WASHINGTON, D.C. – In an effort to capitalize on the glut of technological talent in the District of Columbia, three local entrepreneurs recently joined together to launch VenCatalyst Inc., a technology company incubator that plans to make six seed-stage investments in the next 18 months.
While VenCatalyst has raised capital from several undisclosed outside investors, Managing Director Richard Powell said the firm will not operate as a limited partnership, at least for the time being. The founding partners will combine their own capital with these outside commitments to invest between $50,000 and $300,000 in early-stage companies in the Internet, wireless, information and technology commercialization industries. In return for a capital investment, as well as technical and operational support, VenCatalyst will claim a 30% equity stake in its portfolio companies.
“As consultants, my partners and I recognized how effective the idealab! model is,” Powell said. “So, we decided to leave the consulting business.”
Prior to forming VenCatalyst, Powell served as chief knowledge officer at Burson-Marsteller, a communications consulting firm. The firm’s other managing directors are Andrew Stern, who founded e-commerce solutions provider Logex International L.L.C., and David Bohigian, a former equity partner at Jefferson Partners.
NetCatalyst will close its first two investments, both Washington D.C.-based companies, later this month. Powell said the firm will focus almost exclusively on companies based in the Washington D.C. and outlying Mid-Atlantic areas. According to a recent study in BusinessWeek, Washington D.C. is the nation’s third largest region hosting technology jobs – exceeding 300,000 – placing it behind only Silicon Valley and the Route 128 Corridor outside Boston.
Powell said the partners at VenCatalyst would evaluate operating as a limited partnership after it makes its first series of investments.
“We will consider operating as an investment fund for later round financing, once we get the incubator up and running,” he said. “We will wait and see what happens to the first six companies we bring in-house.”