CMGI Enters B2B

CMGI Inc. enters B2B: Wait they’re already there. [email protected] spoke with
@Venture’s General Partner, Brad Garlinghouse about CMGI’s past success in
B2B and the implications of its new @Ventures $1 billion B2B fund.

Aside from being an online advertising agency, e-business solutions
provider and an operator of leading web companies such as top-tier portal,
AltaVista, CMGI (CMGI) is
best known for its ability to sniff out potential market leaders within the
Internet space that are attacking enormous market opportunities.

on a keiretsu model, the holding company then invests in, incubates and
cross-promotes the partner companies. (Keiretsu is a Japanese business
practice where a family of inter-related companies are able to share best
practices throughout a network).

Investors to this point have rallied behind CMGI’s seemingly flawless
investments in consumer oriented issues (B2C). But on Nov. 22, CMGI
(CMGI) announced the launch of its $1 billion @Ventures business-to-business (B2B)
fund…the incubator’s fourth and largest fund, to date. The company’s past
three successful funds, had a combined capitalization of just $380 million.

Evaluating CMGI’s past investment success and realizing the enormous market
opportunities within B2B e-commerce, Investors pushed CMGI’s stock 18-3/8
higher, or 15 percent, to 143-1/4 on the day of the announcement. The stock
has continued climbing and was trading at 205-3/4 at Tuesday’s close.

I believe investors may have overlooked the fact that a
quarter of CMGI’s investments already occured in the B2B space, prior to the
new fund. Never the less, Investors had good reason to cheer the
announcement of such a fund. Brad Garlinghouse, a general partner of
@Ventures(CMGI’s Venture Capital arm) agreed. We spoke with Brad about
CMGI’s already successful efforts within the B2B space and the potential for
the company’s new B2B fund.

[email protected]: Is it a misperception that @Ventures has not been
active in the B2B space prior to this fund?

Garlinghouse: Definitely. In fact we have been amongst the most
successful venture capital investors in the B2B space over the past several
years. @Ventures was the seed investor in a number of the most notable B2B
success stories. In fact in 1999 alone we had 3 IPO’s that are pure-play
B2B investments: Chemdex (CMDX), Critical Path (CPTH) , Silknet Software (SILK) . All
three today have market caps in excess of $2 billion. Vicinity, another B2B portfolio company
is in registration right now.

[email protected]: I know you hold interesting investments in the
private market as well.

Garlinghouse: We have invested in a number of emerging leaders in the
B2B space prior to this most recent fund: FindLaw,, , NextOffice and Intelligent/Digital are
all great examples.

I think we will look back a year from now and find that some of our
portfolio companies that dominate their consumer categories today will be
major players for B2B. A great exampe of this is

[email protected]: So we’re seeing leverage between the
business-to-consumer and business-to-businessa

renas for CMGI @Ventures

Garlinghouse: Well, it won’t be universal. Companies like (MTHR) will
probably never see leveragable opportunities between B2C and B2B. But
companies like, who have strong supplier relationships and
domain expertise, will naturally serve the B2C and B2B markets.

[email protected]: What is CMGI’s methodology with its $1 billion B2B

Garlinghouse: The new fund highlights our continued commitment with
dedicated dollars focused exclusively on the B2B market opportunities. We
think over the next three years this category will represent an opportunity
which will exceed those in the B2C space.

Incubators are most accurately measured by the value of their private and
public market investments. In most cases, the success of an incubator’s
public offerings is an indicator of viability and long term growth
potential. Both CMGI and pure play B2B incubator, Internet Capital Group (ICGE) have
investment stakes in three public B2B companies, respectively.

Aside from being the most successful holding company in the B2C space,
Garlinghouse spoke about the company’s success in all Internet arenas,
especially in B2B. Intrigued by the leverage and synergy, [email protected]
took a closer look at the the incubator’s overall holdings. We wanted to see
where CMGI investments were creating value for CMGI shareholders.

CMGI owns and operates two public companies, Engage Technologies (ENGA) and NaviSite (NAVI), with
respective market caps of $2.8B and $2.2B. The company owns and operates 14
other high-profile, private Internet companies. The names include
(free Internet access provider which just hit the 1 million subscriber
mark), Alta- Vista (ranks among the portal elite), and iCast (a multi-media
web destination that CMGI has poured over $100 million into).

CMGI’s public @Ventures investments; Chemdex, Critical Path, Silknet
Software, and Lycos (LCOS) have a
total market cap of $20.544 billion. B2B investments make up $8.3 billion of
this market cap. With 34 @Ventures investments on tap to go public, some
sooner than others, the future looks bright, especially in B2B. High
profile, private @Ventures B2B investments include Vicinity, and which just closed on a third round of financing worth $38.5

“So the new @Ventures B2B fund is not an extention or deviation from CMGI’s
core focus,” says Garlinghouse- “it’s a continuation of demonstrated
success.” [email protected] agrees, and sees it as a perfect move that now
shouts for CMGI to be valued much more closely, if not higher, than its
pure-play B2B counterpart, Internet Capital Group.

([email protected] will have an exclusive interview with Internet Capital
Group’s CEO, Walter Buckley, on Friday.)

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