VC Firm Closes Record Internet Fund

Venture capital firm Technology Crossover Ventures (TCV) announced today that it has set a new watermark in the flood of venture capital money washing over Internet companies by closing a $1.6 billion (US$) fund.

The Palo Alto, California-based firm said that 100 institutional investors, 15 investment banks and over 150 leading Internet executives participated in the fund, which it says is a record for the Internet industry.

Earlier this month, Internet investor CMGI (Nasdaq: CMGI) joined with Hicks Muse Tate & Furst and Hong-Kong-based Internet company Pacific Century CyberWorks to launch a $1.5 billion fund, while Internet incubator Idealab! raised $1 billion from investors.

TCV said it will continue to concentrate on five growth sectors of the Internet: e-business applications; Internet infrastructure; Internet services; business-to consumer and business-to-business.

“There is tremendous opportunity and upside in these sectors, as the Internet continues to transform the economics of global business,” said TCV co-founder and general partner Rick Kimball.

Playing to Win

The firm’s other co-founder, Jay Hoag, said that the fund would send a signal to its portfolio companies that it has the resources to help them climb over lesser-backed companies in order to achieve market share.

“Internet history has shown us that the number one and two players in each market category receive huge awards, while the rest risk being marginalized,” said Hoag. “With a fund this size, our portfolio companies know that they have the access to the capital required to be the leaders on the Internet.”

TCV has invested in more than 100 companies since its inception in 1995. In 1999 alone, 15 of those companies went public, including B2B star Ariba Technologies (Nasdaq: ARBA), Alteon Websystems (Nasdaq: ATON), Homestore.com (Nasdaq: HOMS) and MyPoints.com (Nasdaq: MYPT).

Its 15 companies had offered a 239 percent return by the first of the year, with Ariba, MyPoints.com, Homestore.com and Alteon Websystems all faring quite well. Others, like Mortgage.com (Nasdaq: MDCM), Autoweb (Nasdaq: AWEB) and iVillage (Nasdaq: IVIL) have slumped, but not enough to cause more than a minor dent.

This latest fund will pad some very fat venture capital funding for the Internet industry. Last year, 3,619 companies received $48.3 billion from venture capital firms, up from $19.3 billion in 1998. A large percentage of those companies were Internet-related.