Holtzbrinck investment fund eyes small web plays

While small Internet start-up companies have little chance of gaining investment in an age of global players, one investment fund aims to give them a boost.

Holtzbrinck has closed its fourth fund -- and first in partnership with fellow venture capital firm HarbourVest -- at 177 mn euros (USD 231 mn). It will provide capital to companies in its portfolio and to other media companies.

Martin Weber is a partner of Holtzbrinck Ventures Investment, the venture capital arm of the Georg von Holtzbrinck Publishing Group, which has been investing in small Internet start-ups based in German-speaking Europe since 1998.

"We invest in small Internet start-ups, mostly consumer sites, because it is financially attractive to do so, but also because it is fun," he told Reuters on Wednesday.

"These are young, creative companies and it's fun to be a part of their innovations and create growth."

He said the Internet was the most capital-efficient medium because it was possible to set up companies with little capital.

The venture capital firm's 80 investments since 1998 include some of the most successful German internet companies, such as social networking website and Facebook peer StudiVZ, and fashion retail site Brands4Friends, which was sold to eBay for 150 mn euros in December.

Other main holdings include web advertising firm Groupon, which offers leisure deals and merged with Citydeal in May 2010.

"We decided to invest in Citydeal because we thought the concept would go down well in other countries," Weber said.

Holtzbrinck also provides capital to dating sites such as Germany's eDarling, which it chose for its "innovative approach" to online match-making.

Asked about the success of dating sites in its portfolio, Weber said: "We need to think in terms of the overall portfolio. Revenue that high-performing companies bring in must suffice to cover losses made by other companies in our portfolio."

Asked why Holtzbrinck had entered a fund partnership with HarbourVest, Weber said: "We wanted to create a wider basis, which is why we got a partner involved.

"We chose HarbourVest because it is one of the few big investors. It has considerable experience and large funds."