Intel's got one. So do Microsoft, AT&T and America Online.
It's the corporate venture fund, once a novelty but now more of a necessity as technology companies place bets on other businesses that could contribute to The Next Big Thing.
Sure, companies hope to make money on these deals. But more importantly, the investments act as a kind of out-of-house research and development arm. To those watching the corporations, the investments are clues to their current interests, obsessions and worries.
Some call it the crystal ball division.
As younger technology companies in the Washington area step into this kind of financially backed exploration, it's a sign that their roots are getting deeper and their networks stronger.
MicroStrategy Inc. of Vienna has just made its first such investment in another company, Medical Internet Solutions of Bethesda. MicroStrategy took a 10 percent stake in the yet-to-launch enterprise that will collect and sift through health-care information and deliver it electronically to doctors and patients. The amount of the investment was not disclosed.
Medical Internet Solutions is the discovery of MicroStrategy co-founder Sanju Bansal (who personally reached billionaire status this month at age 34). Bansal met Medical Internet Solutions chief executive Sreedhar Potarazu, an ophthalmologist, at a dinner party for an Indian dignitary. Potarazu, also 34, joined the Indian CEO High Tech Council, which Bansal co-founded, and the two started talking about a deal.
"We're creating -- in a good way -- the national Indian Mafia," says Bansal.
The new company's idea was in MicroStrategy's "sweet spot" of data mining, says Bansal, and he liked Potarazu's intense, type-A personality.
"Only over the last year has this [kind of investment] been an option for us," says Bansal. "This is a luxury in some ways."
MicroStrategy isn't the only one placing bets.
Venture capital investment overall has shot up dramatically, and corporate funds represent a higher percentage of the total pool. In 1994, only 2 percent of the total $5 billion of venture capital invested in the United States came from corporate venture funds, according to the National Venture Capital Association in Arlington. But those funds represented 14 percent of the $38 billion invested in the first three quarters of 1999.
Just last week, Electronic Data Systems and Andersen Consulting announced venture funds.
"This is a hot area," says John Taylor of the venture capital association. Because corporate venture funds are his organization's fastest-growing membership area, he said, the group will hold its first conference just for those types of fund managers in San Francisco in April.
America Online's venture arm, AOL Investments, did 30 deals in 1999, investing in such companies as streaming media firm encoding.com, low-cost computer manufacturer eMachines Inc., Asian Internet company Chinadotcom, and Palm Computing. A typical AOL Investments deal is in the $5 million vicinity, although AOL took a stake in Palm of $80 million, or 1.5 percent, whichever is less. In 1998, AOL Investments made just 14 investments.
"It gives us a good radar in terms of what's happening in the world," says AOL chief executive Steve Case.
Shannon Henry's e-mail address is firstname.lastname@example.org