Launching an acquisition strategy directly alongside a more traditional venture investment, Frontenac Co. of Chicago recently led investments totaling $55 million in two e-business service companies.
Redshift Interactive of Boulder, Colo., closed its first acquisition last month, with financing for the transaction coming from Frontenac’s $30 million equity commitment. The company wants to become a single-source provider of a full range of e-business services to middle market companies.
“We think the middle market has greater opportunity,” said Greg Jacobsen, president and chief executive of Redshift. “[Companies] will gain access to talent and skills that they may not be able to recruit.”
Redshift’s first acquisition was XOR Network Engineering. Founded in 1991, XOR provides strategic planning, design, architecture, outsourcing and operations support. The company combines technical networking experience with e-business expertise. Clients include Hewlett-Packard, Whole Foods and Times Mirror Interzines.
Leveraging a Networking Approach
This first acquisition represents Mr. Jacobsen’s intention for Redshift to serve businesses that need help executing e-commerce plays, be they business-to-business or business-to-consumer. Redshift approaches Internet-related professional services from a networking background. Mr. Jacobsen said other service providers approach the market from an agency background, creating the opportunity for his company to stand out through its technical capabilities.
“Greg’s point of view is that the middle markets want a total solution … and a vendor that designs, architects and outsources the network for those applications,” said Paul Carbery, a general partner at Frontenac.
Mr. Jacobsen said the company intends to complete approximately one acquisition per quarter, a pace that he would like to maintain for the next six quarters. Mr. Carbery indicated that the $30 million would likely support the first three to four acquisitions, at which time the company could have enough organic growth to forego additional private equity commitments.
In a separate transaction, Frontenac led Lante Corp.’s recent $25 million private equity financing. Dell Computer Co. and members of Lante’s advisory board also invested in the Chicago-based company’s first institutional round of financing.
Lante focuses its business on companies that have a desire to integrate the Internet into strategic and operations plans, said Rick Gray, a vice president at the company. After a client has decided to begin a Web initiative, Lante creates, launches and improves business-based Internet applications to support the plan.
“We are exclusively focused on Internet business ventures, whether they are business-to-business or business-to-consumer,” Mr. Gray said.
The company received initial funding of approximately $4 million from its board of advisers last year.
In addition to the capital infusion, Lante also recently named Rudy Puryear president and CEO. Puryear comes to the company from Andersen Consulting, where he was global managing partner in eCommerce.