BOSTON – Continuing the explosion of new incubators onto the venture scene, Softbank Corp. and Intercontinental Group of Boston have joined forces to launch I-Group HotBank NE.
I-Group HotBank will focus on providing New England businesses with what managing director Ellen Roy described as mentor capital, a concept that provides selected companies with access to an array of operational expertise.
“This is a strategic play,” Roy said. “We are a private equity incubator, and every company that comes in gets an accelerator kit that is designed to shave off three to six months of development time.”
I-Group will operate as an evergreen fund, with initial capitalization of $30 million from Softbank. The group will fund each company that joins the incubator with $1 million to $2 million, which will be its first private equity financing.
Roy said the group planned to allow some co-investment opportunities for angel investors; however, the firm will always take more than 50% of any investment.
“The mentor capital idea is that the managing directors provide guidance, and also provide key relationships with mentors beyond us,” Roy said.
Possible Deal Sharing
Although there is no investment agreement that would grant Softbank first crack at companies that graduate from the I-Group incubator, Roy said there is hope that the firm would participate in those deals. However, she noted that Softbank would never price deals of I-Group graduates.
The new group plans to participate in 10 to 15 deals per year in three main Internet areas – business-to-business, business-to-consumer and infrastructure. The four managing directors – Roy, her brother Stephen Roy, Jordan Levy and Ron Schreiber – can operate comfortably across each of these areas, Roy said.
The two Roys founded IEG, an electric generation supply company that operated in the United States and internationally. Ellen began her career at Prudential Venture Capital as an associate on the $350 million fund.
Prior to founding I-Group, Schreiber participated in the founding of two companies and was chief executive of the Upgrade Corp. of America, the predecessor to Softbank Services Group. He is also managing partner in Seed Capital Partners.
Levy also serves as managing partner at Seed Capital, and he is vice chairman of ClientLogic Corp. The two also collaborated to found Reciprocal Inc., a provider of digital rights management solutions.