SEATTLE – Internet accelerator iStart Ventures, launched its first fund, the iStart Ventures No-Carry Fund I, targeted to reach between $10 million and $20 million, said James Krejci, chief financial officer at iStart Ventures.
The vehicle will be used to invest in iStart Ventures’ portfolio companies. The fund, which had about $3 million of commitments at press time, is expected to hold a first and final close in August or September, Krejci said.
Founded in the first half of 1999, the iStart Ventures accelerator has received two rounds of funding. After the founders infused the first couple hundred thousand dollars of capital, outside investors backed the entity with $2.25 million in September 1999, followed by $4 million in March, Krejci said.
Investors in the accelerator include: Nick Nicholas, former co-chief executive officer of Time-Warner; David Wetherell, CEO of CMGI; Will Lansing, CEO of NBCi; Tim Choate, CEO of FreeShop.com; Pete Nicholas, CEO of Boston Scientific; Scott Svenson, former president of Starbucks Europe; Bill McAleer, co-founder of Voyager Capital; and Bob McCormack, managing partner at Trident Captial and Silicon Valley Bank.
The accelerator invests a couple hundred thousand dollars in each of its portfolio companies in exchange for equity. The portfolio companies benefit from the accelerator’s 35-person staff that offers temporary help with accounting, legal, marketing, financial and personnel issues. Gradually, the companies replace the temporary assistance with permanent employees, and the company moves on to another round of financing.
The new No-Carry Fund will enter seed-and early-stage rounds of funding iStart Ventures’ companies receive. The fund will maintain minority stakes in each deal because the firm believes it is advantageous for its portfolio companies to receive investments from a variety of strategic investors, Krejci said, rather than create an insular financing environment. Additionally, the firm wants all valuations to be set by third parties to avoid a conflict of interest in the negotiations because the investors are also iStart employees, Krejci said.
All of the proceeds from the investments will be distributed to the fund’s limited partners – mainly active investors such as VCs, corporations and angels.
At press time, iStart Ventures’ portfolio consisted of five companies: eBallot.net Inc., Enfolio Inc., Invenna Software Inc., Post Point Software and PredictPoint Inc. The accelerator plans to invest in four more companies by the end of the year, and another eight next year. The iStart Ventures facility has space for about seven or eight companies within its existing facility and expects companies to leave the nest around the one-year mark, Krejci said.
John Ballantine, chairman and chief executive officer of iStart Ventures, Mike Doyle, the director of finance, and Krejci will invest the fund.
The investors will work with a three-person advisory board to assist the portfolio companies in creating partnerships and developing strategies, Krejci said. Board members include Jon Staenberg, managing partner at Staenberg Private Capital LLC, Jeff Flohr, managing director at Lakeside Capital Advisors and Bob McCormack.