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Novell invests in start-ups

The software provider mimics venture capitalists such as Kleiner Perkins with $9 million in investments from its fund for new, Net-oriented companies.

Network software provider Novell dipped into its coffers and made a second round of investments in start-ups today totaling $9 million, underscoring the company's interest in Java and directory-based application development.

Novell's $50 million Internet Equity Fund (IEF) is an internally managed tool to spur development for the Java programming language--a key component in the company's renewed drive to attract developers--as well as the firm's own Novell directory services.

The fund is distinct from venture capital efforts such as Kleiner Perkins Caufield & Byers' Java Fund--a portfolio of which Novell is also a part.

Novell executives admit that the fund, unlike KPCB's more agnostic approach, is intended to benefit the company's own strategy, rather than just seed start-ups with a compelling proposition.

"If there isn't a tie back into Novell technology, we probably would pass," said Blake Modersitzki, director of strategic investments for Novell.

One of the best-kept secrets in the highly competitive server-based software industry is the $1 billion in cash Novell has tucked away for safe keeping. The company is now using those funds to build on the initial success it has seen since chief executive Eric Schmidt came to the company early last year.

About one-third of the initial $50 million in available IEF cash is now distributed among nine start-ups, according to the company. The $100 million KPCB Java Fund lists 18 investments so far on its Web site.

The companies included in Novell's latest round of funding are as follows: Orbital Software, Oblix, NetObjects, ObjectSpace, and enCommerce.

The five investments build on an initial round involving four companies, announced in August. Companies in that round include: Evergreen Internet, GlobalCast Communications, NetPro Computing, and NetVision.

Novell executives said they chose the latest five companies from a pool of "hundreds and hundreds."

"The Internet Equity Fund continues to make investments in companies that will accelerate the growth of the directory," Modersitzki said. "Absolutely, we'll continue to make investments in Java-related technology."

Just last week, Novell released a toolkit for Java-based developers who want to take advantage of Novell's NetWare operating system and associated services, such as its directory.