PSINet Inc. Wednesday launched PSINet
Ventures, a new Internet development branch funded with about $1 billion to
invest in Internet start-up firms.
The PSINet (PSIX)
investment venture is designed to partner with innovative Internet
entrepreneurs through direct minority equity investments during start-up
financing.
PSINet’s investment arm intends to target application service providers,
content service providers, and e-commerce businesses that will enhance the
global carrier’s portfolio in an international marketplace.
William L. Schrader, PSINet chairman and chief executive officer, said the
PSINet has invested in start-up companies for several years. But that this
is the first time PSINet has applied a more systematic approach to its
funding outreach program.
“We created PSINet Ventures to help bring new ideas and companies to market
that support our business strategy and bring to PSINet the best that
tomorrow’s technology innovators have to offer,” Schrader said.
Schrader added that PSINet is uniquely positioned to accelerate the growth
of fledgling Internet companies.
“We have a global infrastructure of fiber, data centers, e-commerce
capabilities and Internet expertise, all of which are extremely valuable to
the next generation of technology companies,” Schrader said.
PSINet’s existing investment portfolio includes such public companies as Akamai Technologies (AKAM), F5 Networks, Inc. (FFIV), Metrocall, Inc. (MCLL), and other Internet-related companies. PSINet’s public and private
holdings are currently valued at more than $154 million.
As a part of its funding ventures, PSINet introduced a “Leapfrog Program.”
The financing plan determines a “dotcom” start-up company’s value based on
a services-for-equity investment model.
The services-for-equity structure determines a line of credit for the
start-up firm, from which the company may purchase PSINet services. Equity,
rather than cash, gives a start-up company the means to build its business
without a lot of money in the bank.