AV Pumps $125M Into IT Incubator

After closing a whopping $1.25 billion fund earlier this year, Austin Ventures recently invested $125 million of it into AV Labs, a seed-stage investment operation that the private equity giant spun out in 1999. AV Labs, which invests exclusively in Austin-based companies, will commit its newfound capital to roughly 35 Internet-related companies over the next three years.

“We are not investing in b-to-c or b-to-b e-commerce. What we are investing in is infrastructure,” said Tommy Davenport, vice president of finance and operations at AV Labs.

While Davenport would not disclose which lucky companies would receive funding from his company, he did say that the incubator is in talks with many potential portfolio compnies and plans on making some investments during next quarter. It will not likely invest more than $6 million in any particular play.

As with many firms that invest at the concept level, AV Labs is prepared to offer more than funding. If necessary, the Austin-based company will bring together management teams and provide consultancy services.

“At the end of the day it is the quality of the people that make a difference,” Davenport said. “If they don’t have the capacity to fill spots, we help them fill the gaps.” In some cases, AV Labs will also furnish an office space.

The second fund comes on the heels of the firm’s initial $60 million vehicle, which closed in December 1999. The accelerator provided early-stage capital to 23 Austin-based software and Internet companies including Allmystuff, Covasoft, dForward, eCity Limits, Excalium, FLQ, Lane15, MediaPrise, Newgistics, Salion, Telconic, Terrace Mountain and Waveset. Even with most of the first fund’s money tied up in investments, Davenport said there is still a bit of dry powder lying around that is expected to be fully vested in the next quarter.

Moreover, while AV does not have the right of first refusal on any of AV Labs’ portfolio companies, the parent company has provided additional funding to more than half of the companies funded by AV Labs, which reserves the right to be a follow-on investor.

Contact Danielle Fugazy.