Fidelity Ventures is backing several new Internet start-ups in hopes of competing with online giant eBay.
The firm's latest $25 million investment took place in February for a British company called Seatwave, which specializes in the secondary market and resells tickets for concerts as well as various sporting and entertainment events, according to a report last week by The Boston Globe.
Larry Cheng, a Fidelity Ventures partner, believes Internet auction-style businesses are especially appealing because they eliminate the middlemen that often oversee and control real-world, offline transactions. Instead, online-auction and resale sites, like eBay, can effortlessly connect individual lenders and borrowers through a virtual marketplace.
With no desire to reinvent the wheel or business model, Cheng hopes to stumble upon companies that can effectively create their own niche in this virtual market, but he wants to invest sooner rather than later. Latecomers often have difficulty in pushing aside established companies, which tend to be "very defensible once they get to scale," he said.
The firm is following the footsteps of its sister unit Fidelity Asia Ventures, which already experienced success last fall by funding Alibaba.com in raising an estimated $1.5 billion on the Hong Kong Stock Exchange.
Ultimately, Fidelity is, "looking for very big markets that are very inefficient and have a clear value to people on both sides of the transaction," Cheng said.
Fidelty Ventures, a private equity division of Devonshire Partners, is just one of a family of Fidelity Investments-affiliated companies, and Internet marketplaces comprise of about 15% of its current portfolio.
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