Some E*Trade Customers To Gain Access to Start-Ups
By REBECCA BUCKMAN
Staff Reporter of THE WALL STREET JOURNAL
September 14, 1999
interactive.wsj.com
First, online investors got a crack at hot initial public stock offerings. Now, a small number of wealthy customers at E*Trade Group could get their hands on even riskier investments: early-stage companies in search of venture capital.
E*Trade, of Menlo Park, Calif., said Monday that it had formed a strategic alliance with Garage.com, a Palo Alto, Calif., company that uses the Internet to connect qualified investors with fledgling start-up firms in need of funding.
See more in-depth information on initial public offerings.
Though only very sophisticated, wealthy investors would likely be eligible to participate, said Tom Bevilacqua, E*Trade's executive vice president for corporate development and strategic investments, E*Trade is "actively working to develop programs whereby our customers would have access to [Garage.com's] originated deals."
So far this year, Garage.com says it has helped 20 start-ups raise about $60 million from venture-capital outfits, "angel" investors and corporations.
Garage.com screens business plans and posts information about the best ones on its Web site (www.garage.com), allowing investors -- who have paid a fee to participate -- to get in on the action.
Mr. Bevilacqua acknowledged that the vast majority of E*Trade investors wouldn't qualify to participate, but said "more than a couple of hundred" could be eligible. And "from a regulatory standpoint, we've got some work to do," since securities regulators have strict rules about who can invest in such speculative deals, he added.
By sitting on Garage.com's board and becoming involved in its operations, E*Trade will also get an early look at new companies using cutting-edge technology that E*Trade might use in its own business, Mr. Bevilacqua said.
E*Trade led a $12 million round of financing for Garage.com, contributing about half the funding, said Mr. Bevilacqua. Under terms of the deal, E*Trade will take a stake of 5% to 10% in Garage.com and Mr. Bevilacqua will join the company's board.
The other investors in the Garage.com financing are Mayfield Fund; Credit Suisse Group's Credit Suisse First Boston Technology Group; and Advanced Technology Ventures, Garage.com said. Garage.com was founded two years ago by former Apple Computer executive Guy Kawasaki. |
