CMGI Will Continue to Fund Venture Capital Arm

Baldwin Louie — Fri, 09 Mar 2001 17:00:00 -0500

BOSTON (Reuters) - CMGI (CMGI) Inc., which operates several Internet companies, on Friday denied a newspaper report that said its once high-flying venture capital arm had run out of money amid large-scale restructuring to make the company profitable.
Andover, Mass.-based CMGI said its board remains committed to its +Ventures fund, which has helped launch dozens of technology start-up companies over the past few years such as Lycos (LCOS) Inc. and Yahoo (YHOO)! Inc. CMGI issued a statement denying a Friday report in the San Jose Mercury News that said +Ventures has run out of money and is unable to fund its portfolio of companies, CMGI spokeswoman Deidre Moore said.
"There was a lot of speculation that our investment in +Ventures may suffer from the restructuring," Moore said.
CMGI's early venture capital investments in companies such as Lycos and Yahoo! have reaped tremendous financial windfalls. During CMGI's fiscal first quarter that ended Oct. 31, for example, +Ventures generated net pretax gains of about $629 million, CMGI said.
The gains primarily came from the sale of Lycos, Kana Communications (KANA) Inc. and Yahoo! stock. From its inception in 1995 through July 31, 2000, CMGI's +Ventures fund posted a total return of 3,357 percent for investments that had liquidity events, according to CMGI financial statements.
The venture capital arm fueled the run-up of CMGI's stock in 1998 and 1999, in particular, when Wall Street snapped up shares from a string of its investments that went public. But when the initial public offering market for Internet shares dried up, CMGI's stock went into a tailspin.
During the past year alone, CMGI's shares have lost more than 90 percent of their value, and were trading down 3/16, or 4.35 percent, to $4-1/8 in Friday afternoon trade on the Nasdaq.
Meanwhile, the company acknowledged that +Ventures' investment pace will continue to slow.
"We expect to continue making follow-on investments in existing portfolio companies successfully executing on their business plans, as well as a select number of new investments which represent promising opportunities for CMGI," said David Wetherell, CMGI's chairman.
"In recent months, +Ventures has realigned its investment practice to focus on fewer new investments, with activity concentrated on earlier stage businesses emphasizing enabling technologies."
Copyright 2001, Reuters News Service

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CMGI Will Continue to Fund Venture Capital Arm