T. Rowe Price is bolstering its bet on technology startups, and no longer just the ones that get all the headlines.
Following investments in Facebook, Twitter, Zynga and Angie’s List among others, the mutual fund company today led a $15 million financing round in ODesk, whose software helps businesses develop and maintain a virtual workforce.
Henry Ellenbogen, manager of the $9 billion T. Rowe Price New Horizons Fund, spent more than a year chatting up ODesk Chief Executive Officer Gary Swart before he was able to get a piece of the company. They met at an Internet conference in 2011, and then Ellenbogen visited the company’s headquarters in Redwood City, California, the first of several one-on-one meetings.
Swart didn’t need the money at the time, and Ellenbogen was finding plenty of other startups, snapping up stock in daily-deal site LivingSocial and business software provider Workday. Swart says he still doesn’t need the cash, but after spending a year getting to know Ellenbogen, he wanted to bring him in for his knowledge of the industry. Letting him write a check was a good way to open the door.
Ellenbogen is “incredibly insightful and takes things at least a level deeper,” Swart said.
ODesk, founded in 2003, has 300,000 businesses using its software to help find, hire and pay contracted workers in remote locations anywhere in the world. The company said today that contractors are making more than $300 million a year using the system.
While Swart didn’t say when he expects an initial public offering, T. Rowe’s shareholder documents provide some insight. In the New Horizon Fund’s mid-year report in June, the firm said it typically looks for companies that can go public within 12 to 18 months after its investment. Among T. Rowe’s biggest tech bets is Facebook, which in its IPO prospectus counts T. Rowe as the only mutual-fund company with a 5 percent stake.
As Facebook’s IPO nears, Swart has to hope his company looks more like the social-networking giant and less like an earlier T. Rowe private investment: Slide. In 2008, T. Rowe joined Fidelity in buying a $50 million stake in Slide, a creator of Facebook apps, at a valuation of about $550 million. Two years later, after failing to keep pace with app developers like Zynga, Slide was bought by Google for a fraction of that price, leaving T. Rowe’s investment under water.
Thus far, Slide is the exception, not the rule. T. Rowe said in December that Twitter was the second-biggest contributor to the fund’s increased value in the latter half of the year. More importantly, not a single startup was among the fund’s biggest laggards.