SANTA MONICA, Calif. – Just three months after commencing operations – two of which were spent on the fund raising trail – e-business incubator eCompanies in late August wrapped its $130 million first venture fund, another clear indication of institutional investors’ deep fascination with cyberspace.
Founded in May by entrepreneurs Jake Winebaum and Sky Dayton, eCompanies was created to provide Internet companies with the resources necessary to grow quickly from concept to the market, a transition the incubator claims it can shepherd in just three to six months.
Winebaum, former chairman of the Walt Disney Co.’s Buena Vista Internet Group, and Dayton, founder and chairman of EarthLink Network Inc., are well aware of the speed with which Internet businesses must grow to be successful, and the duo saw the value of attaching an early-stage venture fund to the incubator. The pair had little trouble leveraging past relationships to garner $130 million in a first and final close in late August.
The fund, eCompanies Venture Group, attracted a variety of strategic partners, including corporate investors such as the Walt Disney Co., EarthLink Network Inc., Sprint Corp., Sun America Inc. and Times Mirror Inc. The new vehicle also attracted private equity firms Accel Partners, Kohlberg Kravis Roberts and Soros Fund, as well as investment banks such as CS First Boston and the Goldman, Sachs Group.
“We wanted to have partners that extended our capital platform,” said eCompanies General Partner Steve Ledger, explaining that the vehicle’s investors provide enviable sources of strategic advice and distribution channels. “If we had a three or four month [fund raising] process … we could have raised a lot more money.”
Ledger, an early investor primarily in EarthLink, and Timothy Spicer, join Winebaum and Dayton as general partners of the fund.
The fund will invest primarily in companies emerging from the incubator, putting up $3 million to $15 million in their first institutional rounds. Noting that VCs like such as Accel now manage “gargantuan funds,” making it difficult to get portfolio companies’ “engines started at their own organizations,” Ledger also hopes to see plenty of opportunities to co-invest with its limited partners.
Kohlberg Kravis Roberts’ “prosaic portfolio,” for example, will provide plenty of opportunities for the incubator’s portfolio companies to leverage Internet opportunities.
ECompanies in early September closed its first deal, a first round investment in Santa Monica, Calif.-based Internet-enabled work resource eWork. Ledger believes the vehicle would be fully invested in about 12 months.