Acacia Research Corp., a publicly traded financial services firm that invests in biotechnology and information technology, last month formed Acacia Launchpad LLC, an Internet incubator.
Concurrent with the formation of Launchpad, Acacia raised $10.5 million through the exercise of warrants to purchase 1.2 million shares of the company’s common stock. The warrants were issued to undisclosed investors in conjunction with prior private equity rounds.
Pasadena, Calif.-based Acacia hopes to emulate the success of Internet Capital Group and CMGI Corp., firms that derive much of their capital from the public markets. After making seed-stage investments of between $500,000 and $1 million, Acacia often leads its portfolio companies in their first external rounds of funding.
“Some of the smaller people in the field are losing valuable lead time when making the transition to a larger round of financing,” said Chief Executive Paul Ryan. “We can provide that internally and also line companies up with co-investors.”
Ryan added that Acacia differs from larger, privately held incubators-including its neighbor idealab!-by retaining a controlling interest in its portfolio companies.
“We have been doing this on a less formalized basis since 1996,” he said. “We like to hold a majority interest in a group of companies and not just wait for a liquidity event.”
Acacia owns 67% of Soundview Technologies Inc., the company that owns the patent for the V-Chip, and 74% of Soundbreak.com Inc., a youth-oriented music site. In October, Soundbreak.com raised $7.5 million in its second round of venture financing.
While Launchpad invests mostly in business-to-business and business-to-consumer e-commerce, Ryan said the firm invests in companies that catalyze the convergence of new and traditional media.
“The next generation of the Internet will be engaged in specialized commerce, content and entertainment,” he said. “Media will not just be a static Web page.”
Ryan recruited both software and entertainment executives to sit on Launchpad’s board of advisors, including former NBC.com General Manager and Soundbreak.com CEO Lisa Crane, and Philip Engelhardt, a consultant to Silicon Graphics, Lucasfilm Ltd and Columbia Pictures.