American Century Ventures, the venture capital-arm of American Century, was launched in 1999 and has committed over $100 million over the next four years. ACV never intended to invest in quick-exit-strategy IPOs. Instead, ACV's strategy is to make smaller investments of between $2 million to $8 million in companies primarily involved in developing technology designed to fundamentally change capital markets and equity trading.
The portfolio is purely a corporate investment and is not tied in any way to American Century's shareholders' investments, said Harold Bradley, president of ACV.
The idea is to find companies that are developing products that directly impact American Century's business and encourage the growth of those businesses, he said.
While ACV is continuing to search for new companies to invest in, like the rest of the venture capital industry, the firm has significantly throttled back on its levels of investments compared to previous years, he said.
American Century Ventures portfolio is made up of 10 different companies including; Foliofn, Archipelago, ArrayComm, StarMine, OptiMark, Tradepoint, EuroNet Worldwide, Corticon, WR Hambrecht & Co. and Third Age.com.
But most of the venture industry is not as positive as American Century these days. Venture capital funding dropped 42% in the second quarter from the first quarter, amounting to $9.7 billion. That is down 68% for the same period a year ago, according to Venture Economics and the National Venture Capital Association. A total of $104.8 billion in venture capital was raised in 2000. With just $26.4 billion raised as of the second quarter of this year, fund raising levels are not likely to eclipse fund raising levels that were reached in the past two years.
However, fund raising for this year is on pace to make it the third highest year in terms of capital raised since Venture Economics began tracking the data in 1969.
To date, only a handful of mutual fund companies have launched venture capital businesses. Both Fidelity Investments and Warburg Pincus launched venture capital initiatives in the late 60s and early 70s, according to Morningstar. Warburg Pincus became an independent company last year after Warburg's investment management division was acquired by Credit Suisse Asset Management.
Fidelity Venture, the venture capital arm of Fidelity Investments, was launched in 1969 and today has more than $500 million of its corporate earnings and its employees' capital invested in young companies.