BuyandHold.com Keeps on Selling

Armed with plans to help long-term investors participate in an online broker-dealer revolution that has, thus far, catered primarily to day traders and college students, BuyandHold.com Inc. recently netted $42 million in its second round of venture capital financing.

The company came into the deal looking for a pre-money valuation of approximately $80 million and was adequately rewarded with a post-money number of $122 million.

TH Lee.Putnam Internet Partners (THLi) and Goldman, Sachs & Co. co-led the transaction. Each firm pumped $10 million into the New York-based issuer and will each take a BuyandHold.com board seat as part of the private placement agreement.

“This deal came to us from Goldman, which is an investor in our fund, and was already looking at the transaction,” said Jim Brown, managing director with THLi. “We initially had the… reaction that they were just another online broker, and that we’d seen thousands of those, but the due diligence showed us that they really had a different approach and quality technology backing them up.”

Additional participants in the deal included Dominion Ventures and existing investors APV Technology Partners, The Bank of New York, The Roman Arch Funds, Platform Ventures and Barnard & Co.

“We were the 215th online broker out there, but we have one major strategic differentiation: we buy in real dollars,” said Peter Breen, co-founder and chief executive of BuyandHold.com. “We want to treat the securities market like a 401K.”

And, so far, investors seem to have embraced Breen’s sales pitch. The company already serves 70,000 customers and expects that figure to explode in the upcoming months as deals are struck with various strategic partners.

“All of the online brokers combined have about 200 million accounts, or users,” Brown said. “BuyandHold is targeting the other 58 million Internet users, and they don’t yet have much competition in that space.”

The company, whose broker-dealer business operates under the name BuyandHold Securities Corp., had previously raised $7.9 million in a Series A deal last August and hopes to begin marketing a strategic third round later this year.

“When you’re talking about investible assets, we’re competing against everything from the mattress to the mutual fund, but I think that this deal shows that people feel we have the right formula here,” Breen said. He added that proceeds from the transaction will be used primarily for infrastructure expansion and technology enhancement.