Case and Leonsis said they hope their new fund will disrupt the trend of technology start-ups turning to Silicon Valley.
“We want to make it easy for companies to get started here, and particularly to stay and expand and grow while being headquartered here,” Case said in an interview, adding that the fund will look for prospective investments up and down the East Coast.
Case and Leonsis, along with a third partner, Donn Davis, 49, who also worked at AOL, said they will target a new category that they call “speed-up capital,” which is designed to expand companies worth $100 million into ones worth $1 billion or more.
The two executives said Washington has the “angel” investors who can provide the $10,000 or $100,000 in seed money that gets a company from an idea to a small one- or two-person operation. The region also has venture capital firms, such as New Enterprise Associates, that can provide the $1 million or so that sparks a company into life.
But to go from 50 employees to 1,000, companies need big batches of cash — $25 million or more.
When LivingSocial, based in the District, needed a big infusion of cash, it looked west for funding. The Revolution Growth Fund will try to fill that role. That’s different from the Carlyle Group, whose traditional business is to buy large, established companies, improve them and sell them at a profit.
“We want to take off the table the capital issue,” Case said.
Revolution Growth, which will be based in the offices of Case’s holding company in Washington, said it will invest in about 10 to 12 consumer technology companies over the next five years. All investment decisions must be unanimous among the three partners.
“Our goal is to make big investments . . . and really work closely with the entrepreneur to help that company grow,” Leonsis said. “We want to take companies from niche-y to mass.”
Case and Leonsis’s biggest recent success was Revolution Money, an online payment system. The pair sold it to American Express in 2010, earning a more than threefold return on their money.
Case’s high-profile Revolution Health, which financed medical clinics at big retailers and offered online health-care information to consumers, did not fare as well, and he merged it with Waterfront Media in 2008. He also merged his Flexcar rent-by-the-hour company with Boston-based Zipcar in 2007.
Leonsis is an investor in Groupon, and Case has invested in its rival, Washington-based LivingSocial. LivingSocial is run by Tim O’Shaughnessy, son-in-law of Washington Post Co. Chairman Donald E. Graham.
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