BOSTON – Scudder Kemper Investments Inc. in December launched the Scudder Kemper Investments E-Cubator Group, an incubator geared toward funding, building and launching e-businesses in the financial services industry.
Jay Kingley, formerly a partner at the e-business consulting firm Diamond Technology Partners, will head the new unit, whose parent company is Zurich Financial Services Group.
The idea of E-Cubator first emerged at Scudder Kemper around June 1999, Kingley said. “The leadership of the company [Scudder Kemper] concluded that the Internet will bring about new business models in the financial services industry, models which E-Cubator intends to build into dominating companies for the 21st century.”
At press time, E-Cubator’s capital pool was in the “tens of millions of dollars,” chiefly committed by Zurich Financial Services and Scudder Investments, said Kingley, who declined to provide further details, including potential candidates for the incubator, until after the New Year. Several private equity firms have expressed interest in providing capital to the group, but no formal arrangements were in place at press time, he added.
E-Cubator will incubate early-stage e-business companies with an initial focus on the United States market. Given the global nature of E-Cubator’s parent company, Kingley expects portfolio companies eventually to gain an international presence in the financial services industry.
“We aren’t interested in businesses that only adapt an existing mechanism to the Internet, we want businesses that meet the changed behavior and demands of consumers as they have been influenced by e-commerce,” Kingley said. The incubator will put up a mininum of $5 million up to “whatever it takes to make the company successful,” said Mark Casady, managing director of Scutter.
Zurich Financial and Scudder Kemper will provide most of E-Cubator’s capital, but Kingley expects private equity firms to bring funding and strategic value to the table. “We are counting on high-quality deal flow and fund raising shouldn’t be a problem, so we’re looking for investors who can assist companies with managerial and operational expertise, as well as other resources,” he added.
The group will not raise traditional venture capital funds, but instead will secure capital on a deal-by-deal basis from Zurich, Scudder Kemper and outside investors. At press time, Kingley was the first and only hire at E-Cubator, which is actively recruiting up to 12 investment professionals for the firm’s staff.
Companies are expected to stay in the incubator one to three years or until they are ripe for a liquidity event, preferably an initial public offering.
“We don’t see any competition for E-Cubator at this time, but we know this will change,” Kingley said.