Investment firm eyes e-commerce
Attention e-commerce start-ups--El Dorado Ventures has earmarked $40 million in venture capital for young Net commerce companies.
The venture capital firm likens its e-commerce emphasis to the Java Fund, launched in August 1996 by Kleiner, Perkins, Caufield & Byers (KPCB) to invest in start-ups using the Java technology.
"Some of the most significant upside in the venture capital community in the next 10 years will be in e-business and e-commerce," said George Hoyem, who has joined El Dorado to head its Net commerce push. Hoyem most recently ran the Internet payments operation of payment technology firm VeriFone, now a subsidiary of Hewlett-Packard.
El Dorado will put about half of its $82 million venture fund into e-commerce, likely stressing business-oriented firms rather than those catering to the consumer market. The firm will make seed investments of less than $1 million in e-commerce start-ups.
That's a similar approach to Interactive Minds, a technology consultancy and executive recruiter that last September moved into the VC game with a $5 million fund for e-commerce and online firms.
Many Silicon Valley start-ups rely initially on so-called "angel money," generally from successful high-tech entrepreneurs who invest in new companies. El Dorado will take an angel-friendly approach, relying on these private investors to generate potential deals for funding, Hoyem said.
El Dorado is not the first venture firm to hire an executive from an Internet commerce firm. Kleiner Perkins last month hired former Microsoft exec Peter Neupert, who guided Microsoft's foray into new media, to "dabble in e-commerce." He was quickly named part-time CEO of Kleiner Perkins investment DrugStore.com, soon to launch as an online pharmacy.
Magdalena Yesil, a cofounder at payments firm CyberCash, is now a partner with U.S. Venture Partners, which specializes in retail and technology firms.
El Dorado is interested in several segments within the e-commerce market, Hoyem said, including firms working with XML (eXtensible Markup Language) like current investment Poet Software; Internet billing, application service providers (ASPs) that host Web applications for corporate users, and special-interest sites that emphasis e-commerce revenues as well as advertising.
Recent El Dorado investments in e-commerce include HotData, a service that collects and updates data from multiple databases to round out profiles of individuals or companies, and SmartAge, an e-commerce site focused on the small office, home office market.
Among El Dorado's best-known venture investments are ISP EarthLink Network, Poet, special-interest site Women.com Networks, and secure Web hosting service Pilot Network Services, which went public last month.