Venture Capital: Investcorp partners 212 Ventures

LBO house Investcorp has agreed a partnership with a newly formed venture capital firm called (212) Ventures that is based in New York. Together they will launch a fund called Investcorp/(212) Ventures Technology Fund I LP with a target of $200 million (EURO220 million). Of this figure, Investcorp has committed $100 million and the rest will come from external sources linked to Investcorp and (212) Ventures and from institutional investors. (212) Ventures says it expects to close the remaining $100 million by the end of the summer and estimates 80 per cent of this will come from institutional and 20 per cent from private investors. Investcorp and (212) Ventures) have already collaborated on three investments from the Investcorp/(212) Ventures Technology Fund I. These are: Mobilelogic, a wireless solutions provider that aims to improve out-of-office productivity;, a direct marketing services company that specialises in building customer relationships through email; and, a marketing services company offering customised direct response on a profile registration pages across a network of affilitated websites.

Investcorp/(212) Ventures fund co-led a $9 million investment with CMGI Adventures for a 20 per cent stake in Mobilelogic. Another $15 million was invested in the company by minority investors Allen & Co, a New York-based investment bank; Apollo Partners; Odyssey; Hikari Tsushen, Japan’s largest cellphone distributor; Ericsson; Softnet; and Henry Kravis of Kohlberg Kravis Roberts, who invested in a private capacity. The fund took a 10 per cent stake for a $5 million investment in middle- stage company Bigfootinteractive, which previously only had strategic investor AXCIOM on board. It also paid $2.5 million for a 15 per cent stake in Mightyseven networks, which previously only had an angel investor involved.

The Fund will invest in Internet picks and shovels’ – that is, companies engaged in activities that enable companies to establish an online capability. Where required investments are too large for the Investcorp/(212) Ventures Technology Fund I, the (212) Venture team will carry out due diligence on behalf of Investcorp which will invest alone in such situations.

The partnership appears to fulfil a number of functions for Investcorp and is in line with its stated intention of widening its US market penetration and globalising its telecommunications and technology investments. For its part, (212) Ventures gets Investcorp branding and financial backing.

(212) Ventures was formed by four partners. Ed Bennett has been involved in the Internet space for a number of years, notably as president and chief executive officer of Internet service provider Prodigy Services. From 1979, he spent 15 years with Viacom. Bennett is also chairman of Mobilelogic. James Altucher has been involved in the Internet space both in an operating and investing capacity, largely through Reset Inc a web development agency based in Silicon Valley, which he started in 1996 and subsequently sold to Xceed Inc. Mark Kennelley is a former managing director of Credit Suisse First Boston’s investment banking group. Alex Guira was MD of Fairlawn Advisors that assists high growth companies in raising finance. Taking seats on the Fund’s investment committee from Investcorp are Savio Tung, Christopher Stadler, and Mamoun Askari.