Having found success for itself on the Internet-crazy stock market of the late 1990s, Lycos, Inc. (Nasdaq: LCOS) is now reaching out to help find funding for online start-up companies. The search engine operator this week founded Lycos Ventures L.P., a venture capital fund that pools money from a handful of Internet investors.
The Waltham, Massachusetts-based portal and online community said that it would contribute $10 million (US$) to the fund, with the rest coming from partners, Bear Stearns, Mellon Ventures, Mirae Corporation, Sumitomo Corporation, Vulcan Ventures and others.
Lycos says it will be choosy about which companies it invests in, planning to support fledgling firms that could have a strategic benefit to Lycos in the future. By offering start-up cash alongside its usual technology, content and commercial agreements and partnership options, Lycos hopes to be a one-stop shop for these new companies.
With nearly 50 percent of Internet users visiting Lycos sites each month, affiliated companies have access to a high level of visibility and brand power by teaming with Lycos.
Initially, Lycos Ventures will focus on companies involved in electronic commerce, online media, or other Internet technology development. “The fund gives us the leverage to increase our investment position in a balanced, risk-managed fashion with select partners,” Lycos CEO Bob Davis said. “This is the classic win-win.”
Younger businesses get funding and with it distribution on the Lycos Network, the investment risk and reward is shared by Lycos and our partners and, finally, Lycos puts itself in a position of strategic influence with many of the companies that are developing next generation offerings even though the outlay of our capital is minimal.”
The fund will be managed by Dennis Ciccone, the former CEO of WiseWire, an April 1998 Lycos acquisition. Venture capital management firm Triangle Capital Corp., through its Lycos Triangle Joint Venture, will provide operational and administrative support.
Planting the Seed
Lycos is already well extended as an Internet investor. The company has stakes in Mail.com, auction creator Fairmarket, Amazon.com’s PlanetAll, online investment banking firm Wit Capital Group, Inc. and several others.
Lycos says it has seen considerable success from these initial investments, prompting its move into the full-fledged venture capital business. For example, the company’s $4 million investment in Mail.com in late 1997 is now worth more than $40 milion. Lycos’ investment in PlanetAll has shown a 300 percent return.
The brainchild of Carnegie Mellon University, Lycos is one of the most visited sites on the Web, reaching nearly 50 percent of Internet users. The company’s network consists of Lycos.com, Tripod, WhoWhere, AngelFire, MailCity, HotBot, HotWired, Wired News, Webmonkey, Suck.com and MyTime.com.