Cigar Vendor Launches VC Fund –

BOCA RATON, Fla. – From e-commerce start-ups to launching a venture fund – there will certainly be no dearth of celebratory stogies lying around when one of International Internet Inc.’s portfolio companies hits it big.

International Internet, a developer and operator of e-commerce and offline, direct marketing companies such as Inc., Inc., Inc. and Mr. Cigar Inc., in May launched International Internet Ventures I L.L.C., a venture fund modeled after CMGI Inc., the Internet business holding company that closed its third venture fund in December 1998 (VCJ, February, page 25).

The company, originally known as International Industries Inc., delved into e-commerce after it purchased Mr. Cigar, an operator of automated cigar vending machines. “We put up a Web site … and immediately did more business than the machines,” said International Internet President and Chief Executive Gary Schultheis.

As a result, the company changed its name to International Internet in February and refocused its strategy on acquiring other e-commerce businesses, evident in its purchases of in February and in April.

International Internet at press time was in talks with several potential strategic partners for the fund, whom Mr. Shultheis declined to reveal. He also would not disclose the fund’s target size.

“International Internet has a nice war chest of cash,” he said, which the company will use to make seed, bridge and private placement investments in “high-growth, hot-sector companies,” particularly in e-commerce.

International Internet Ventures will invest no more than $1 million in each deal and will co-invest with established venture firms, Mr. Shultheis said, adding that the company likely will sign its first term sheet within the next quarter.