Mastech puts $50 million into venture capital
By Dan Fitzpatrick, November 05, 1999
Copyright © Pittsburgh Post-Gazette
------------------------------
Software consulting firm Mastech Corp. unveiled a $50 million venture
capital fund yesterday, promising to finance a new crop of young, Web-based
companies. Mastech, based in Oakdale, is the first Pittsburgh-area company
to launch such a fund. Its priority is to help Western Pennsylvania
start-ups, but the company also plans to search for new investments
internationally. "We are looking for the best ideas," said Sunil Wadhwani,
Mastech's chairman and CEO. Designed to help the 5,000-person firm generate
more technology consulting business while boosting entrepreneurship,
Mastech's fund is the latest sign of a boom in local venture capital. Called
Mastech eVentures, the fund also represents another crack in Western
Pennsylvania's image as a region starved for money and risk-takers.
Suddenly, new venture capital funds are everywhere.
When it comes to finding venture capital, "I would say the entrepreneur is
much more of a buyer these days," said Sean Sebastian, managing principal of
Birchmere Investments, which invests its $20 million solely in local firms.
"He can afford to be more selective." Among the new funds is Redleaf
Management, an $80 million Silicon Valley firm that opened a Downtown office
earlier this fall. Another California venture firm, Draper Fisher
Jurvetson, has agreed to help run a new $40 million to $50 million Western
Pennsylvania fund that includes the state, the State Employees Retirement
System, PNC Equity Management Corp., Carnegie Mellon University and the
University of Pittsburgh as investors. Draper is one of Silicon Valley's
largest and most active funds. Triangle Capital Corp., a Downtown fund led
by CMU business professor Don Jones and his son-in-law Jay Katarincic, is
expected to manage the fund with Draper. The state selected Triangle as the
fund's local manager five months ago, but it has yet to unveil the fund
officially. In addition to the state project, Triangle Capital also is
involved in a $70 million fund created last summer by Lycos, the online
search company founded in 1995 by CMU researcher Michael Mauldin. Lycos
Ventures plans to focus on small, early-stage companies involved with the
Internet.
With Mastech's new fund, the focus is twofold.
The $500 million company wants to fund Internet technology startups that
need the type of consulting services Mastech provides. On the other hand, it
also wants to finance companies that provide those same services to
Internet-based companies.
"The Internet world is moving so fast that we recognize we can't tackle it
all ourselves," Wadhwani said. Mastech eVentures plans to make one to two
investments per quarter, each ranging from $2 million to $10 million. If the
$50 million goes quickly, Wadhwani is prepared to commit another $50 million
within two to three years. Mastech would own some of the companies created
by Mastech eVentures. It plans to take a majority or minority ownership
stake in the others. The fund's leader is Ajmal Noorani, a Mastech vice
president. Mastech plans to put together a fund advisory board in the next
30 days, made up mostly of people within the company. As an established
firm, Mastech can offer access to its 1,000 clients, its recruiters and its
management experience. "All of the expertise one looks for on an advisory
board we have internally," Wadhwani said.
p.s. Ajmal Noorani can be reached at 412-787-2100, ext. 9210, or by email,
[email protected]