Rather than shying away from online financial services companies during these tough market times, Mellon Ventures Inc. continues to embrace them with open arms and money. Last week the Boston-based VC put money into the hands of RunMoney Corp., a b-to-b provider of money management tools, and Princeton eCom, an online bill payment service.
Such disbursements should come as little surprise considering that Mellon has put over 35% of its funds into Internet-related companies and over $42.5 million into financial service companies, according to our VentureXpert database. Paul Cohn, the principle at Mellon Ventures who took a board seat at RunMoney, said Mellon does not focus on the online financial services sector but simply receives an extraordinary amount of dealflow related to its parent company, Mellon Financial Corp.
As for Mellon Ventures being so Internet-heavy, CEO Larry Mock said the sector represents high growth opportunities. He added that while the overall market downturn is not having too significant an impact on its investment activity, Mellon Ventures is committing less capital to deals than it was last year.
Indeed, the VC only invested a total of $5 million into San Diego-based RunMoney, while the final $3.5 million came through last week. RunMoney, which initially developed its product for direct consumer use but now creates fee-based management accounts, plans to use the cash to keep developing its products, growing its business and building the back office.
Stuart Rockett, a spokesman for RunMoney, said the demand for his company’s service has increased in light of the falling stock markets. “Investors are looking for more control and more involvement with their money. For companies to set this up on their own, it would cost a great deal and take a long time. [We give them] the ability to set up in three months.”
While the $5 million infusion by Mellon does not seem like a lot, it is the most RunMoney has ever received. Rockett said while Mellon wanted to invest more, RunMoney didn’t want to accept it because all 40 RunMoney employees are shareholders and management is very cautious about overselling the company and lowering the number of shares the employees own. To date the company has raised $9.2 million. Individual investors with financial backgrounds invested in the first two rounds, with its Series A closing in December 1999 with $1.8 million and the Series B finishing with $2.4 million.
The company’s future financing plans were unclear, but an IPO is not out of the question. Rockett expects to company to be profitable by the end of this year.
Cohn said he was unsure about Mellon’s future plans with RunMoney, however assuming RunMoney reaches its goals Mellon will continue to support it. Mellon has supported similar financial services companies like ecredit.com, investorforce.com and financeware.com.
Unlike RunMoney, Princeton eCom has already been lucky enough to receive its second investment from Mellon. The Princeton, N.J.-based company last week completed a Series D deal for $20 million in convertible debt financing with an infusion from New Century Equity Holdings Corp. and Mellon contributing $5 million.
The company’s previous investors include SG Capital Partners LLC, Bottomline Technologies, Terra Lycos Ventures L.P. and BT Investment Partners Inc.
Princeton eCom, which boasts a client roster of over 900 banks and billers, provides services to such firms as Verizon Wireless, Time Warner Cable, Cingular Wireless, GMAC Financial Services, UPS Capital, United Technologies, Mellon Global Cash Management and FiServ.
The 16-year-old company has not reached profitability, but expects to by 2002 and has received a total of $71 million in financing.
Contact Danielle Fugazy.