ATLANTA – Former information- technology entrepreneur Buck Goldstein and strategic partner Mellon Ventures in February launched netWorth Partners, the latest in a growing list of Internet-focused venture funds.
Mellon Ventures, the captive equity investment vehicle for Mellon Bank, will invest in netWorth as a strategic limited partner, sharing deal flow and expertise and assisting in due diligence. Mellon also will warehouse netWorth deals until the fund closes so the firm can begin investing immediately. Mr. Goldstein expects to make three to five investments by the time the vehicle concludes fund raising in mid-year.
Although Mr. Goldstein is unsure about the amount of capital netWorth will raise, he expects to invest a minimum of $60 million to $65 million over the next two years. The new firm’s relationship with Mellon gives netWorth the luxury of not having to worry too much about the fund’s final tally. “We’re not going to turn down [an attractive] deal … because we don’t have the resources,” he explained.
The firm is talking with a variety of prospective limited partners, primarily corporations that can “bring more than money” to the table, Mr. Goldstein said. NetWorth is targeting about four or five such partners, in addition to a select group of individuals.
The vehicle’s L.P. base likely will come from Mr. Goldstein’s contacts from his years as chairman and president of Information America, an online database company he co-founded in 1981. The company was sold in 1994 to West Publishing, a division of Thomson Corp., the parent company of Venture Capital Journal.
NetWorth, which primarily expects to invest between $3 million to $5 million per deal, will focus on early-stage companies that have revenue and are beyond angel and seed-stage rounds of financing.
Venture capitalists in 1998 invested a total of $5.43 billion in computer software and services (story page 39), the industry category to which Internet investments belong, according to Venture Economics Information Services, a research company affiliated with VCJ. Many of these investments, however, are made as part of larger information technology-focused vehicles that only make some of their investments in Internet companies.
NetWorth was founded on the premise that the time had come “for grown-ups on the Internet,” Mr. Goldstein said. He sees great potential for investors who realize the value of facilitating business transactions and commerce, rather than those who focus on content – a trend that an increasing number of VCs have identified (VCJ, January, page 37). Entrepreneurs with operational experience will be invaluable to these companies, and vehicles with deep pockets such as netWorth will be ready to fund them, Mr. Goldstein said.
Larry Mock, president of Mellon Ventures, shares Mr. Goldstein’s vision. “The Internet needs focus,” he said. “It’s not just something you can put in a broad portfolio. We wanted [to invest in] a partnership that is focusing strictly on the Internet.”
Mellon Ventures had invested in about six Internet companies at press time, usually alongside investors experienced in the industry such as Flatiron Partners, Chase Capital Partners and Prospect Street Ventures in New York and Internet Capital Group in Philadelphia. Current portfolio companies include The ComputerJobs Store Inc., interactive marketing solutions provider iXL, Qwest Communications Corp. and Multex.com, formerly Multex Systems.