PALO ALTO, Calif. – Another player has entered the corporate venture capital fray, and this time it is a company that received its own venture financing not too long ago.
Online investment brokerage E*Trade Group Inc. in March formed a $150 million captive venture capital unit headed by Thomas Bevilacqua, the company’s former independent counsel at Silicon Valley law firm, Brobeck, Phleger & Harrison.
E*Trade is the fourth technology-oriented corporation to form an in-house venture unit in the past several months, including cable television operator Comcast Corp. (VCJ, February, Page 5), computer manufacturer Oracle Corp. (VCJ, March, page 6) and long distance telephone carrier Frontier Communications (VCJ, April, page 5).
While each of the four technology corporations can enhance its core business by speeding the development of Internet-related start-ups, E*Trade is by far the youngest company to attempt such a strategy. Founded in 1992 and backed by General Atlantic Partners and Softbank, E*Trade went public in August 1996.
Although Mr. Bevilacqua conceded that other corporate venture investors are more developed than E*Trade, the company believed the time was right to launch its VC unit. “The Internet has sped up everything,” he said. “We didn’t want to be in a position two years from now, saying, I wish we’d done that.'”
E*Trade will invest as little as $5 million in start-ups involved in bill payment, mortgage, loan, banking, insurance and other “business exchange” processes, both nationally and internationally, although the majority of deals likely will be based in Silicon Valley, Mr. Bevilacqua said. The company will help its portfolio companies by sharing “a lot of in-house knowledge and expertise” in brand-building and customer recruiting, two areas in which E*Trade has excelled, he added.
Mr. Bevilacqua, named executive vice president and general counsel, joined E*Trade full-time in early April. As the lead attorney at Brobeck on the E*Trade account, Mr. Bevilacqua has helped E*Trade invest in about six companies on an ad hoc basis, including online investment bank E*Offering, e-business outsourcer Digital Island and e-mail hosting server Critical Path Inc., which went public in late March (story page 54).
By formalizing its investment program and setting aside $150 million solely for additional investments, Mr. Bevilacqua said E*Trade is “sending a signal that we’re real serious about deploying this capital.”
While the company has no timetable for investing the entire $150 million, the money should last until at least the end of 1999, Mr. Bevilacqua said, adding that he could see being substantially invested by then.
Mr. Bevilacqua, Senior Vice President of Electronic Trading Strategies Stephen Richards and Vice President Michael Rolnick comprise the new VC unit’s management team. Mr. Bevilacqua anticipates adding one or two associate-level staffers in the ensuing months.
E*Trade President and Chief Executive Christos Cotsakos did not return phone calls by press time.