Capital Z Leads Minority Rounds In Two Financial Services Companies

There is no dearth of opinions available on the Internet, particularly on investment ideas. To divide the plums from the pits, iExchange.com has developed a technology that allows users a superior service to the myriad opinions posted on investment bulletin boardsthe performance of people that post opinions is tracked by the company, so visitors can determine the precise value of the advice being doled out.

The company closed its second round of financing on $28.5 million in late December. Capital Z Partners of New York led the transaction, investing through Capital Z Financial Services Fund II LP. Comdisco Ventures was the other new investor in the round that saw both existing institutional investorsidealab! Capital Partners and Kleiner Perkins Caufield & Byersre-up.

“We didn’t plan to raise more money until February,” said David Eisner, chief executive and president of iExchange. “But we made a handful of introductory visits last fall … and Capital Z came back with a very compelling proposal.”

Eisner said the company would use proceeds from the offering to continue developing the infrastructure needed to finish development of the services needed to complete the technology behind the company’s service as well as speed up marketing expenditures that will target a broad array of potential users.

“Our technology is applicable to just about everybody with a stock and bond portfolio,” Eisner said.

The concept behind iExchange is to offer a marketplace for investment ideas that offers accountability. Anyone that posts an opinion on the site will have performance tracked by the company, and that performance will be scored and ranked among all the other analysts on the site.

“We like this company as a unique platform to sell ideas,” said Adam Mizel, a partner with Capital Z. “It is a simple and elegant Internet business play.”

Eisner said the business model for the company consists of permitting its non-professional analysts to establish a performance record that becomes strong enough for the users to sell future ideas to prospective clients.

“This is a much safer [investment] alternative to anything online, and it’s safer in some ways than offline alternatives,” Eisner said.

He declined to say when the firm might seek its next round of financing, or if the capital would come from the public or private markets.

Following the transaction, Mizel joined the iExchange board of directors.

In a separate transaction, Capital Z led a $40 million funding of Derivion, an Atlanta-based application service provider of electronic bill presentment and payment services.

Additional commitments came from GE Financial Assurance, Zurich U.S. Farmers Group Inc., Access Technology Fund and Derivion’s existing investors – NeoCarta Ventures, PTEKVentures.com and Fuqua Capital. Derivion has raised $54 million in private financing since being founded in 1998.

“As we looked at the finance landscape, [we saw] bill presentment and payment as a key that will be expanded on the Internet,” Mizel said.