventures, and Tench Coxe, a managing director at Sutter Hill Ventures – who will review and approve investment decisions.
ELoyalty Ventures is actively seeking another investment professional to co-manage the vehicle, Faux said, adding that eLoyalty expects to be ready to raise another fund within a year.