StarMedia raises $80 mil in financing

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Latin american content provider and online community StarMedia Network announces today that it's raised $80 million in financing, which it claims is one of the largest private placements in an Internet company.

New investors include Chase Capital Partners, Flatiron Partners, Intel Corp., Robertson Stephens & Co. and Albert Waxman. Repeat investors include Warburg Pincus, GE Capital Corp. and Morgan Stanley Dean Witter & Co.

StarMedia plans to use the money for marketing and product development. Its traditional agency of record, Ogilvy & Mather, Miami, will continue the TV campaign that has been running across Latin America. StarMedia handles most of its online advertising in-house, but does use some outside agencies.


StarMedia opted for private funding over an initial public offering because it wanted to maintain more management control, said Fernando Espuelas, chairman, CEO and co-founder of StarMedia.

"We have much more flexibility," he said. Public companies must disclose revenue and profit, he added, and "by being private we're able to be much more stealthy and aggressive in the market and appear where we're not expected."

StarMedia wants to target the top 20% of the population in terms of wealth, a class of about 100 million people in Latin America, Mr. Espuelas said. The Internet company has grown from six employees a year ago to nearly 200. Mr. Espuelas predicts it will have 400 on staff by the middle of next year.

StarMedia operates a network of Spanish- and Portuguese-language sites in Argentina, Brazil, Chile, Colombia, Mexico, Peru, Uruguay and Venezuela. It provides a variety of news and entertainment content as well as retail services, free chat, e-mail and search capabilities via a partnership with Excite.

StarMedia clearly wants to "be the center of the online world for Latin America," said Lanny Baker, research analyst-online media, Salomon Smith Barney. "I think they have a pretty good start in that direction. The biggest challenge is building up their brand."

Copyright October 1998, Crain Communications Inc.

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