WR Hambrecht raises $83 million

Investment bank WR Hambrecht announced today that it has completed a third round of strategic financing valued at $83 million.

But the San Francisco-based company, which specializes in taking privately held technology firms public, probably won't make its own debut on Wall Street anytime soon. Chairman and CEO Bill Hambrecht said the Nasdaq stock market's extreme volatility in the past two months makes him question the logic of an immediate IPO.

"Let's just say that nothing's planned right now," said Hambrecht, who expects the market to remain jittery for six to 12 months.

WR Hambrecht also announced today the appointment of Clay Christensen to the firm's board of directors. The Harvard Business School professor wrote the best-selling business tome "The Innovator's Dilemma" and is an expert on so-called disruptive technologies--innovations that force companies and cultures to undergo radical changes to keep pace with competitors.

Christensen's appointment is apt: WR Hambrecht fashions itself a renegade in the otherwise stodgy and button-down world of investment banking.

The 200-employee firm, headquartered in a former warehouse near San Francisco's new Pacific Bell Park, is the first to use an auction-based model for initial public offerings. Investors submit bids to WR Hambrecht, and the firm sets the clearing price--or the lowest price that will result in the sale of shares.

That's a stark contrast to relatively obscure and mysterious strategies that more established banks and their most important clients use to set newly public companies' initial prices.

Experts say WR Hambrecht's model mirrors the pricing transparency of the Internet--a natural venue for auctions, virtual marketplaces, bulk buying groups and other alternative purchasing models. But they question whether WR Hambrecht can upset entrenched competitors such as Morgan Stanley and Goldman Sachs.

"Longer term, perhaps Hambrecht is a threat. But so far, they've had no traction with top-tier deals," said Michael Frank, general partner of Waltham, Mass.-based venture capital firm Advanced Technology Ventures. "The marquee names of the major investment banks mean a lot. At the end of the day, companies are willing to put up with that kind of dilution. It's going to be very hard to challenge the brand value of these banks."

WR Hambrecht has been the lead manager of four IPOs: Nogatech (ngtc), Andover.net (andn), Salon.com (saln) and Ravenswood Winery (rvwd).

Major contributors to the company's third round of financing included American Express, Scudder Kemper, Texas Pacific Group and Hikari Tsushin Capital. The company raised $50 million in financing in 1999.