Venture Capital – Protege receives 2nd round of funding

Protege, which describes itself as Europe’s leading Econet, has announced that it has secured a second round of funding worth $45 million (e48 million). There are five investors, all with strategic interests. Larry Levy , chief executive at Protege, says of this fund raising: “We now have all the capital , exposure, and platform we need to become a one billion dollar business.” He did not rule out a flotation further down the road for the Protege Econet, which consists of three businesses – CITRIA, VIRTUAL MANAGEMENT and iCocoon.

The investors are: American Express Company, which is making minority investments in emerging Internet companies and building strategic marketing alliances and supplier agreements with such companies; Bridgepoint Capital (formerly NatWest Equity Partners), which will use its strategic investment to leverage e-commerce opportunities within its existing portfolio companies – currently numbering around 200; Partech International, a US-based technology venture capital firm interested in startups and emerging growth companies; and Washington-based venture capital firm Vulcan Ventures. Both Partech and Vulcan intend to work with Protege – and more specifically with VIRTUAL MANAGEMENT – to bring their portfolio companies to Europe.

Around 80 per cent of the $45 million will be directed to VIRTUAL MANAGEMENT and CITRA and the remainder to iCocoon.

The existence of three businesses within Protege helps explains the Econet tag. CITRIA develops and implements e-business solutions for corporates and Internet startups, and VIRTUAL MANAGEMENT accelerates the entry of US Internet businesses into Europe. CITRIA was set up in August 1998 and VIRTUAL MANAGEMENT has been around since Protege’s chief executive, Larry Levy, set up the business in 1996. iCocoon is the latest addition to the Protege stable and was launched in November last year following a

$20 million investment from Global Retail Partners, a US- and UK-based venture capital fund specialising in e-commerce investment.

At the same time as announcing its second round of financing, Protege has also launched an incubated company called AdvertExpress.com, an online exchange for the buying and selling of advertising space by small and medium -sized companies. AdvertExpress.com was incubated through Protege’s incubator business iCocoon. At the same time it went live with Boatastic.com – another iCocoon business. Recently, through its VIRTUAL MANAGEMENT arm, Protege has signed agreements with Intraspect Software Inc to manage its European business expansion, and it will do the same for FaceTime Communications Inc. Part of the deal with Intraspect Software Inc included participation in a $26 million round of corporate funding.

According to Levy, Protege’s current equity holdings in iCocoon companies average around 68 per cent but they expect this to drop to between 50 per cent to 60 per cent with the participation of Bridgepoint, as outlined earlier. Whereas for VIRTUAL MANAGEMENT assisted companies the average equity stake, taken in the parent company, rests between two per cent to five per cent.

Levy set up Protege in 1996 following his departure from Delrina, a software developer, which was bought by Symantec, a developer of utility software products, in November 1995. Despite now employing 200 people Levy built his senior management team over time. Chris Potts, who has responsibility for CITRIA, joined from Mondex International, where he was the deputy CEO, in the middle of last year. And Simon Edwards joined at the start of this year from Systems Union to run the VIRTUAL MANAGEMENT business. Levy chooses the iCocoon investments and manages the fund raising and investor relations process.

Towards the end of July Protege’s 200 employees (12 of which belong to iCocoon) will regroup from their disparate locations to one office in Holborn Viaduct in the City of London.

Protege has commissioned a report that teams up the Online Research Agency with the London Business School to highlight areas of concern regarding e-strategies and technologies for over 450 heads of Internet within companies throughout Europe – the release date for the report is 29 June.