Although most of its incubator cousins wised up and abandoned the urge to nurture start-ups after the dotcom boom went bust, Pasadena, Calif.-based idealab! doesn’t seem willing to let go just yet. Despite its laundry list of failed start-ups, the once widely-ballyhooed Internet incubator recently returned to the drawing board again and conceived yet another protege, called Partsearch Technologies.
The company is currently shopping its Series A offering to venture capital investors and hopes to seal the deal by mid-May, said Glenn Laumeister, a former idealab! employee who recently joined Partsearch as its CEO.
This time around, Partsearch is looking for between $1 million to $2 million, and will likely return to the private equity market later this year to raise additional capital. All tolled, the company will need about $5 million worth of venture capital to reach profitability next year, he added.
To date, Partsearch has met with three or four undisclosed institutional investors in the New York area, as well as a few high-net-worth individuals, Laumeister said. Interestingly, it has not approached Clearstone Venture Partners, the venture house formerly known as Idealab Capital Partners. Laumeister explained that New York-based Partsearch is targeting mostly local investors.
“We haven’t had talks with Clearstone, but the only reason is that they tend to do most of their deals on the West Coast, and I think they generally do later-stage deals that are a little larger,” he said. “We’ve tended to work with people we know in New York City because they’re close, and most VCs like to invest in early-stage companies that are very close to them geographically.”
As such, Howard Morgan, vice chairman and president of idealab! New York confirmed that his firm is talking with Partsearch about the possibility of participating in its first VC round, and said that he would likely put up some angel money as well.
“Idealab! put up some seed money for Partsearch, and it occasionally does follow-on rounds, but not as a matter of policy,” Morgan said. “However, it is looking at doing a follow-on [in this case].”
One-Stop Parts Shop
Partsearch, which provides an end-to-end service that essentially streamlines the way large-scale retailers and service technicians obtain replacement parts and accessories, announced last week that it signed on Best Buy as its first customer. Neither Best Buy nor Partsearch would confirm if the electronics retail behemoth would come on board as a strategic investor in this round.
For now, Best Buy has teamed with Partsearch in order to reap the benefits of the start-up’s online catalogue, which contains more than 5 million SKUs for all manner of replacement parts, from laptop batteries to dishwasher baskets. Currently, it only provides external accessories, but eventually plans to expand its offerings to include internal replacement parts as well, said Lowell Peters, Best Buy’s senior vice president of services.
Moreover, Best Buy hopes that Partsearch’s technology may someday be adopted as the industry standard, as the present methodology used to procure replacement parts is extremely fragmented. At times, a store may use up to 70 suppliers to obtain all of the replacement parts it needs, creating longer repair times and causing consumers undue frustration, Peters explained.
“[The procurement process] tends to be one of the last things that’s thought about in the process of providing a product to the marketplace,” he added. “There isn’t the consistency around it that we’d like to see.”
With Partsearch, however, a retailer has a one-stop shop that can fulfill all of its parts needs. What is more, a customer that has lost his television remote, for example, can get a special toll free number from the store where he bought the original, and call Partsearch directly to replace the part.
“Most retailers have the same needs [as Best Buy],” he added. “When we go to talk to them, it’s not so much a matter of whether they want to do it or not do it, but it’s a matter of how they’ll do it, how they’ll communicate in stores and how they’ll set up for it. Most agree [Partsearch] is a simple, logical solution for them.”
Currently, the company has 16 employees and still resides inside the idealab! incubator. It plans to use some of the money it raises in two upcoming venture rounds to hire more employees and lease office space. It will also make additional investments in hardware and infrastructure, Laumeister said.
Contact Robyn Kurdek.