Just over a year after founding venture firm WashingtonVC, dot-com veteran Mike Mann has handed over the day-to-day operations of the firm to Eric Litman, an internet entrepreneur who has been involved in building several start-ups for nearly two decades.
Though he has worked with venture investors before, his new role as a managing director at WashingtonVC is the first time Litman has been an investor himself. Litman co-founded e-business consultancy Proxicom in 1991, and was chief executive of internet mobile technology company Viaduct Technologies. He also helped to build up digitalNATION, a web hosting and services provider.
At WashingtonVC Litman will work out of the firm’s Washington DC office, managing a team of 10 investment professionals, working with portfolio companies and overseeing the firm’s non-profit activities.
Mann, who made a fortune in the 1990s while building the market for domain names in the early days of the internet, founded WashingtonVC in 2005. The firm invests in internet businesses related to domain names, hedging the risk of an early stage tech deal with the appreciating asset value of the underlying domain name.
For example, the firm has invested in the domain name phone.com. WashingtonVC is currently developing series of telecommunications products to be launched on the site, but the firm will also benefit from ownership of the URL, which Litman described as a “keyword rich domain name” that can draw a large volume of traffic to the site.
WashingtonVC appealed to Litman for a few reasons. He said he was drawn to the firm’s management style, which follows the mold of the Japanese keiretsu system. WashingtonVC encourages its portfolio companies to offer one another resources and technologies at a discounted rate, enabling the companies to help each other develop.
“The notion is that you have the benevolent corporate entity in the middle, they’re a bank or a big company like Mitsubishi, and then lots of small service companies that work together to bring each other to market, and to offer goods and services to each other at a discounted rate, knowing that they’re benefiting the whole as well as themselves,” Litman said.
But there is an element of “natural selection” in the process, in that portfolio companies have the option of going elsewhere if they are unable to find a satisfactory solution within the WashingtonVC family.
“We’ve structured the companies in such a way that they’re all external to the organisation; they’re all self-sustaining entities to remain competitive in the global marketplace,” Litman said. “I think by doing that we inherently build in the capability for all of our companies to be best of breed.”
The firm typically invests less than $5 million per deal. It is currently investing the personal capital of some of its team members, but is in the process of raising its first institutional fund. Though Litman did not disclose the target size of the fund, he said that by most industry measures it would likely be “a small raise”, and is likely to close in the first quarter of 2008.
Another aspect of WashingtonVC that Litman found attractive was the firm’s charity work. WashingtonVC is associated with two of Mann’s non-profit organisations: the Make Change! Trust and Grassroots.org. Make Change makes donations to nonprofit organizations that are aid other nonprofits and the underserved through innovative uses of technology, while Grassroots.org gives up-and-coming non-profits access to the resources they need to get on the internet. Grassroots.org has the goal of providing 10,000 charities with $10,000 of cash and services in 2008.