BOULDER, Colo. – Pete Estler, founder of MatchLogic.com, describes his new venture capital firm as “an incubator on steroids.” iBelay.com celebrated its $50 million first close Dec. 3 with investments in two early-stage Internet companies, netLibrary Inc. and Epidemic Marketing Inc.
Excite@Home, which acquired MatchLogic Inc. in 1998 for $90 million, invested in iBelay.com, as did Tango, a Boulder-based venture capital firm, Barrett Capital and Estler’s personal holdings. Estler, who resigned from MatchLogic at the time of its first close, said iBelay.com will close on an additional $50 million, likely from one more investor, early this year.
“I want to own the Rocky Mountain region,” he said. “We have a chance to leverage the broadband resources of the region and offer a mix of direct marketing and [e-commerce] business-to-business services.”
iBelay.com will invest between $500,000 and $4 million in early-stage, Internet companies based in Colorado and outlying regions. The firm also intends to commit to the first two institutional rounds of financing after a company leaves the incubator. The “Accelerator” incubator will conceive approximately half of the fund’s portfolio companies. Estler plans to launch additional regional incubators in late 2000. From the outset, iBelay.com is structured to ultimately become a publicly traded enterprise.
“The plan is to create a national infrastructure (of incubators) that CMGI Corp. and the Internet Capital Group lack,” Estler said. “If we don’t go public, we can help one of these larger companies grow or become acquired by a later-stage venture firm such as Redpoint [Ventures].”
The accelerator, which is wholly-owned by the fund, employs 32 technicians to develop iBelay.com portfolio companies. Estler said MatchLogic’s promotional resources will be used to market iBelay.com’s investments.
Terms of the fund include an 80%/20% carried interest split and 2.5% management fee. The fund’s limited partners have agreed to roll proceeds back into the fund indefinitely.
“They are going for the snowball effect with a different kind of exit strategy,” Estler said. “Ultimately this will bring more money back to the table.”
The firm expected to close on at least two more investments by the end of 1999.