CORPORATE VENTURE CAPITAL has gone from a blip to an established sector. All in the blink of a bull market.

Through the first three-quarters of 1999, venture investment by corporations totaled $4.4 billion or 15% of allventure capital invested during that period, according to the National Venture Capital Association. That compares with $1.46 billion for all of 1998, or 7% of venture investments that year, and $107 million for 1994, 2% of venture investments. Moreover, in the past three years, the number of companies with venture programs has more than tripled, to 163 from 49 in 1996, according to Asset Alternatives Inc., a Wellesley, Mass., firm that last month published the Corporate Venturing Directory & Yearbook, the first directory of corporate venture capital. (At least 90% of those companies are based in the U.S., Asset Alternatives says.) It seems that even large corporations, traditionally cautious when it comes to risking their money, have been swept up in the euphoria that has led to staggering returns on early-stage investments in high-tech start-ups. "Nowadays, there's no pretense," says Jesse Reyes, managing director of Venture Economics, a division of Thomson Financial Securities Data, Newark, N.J. "Ultimately, corporations are looking for financial gains." For start-ups, a corporate venture partner can be attractive because a large company can provide resources potentially more valuable than money-research, marketing and connections. Still, corporate backing can have its pitfalls. Corporations are typically slower than traditional VCs to close deals. What's more, corporate investment occasionally cows smaller investors from coming aboard. Among the new entries to the venture-capital arena in the past few years are Boeing Co., Lucent VenturePartners Inc. and Nokia Corp.'s Nokia Ventures. Just two weeks ago, Andersen Consulting, the New York-based global management-consulting firm which has invested about $50 million in start-ups during the past four years, announced plans to form Andersen Consulting Ventures, a $1 billion venturecapital unit focusing on e-commerce. Over the next five years, Andersen plans to contribute $500 million to the fund and hopes to raise an additional $500 million. The NVCA says corporate investors are its fastest-growing group of members. "It's another vehicle for us to grow our business. We can't do it all internally," says Lynn Newman, a spokeswoman for Lucent Technologies Inc., which formed Lucent Venture Partners, a $100 million fund. The fund's investments are committed almost entirely to early-stage communications and technology companies. Of course, companies have dabbled in venture capital in the past. During the late 1960s and again in the mid-1980s, scores of corporations took the plunge, but they were almost always the sole investor. And so, says Mr. Reyes, "if the `small' company survived, it was acquired." The state of corporate venture capital is vastly different today. Back then, it wasn't about the money, says Joshua Lerner, a professor of finance and entrepreneurial management at Harvard University. Prof. Lerner says that in neither period were profit-sharing mechanisms in place. Rather, corporate investors garnered new business ideas as well as credibility. But these days, most corporate VCs are unafraid to invest in early-stage companies and increasingly resemble traditional venture-capital funds. In December 1998, for example, Lucent and Nokia

participated in the first round of financing for Caly Networks, a supplier of high-speed wireless systems in Sunnyvale, Calif. Because corporate venture capital today is rooted in profit, it is likely that the inevitable downturn in the market will rattle the sector. Continued existence will depend on how companies operate their venture arms. "Those corporations that have allowed their VC groups to have independence will survive," Mr. Reyes says. One such company is SmithKline Beecham PLC, the London-based pharmaceutical company whoseventure-capital arm, S.R. One Ltd., was begun in 1985. "We're quite autonomous in our decision making," says Brenda Gavin, president of S.R. One. Ms. Gavin says the group is told to keep its investments in the health-care field, but other than that is largely free to invest its $100 million where it sees fit. She also credits SmithKline's compensation policy for the fund's longevity-its five members split 15% of SmithKline's take on its venture investments. Unlike SmithKline, many corporations such as General Electric Co., which in 1995 began GE Equity, don't share company profits from venture investments with their venture teams. But withholding investment profits from venture teams can come back to bite a corporation. "They're going to find their people heading off to greener pastures," says David Barry, a senior editor at Asset Alternatives. Indeed, this past summer, at least seven members of GE Equity's Internet investment team left to join traditional venture-capital firms. DOMAIN NAMES ABOUND with words millennium, millennial and millennia. But milenium? Yup. In fact, more than a dozen Web addresses brandish misspellings of millennium. Misspelled or not, some of the sites are proving Internet hot spots. "Hundreds of thousands of people a year type it in," says Greg McLemore, chief executive of WebMagic Inc., an Internet-service provider in Pasadena, Calif., that trademarked millenium.com. But, he adds, "It was truly accidental. Someone on staff here misspelled it." Because of its draw, WebMagic uses the site to advertise some of its other sites, including pets.com and cooking.com. If all this has you saying millennium shmillennium, despair. That address is also taken. Credit: Staff Reporter of The Wall Street Journal