If the venerated Andersen Consulting is putting money into startup Net companies, you know there's got to be money in it.
Today, the company announced the formation of a venture capital unit, called Andersen Consulting Ventures, which will invest $US1 billion over the next five years. The firm will put up half of that total, with the other half coming from outside investors that haven't been officially decided yet.
Andersen has dipped its toes into the funding waters before, investing in companies like business-to-business player ChemConnect, Blue Martini and Calico. But for the most part, it has bought into companies as a secondary investor with dedicated venture capital firms. With the new fund, Andersen hopes to lead rounds of financing into e-commerce plays.
The main problem faced by Andersen's new Palo Alto, Calif.-based unit is that it could be viewed as too much of an internal Andersen project, which could conceivably scare off entrepreneurs who might not want to deal with the consulting firm's slate of services. The chief of the new unit, Jack Wilson, who was previously managing partner of Andersen's global markets division, says the venture arm is taking steps to allay these fears.
"There are no restrictions on investing in companies that don't use Andersen services," Wilson says. "If we want to be a player, it can't be about selling Andersen Consulting hours."
The firm is also looking to hire some outside partners that will signal to startups that there is real independence between the consulting monolith and the investment wing.
"I have over 300 applications from internal Andersen folks," Wilson says. "But we have to hire from the outside, because if we populate the unit with only Andersen folks it will look too insular."
But can the massive consulting and services firm be able to find and back the the next Jeff Bezos? Wilson thinks that it will be easier to do that with the right partners. The decision on what investment partners chip in the other $500 million is crucial to the unit's success.
"Can we go from being dumb money to smart money?" Wilson asks. "To do that in six months is aggressive, but we can do it better by partnering with other venture capitalists."