From Apron Strings to Purse Strings
Gen-Xer Tapped by Frontier to Invest $100 Million in Startups
By Ken Branson
Name: Jonathan Heiliger
Title: Senior Vice President, Frontier Internet Ventures
Hometown: Palo Alto, Calif.
Education: High School
Assignment: Find businesses (or ideas for businesses) that
How To Get His Attention:
Deep, Dark Secret:
Joseph P. Clayton, vice-chairman-presumptive of Global Crossing Ltd., Hamilton,
Bermuda, and presently CEO of Frontier Corp., Rochester, N.Y., shakes his head and
chuckles when he talks about Jonathan Heiliger. Heiliger is senior vice president of
Frontier Internet Ventures Inc., Sunnyvale, Calif., and is in charge of investing $100
million of Frontier’s hard-earned cash in startups that someday, somehow, will do Frontier
Heiliger may not have a long resume, but he has the right one, as far as Clayton is
concerned. He is a product of the Silicon Valley business culture, a child of the
Internet. "Now that we’re a member of the Internet fraternity, we have to learn the
secret handshake," Clayton says.
He is 22 years old, never went to college and, until recently, was the chief technology
officer of Global Center Inc., which Frontier bought last year. Before that, he was a
working techie in a startup, which eventually got bought by Global Center. Before that, he
was in high school in Palo Alto, Calif., just across the street from Stanford University.
He is the son of highly educated parents (father, a political scientist; mother, a
photography teacher) who probably saw him following a similar path. Wrong.
"I had an opportunity to go to college, and an opportunity to work at a
startup," Heiliger says. "The startup seemed like the more serious thing to do.
College was, well, you know, kind of a social thing."
"I asked him (Heiliger) for a list of good funding prospects," Clayton says.
"He came back to me with a list of like 36 prospects. (Clayton parts his hands
vertically, as if unrolling a scroll, his eyes widening as he does.) I told him,
‘Jonathan, give me three or four of your best bets, man!’"
Frontier Ventures is just getting started, and had announced no investments at press
time. Heiliger says he expects to announce the first investments soon, and that he intends
to have between five and seven active investments at any one time.
Frontier is not the first corporation to form a captive venture capital firm. AT&T
Ventures Inc., Basking Ridge, N.J., has a $350 million kitty; MCI WorldCom Inc. has $500
million in its venture capital war chest. Frontier Internet Ventures’ counterparts at
other companies usually are managed by investment professionals with: a) long track
records in the industry; b) long service records at the parent company; or c) both. For
now, at least, Frontier Ventures’ consists of Heiliger, who has marched, shall we say, to
a different drummer.
Frontier’s $100 million is very modest potatoes compared with the AT&T and MCI
WorldCom war chests. But Heiliger is undaunted.
"We’ve committed $100 million over four years to this venture," Heiliger
says. "For a corporate fund, it’s kind of on the low-to-medium side, you’re right.
But for Frontier, which used to be focused on local telephone service and paying
dividends, it’s pretty significant."
Frontier Ventures is interested in three categories of business: applications
developers, service providers and equipment manufacturers, in that order. For such
businesses, Frontier offers customer commitment (they’ll be a first customer), services
(they have lots of bandwidth) and capital (they’ll buy a stake).
But Heiliger believes Frontier has a good case to make for entrepreneurs in whose
companies it takes an interest: commitment as a customer, services and capital.
Heiliger says he may commit between $500,000 and $1 million as seed capital, and
several million dollars in a second round of venture capital financing. He expects about
half of Frontier Ventures’ effort to be on the "investment side," in which
Frontier Ventures will take an equity stake, and half on the "business
development" side, in which Frontier Ventures will nourish a "relationship"
by making Frontier a first customer or by providing bandwidth.
But he emphasizes that Frontier wants to start companies, not own them. "We’re not
using Frontier Ventures as a vehicle to acquire companies," Heiliger says.
"We’re looking to own minority stakes in businesses."
And where will Heiliger find these businesses? When it is suggested to him that the
Silicon Valley (known on ancient maps as the Santa Clara Valley) may be a bit of a
hothouse, and that it isn’t the only place where technical innovation happens, he is
unruffled. "Initially, I don’t think that’s bad," he says. "As we get
bigger, we can look in other parts of the country."
Remember, he had 36 prospects on the list he first handed Clayton. Heiliger says his
original list has shrunk to about five prospects, and that Frontier Ventures wants to
limit itself to between five and seven active investments at a time. Announcements should
come soon, he says.
Should entrepreneurs call him, or wait for his call? Heiliger seems to feel that, as
far as the Silicon Valley goes, he knows who they are, or at least, where they are.
Entrepreneurs and the people who fund them tend to move in the same tight little circles,
he says. Well, do they hang out in venture-capital bars? Don’t laugh.
"There really are such places," he says. "There’s a place I know in
Woodside (Calif.) called Bucks." (A call to Bucks’ owner, Jamis MacNiven, confirms
that his establishment is full of deals in the making during the day.)
And he sees only good news in the pending acquisition of Frontier by Global Crossing.
"As Global Crossing is a more growth-oriented company than Frontier, I would expect
renewed emphasis on anything related to growing the business," he says.
Ken Branson is the business and finance editor for PHONE+ magazine.