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Venture Frogs Leap Into Ribbeting Investment Niche

San Francisco venture capitalists Tony Hsieh and Alfred Lin think they have a ribbeting profit model ready to help early stage companies leapfrog their competition.

Hsieh and Lin are the managing partners of Venture Frogs which also operates an incubator facility at 1000 Van Ness Street in downtown San Fran.

Members of the team which founded Link Exchange, now owned by Microsoft (MSFT), Lin and Hsieh weren't jumpy at all about accepting a dare this spring to name their new fund after a green lumpy amphibian.

"A friend of ours has a pet frog named Frisky that she loves and talks to every day," said Hsieh. "When we were trying to think of a name for our investment company, she jokingly told us that if we named it Venture Frogs, she'd give us all her money. So we did, but still haven't seen a cent, " he jokes. On the other hand, a lot of others -- mostly people from Link Exchange or their friends and families -- hopped at the opportunity to invest $27 million in the new VC's first find which closed in April. According to Hsieh, they are currently looking at raising a second fund in the next couple of months.

Hsieh said he and Lin focus on seed and early stage investments in Internet, e-commerce, information, and telecommunications technology companies located in Silicon Valley. So far this year, he said they have made more than a dozen investments ranging in size from $100,000 to $3 million.

The size of equity stakes varies, "Depending on how early stage the company is," Hsieh said. "For early stage investments, anywhere from 10% to 30%, but it really varies on a case-by-case basis. For every three or four early stage investments, we've made one later stage investment, where our stake would be smaller."

Some of the tadpoles they have already nurtured look like big bullfrogs in the pond, including: Ask Jeeves (ASKJ) and NeoPlanet. Others, Hsieh emphasized, are still in "stealth" mode.

Some of these new companies are taking advantage of the fully equipped offices in the incubator space which also provides phone systems, conference rooms, computers, Internet connections and other vital necessities as well as access to legal, financial, engineering and marketing consultants. Hsieh said that the 15,000-square-foot incubator is designed to accommodate 120 people or about 15 start-ups.

Contrary to Kermit's frequent lament, Venture Frogs is finding that it's pretty cool being green, especially when it's the same shade as money.


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