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Andersen to invest in Web
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December 13, 1999: 3:51 p.m. ET
Forms $1B venture capital unit to target electronic commerce start-ups, tech firms
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - Andersen Consulting, a leading adviser on e-business, became a major investor in the field Monday by forming a venture capital division that will put up $1 billion over the next five years.
The Chicago-based firm is creating Andersen Consulting Ventures, which will purchase equity stakes in Web start-ups and new technology firms.
It will seed the division with up to $500 million cash, provide access to its intellectual property and seek other strategic and financial partners.
"With this bold initiative, we are sending a strong message to our clients, alliance partners and our employees that Andersen Consulting intends to lead the new eEconomy," Joe Forehand, managing partner and chief executive of Andersen Consulting, said.
The operation will be based in Palo Alto, Calif., in the heart of Silicon Valley, and be headed by Jackson Wilson, 52. Wilson previously was the firm's managing partner of global markets. In that role he oversaw the company's strategic alliances and equity investments.
The birth of the venture comes against a backdrop of roaring successes at so-called Internet incubators such as CMGI Inc. (CMGI), which owns big stakes in search engines AltaVista and Lycos (LCOS). And it could help tie in Andersen executives who might be lured by the riches offered by Internet companies.
"CMGI is a big model for us,” said Wilson in an interview with CNNfn. "Where people are going are the Internet start-up companies. I would much rather have them go to start-up companies that we have an investment [in] than others we don’t.”
Andersen has lost some partners to e-commerce firms, whose stock price explosion has been one of the banner events in the late 1990s. Most notable of those was George Shaheen, who left the top job at Andersen Consulting in September to help take public Internet grocer Webvan Group Inc. (WBVN).
One big risk for Andersen is that, as a major consultant in the rapidly changing world of e-commerce, it could end up owning stakes in operations that are competing with existing clients.
"It is not our intention to do that," said an official of the company, who spoke on condition of anonymity. "In some situations that will inevitably happen, though. When it does, we will manage it the same way we do conflicts between clients right now, with strict confidentiality rules."
Andersen Consulting already has invested $40 million in stock of various e-commerce companies such as publicly traded Calico Commerce (CLIC), a provider of e-commerce software.
Andersen Consulting and accounting firm Arthur Andersen are owned by the partnership Andersen Worldwide. But since a 1989 reorganization, each set of partners separately owns each firm. Andersen Consulting is attempting to sever that relationship through arbitration.
Overall, Andersen Consulting has investments or alliances with more than 140 companies. The firm had revenue of $9 billion for the 12 months ended Aug. 31, up from $8.3 billion for calendar year 1998, according to statistics from Andersen Worldwide. 
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Andersen Consulting
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