SoCal: Hatchery on the Rise?

SAN FRANCISCO (03/21/2000) - If Southern California is becoming known as the land of new-media incubators, there's good reason. Yet another - this one called Shelter Ventures - officially opened its doors today, joining a crowded field that includes eCompanies and Idealab.

Shelter Ventures is backed by Art Bilger, vice chairman of Akamai Technologies and former president and COO of New World Communications, and Kevin Wall, former vice chairman of iXL Enterprises. Bilger first made his name in the 1980s when, along with Leon Black, he headed Drexel Burnham's legendary corporate finance department under Michael Milken.

The new incubator also will include a venture firm. Both Bilger and Wall said they expect to raise $300 million to invest in companies that provide the infrastructure for new-media content companies. The new fund will consist of money from strategic partners such as corporations and wealthy individuals, but it also will include cash from the two principal partners. But why an incubator? Why not just start a venture fund? Bilger said it all comes down to equity and level of investment.

"You can own much greater levels of companies in a incubator-type setting," Bilger says. "And incubators are much more human-resource driven and less capital driven than straight venture investments." The firm has already invested in business-to-business company Need2Buy.com, which is a marketplace of electronic components based in Westlake Village, Calif. Both Bilger and Wall sit on Need2Buy's board.

By starting the incubator, Bilger and Wall join what's becoming a bustling group of new-media investors who don't have Web backgrounds in the Los Angeles area. Sandy Climan, a former agent and executive at Universal Studios, recently started Entertainment Media Ventures, and TMCT Ventures, a firm backed by Times Mirror and the Chandler Trust, is headed by former Times Mirror CFO Tom Unterman. These old media executives are betting that Southern California is the next new economy boomtown.

"What happened in the last 10 years in Silicon Valley is just starting to happen in Los Angeles," Bilger says. "And if you look at the level of sophistication of VCs in this market, we think there's opportunities for us."

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