New Kids of Venture Investing: Web-Struck Titans of Wall Street
The volatile stock market may provide all the risk that most investors can stomach, but some Wall Street investment banks are making much more daring bets: pumping venture capital into fledgling Internet companies whose initial public offerings may be years away.</br></br>Traditionally, Wall Street's leaders have avoided venture investing, leaving it to specialized boutiques that raise money from universities, wealthy individuals and others. But with many venture funds lately earning 50% or more a year, securities industry heavyweights such as Goldman, Sachs & Co. and Morgan Stanley Dean Witter & Co. are pushing their capital into venture investments ranging from biotechnology to telecommunications.</br></br>Some of the most hectic action involves tiny, money-losing Internet enterprises that investment bankers hope will be the next Yahoo! Inc. or Amazon.com Inc.</br></br>Executives of closely held Internet companies are watching this stampede with delight. In May, Ross Garber, chairman of Vignette Corp., came to New York to raise $7 million of venture-capital equity for his Austin, Texas, Internet-software company. After huddling with Goldman, Morgan Stanley and three other firms, Mr. Garber realized his sights were too low.</br></br>"We ended up raising $14.3 million, including $10 million from the investment banks, and we could have gone much higher," Mr. Garber says. "I had bankers calling me at home on weekends, threatening my future livelihood if I didn't let them in for a bigger stake."