IBM, others join e-venture fund rush
- 20 December, 1999 12:56
The rush by technology firms to finance e-commerce ventures is gaining momentum.
IBM last week announced an alliance with Ernst & Young under which IBM's Global Financing group will provide financing for e-commerce projects by Ernst & Young clients.
Ernst & Young's customers are expected to use nearly $500 million in IBM funding during the next year, said Sam Khanna, an IBM vice president.
In a similar move, Andersen Consulting said it's forming a venture capital firm, called Andersen Consulting Ventures, that will invest $1 billion over the next five years in e-commerce businesses. Andersen will spend $500 million of its own money; the rest will come from venture capital firms.
As part of its financing arrangements, Andersen's new unit will in some cases also get into equity arrangements with dot-com start-ups.
Another integrator, Cambridge Technology Partners, announced plans to set up a fund to help dot-com start-ups.
IBM, Ernst & Young, Andersen and Cambridge Technology join a growing list of companies trying to underwrite the demand for capital that's being created by dot-com start-ups and e-commerce projects, said Gopi Bala, an analyst at The Yankee Group in Boston.
"Companies with ready finance are looking to invest in some fashion in the Internet economy regardless of their core businesses," Bala said. "Look for the trend to grow" as corporations start getting to e-commerce projects that have been put on the back burner by Y2K work, Bala said.
Hewlett-Packard has been one of the most aggressive technology vendors in funding and financing e-commerce ventures. It has set aside $1 billion for that purpose and has been busily signing up partners. HP, for instance, inked a five-year deal with Colorado Springs-based USA.Net. The agreement calls for HP to provide $15 million worth of hardware for an equity stake and a share of USA.Net's future revenue.
Rival Sun Microsystems has been busy, too. The company has a similar financing program for dot-com start-ups. But unlike HP, Sun doesn't plan to get into any equity partnerships with its customers.
"The largest system vendors are trying to give added value" by extending e-commerce-related financing options to customers, said Joyce Becknell, an analyst at Aberdeen Group in Boston.