W.R. Hambrecht Closes $50M First Round

Epartners, a $300 million investment vehicle of media conglomerate News Corp, made its first investment May 28, taking a minority stake in W.R. Hambrecht & Co.’s $50 million first-round financing.

Epartners would not disclose the amount of its investment in the round, which saw four other strategic investors join the newly formed corporate fund, said Sharon Smith, a spokesperson at W.R. Hambrecht.

In a previous close on the round last month, Instinet Corp., the electronic brokering division of Reuters Group Plc., invested $20 million to acquire an 11.4% stake in W.R. Hambrecht. American Century Investments and networking company Novell Inc. have also invested in the round.

San Francisco-based W.R. Hambrecht is an early-stage investor in software, Internet and branded consumer products companies. In February, the company launched its OpenIPO service, an electronic auction method that allows companies to conduct initial public offerings online.

Earlier this year, Ravenswood was the first to use the OpenIPO service to go public, and Salon.com is scheduled to go public using OpenIPO later this month.

“We like the Internet IPO concept,” said Bruce McWilliam, a partner at Epartners. “As a side benefit, this is the most efficient way possible to get in on deal flow.”

W.R. Hambrecht will use proceeds from the investment for working capital and to hire more employees. As part of the deal, each investor will be given a board seat.

“Bill Hambrecht has a $1 billion Rolodex and is one of the most widely connected individuals in the venture capital arena,” said Ben Holmes, an analyst with IpoPros. “However, nobody knows how this current situation will play out because the company has not yet made enough deals.”

Epartners will invest mostly in new media companies. McWilliam said the fund is “a stand-alone operation designed to make money for the parent group”, and is in no way biased toward companies that may complement News Corp’s new media operations.

“We do not have the same concerns of normal corporate funds like Microsoft and Intel,” he said.

Epartners has no formal investment range and will invest in companies at all stages of development, including buyouts, McWilliam said.

McWilliam, who was formerly general counsel for News Corp’s U.K. arm, will co-manage the fund with Epartners Chief Executive Mark Booth. Booth had been chief executive of British pay-TV company BSkyB, in which News Corp owns a 40% stake.

“Institutional investors like News Corp are the biggest venture capital firms on the street,” IpoPros’ Holmes said. “Usually they are not looking for investment return as much as strategic alliances. It allows them to sniff tails and find potential in small companies.”