Novell Inc yesterday handed over more than $15m in capital investments for five internet and network software companies. The money was raised by Novell Ventures (formerly called the Internet Equity Fund) for minority equity positions in five firms including Edgix, Food.com, Indus River, Red Hat and WR Hambrecht. The aim of the Ventures group is to accelerate the growth of the directory market and at the same time boost sales of the networking giant’s Novell Directory Services and NetWare server platform. The move is part of Novell’s stated strategy to seed the market with its flagship NDS version 8 and then sell as many applications as possible on top of it. Back in May, the company acquired Netoria Inc, a firm which specializes in developing applications for NDS, and last month it bought Ukiah Software, a privately held developer of policy-based network management software. On top of that, the venture fund has already made investments in nine other internet companies.
Novell said all five of the new investment partners have developed products that take advantage of NDS. Edgix, of New York City, has developed an advanced content delivery solution to accelerate internet traffic flow and is targeting the ISP and enterprise market. Indus River, of Boston, is advancing Virtual Private Network (VPN) technology that enables businesses to reduce communications costs by facilitating wide-area network connections over the internet. The software takes advantage of NDS to simplify VPN deployment and administration, the two largest barriers to wide VPN deployment today, Novell said. Novell’s stake was part of Indus River’s $14m third round funding, which also included an investment from MCI Worldcom. In the case of the last three, Red Hat, WR Hambrecht and Food.com, Novell said it was investing in the companies to work with them to optimize NDS for their particular platforms.
Food.com, of San Francisco, has established the nation’s largest online, one-stop shopping sites for food take-out and delivery ordering, while WR Hambrecht + Co, also of San Francisco, has built an OpenIPO service, an electric auction-based method of conducting initial public offerings. In the case of Red Hat, Novell said it was working with the Linux reseller to port NDS and Netware to the free operating system. It’s a market where we see a lot of growth potential for NDS, Blake Modersitzki, director of Novell Ventures, said, adding that the company chose to partner with Red Hat over the other linux developers because it felt the two companies had the best fit.
Asked why Novell acquired some companies for NDS-based applications and only invested in others, Modersitzki said that Novell was keen to develop a product roadmap to answer those types of questions. As part of that, we ask ourselves what do we want to own and what technology do we want others to build that we can leverage? he said. What Netoria had we wanted to own, but in some other cases, like Indus River or Edgix for example, we want to work with those companies to showcase our technology and ensure their compatibility.
Modersitzki wouldn’t provide a breakdown of the individual investments but said that Novell aimed to invest between $1m and $3m per company, or less than a 20% stake. In August and December of 1998, Novell announced two rounds of Novell Ventures investments in nine software companies: enCommerce Inc, Evergreen Internet Inc, Chandler, GlobalCast Communications Inc, NetPro Computing Inc, NetObjects, NetVision Inc, ObjectSpace and Oblix Inc, bringing the total number, with yesterday’s five additional firms, to 14.
