Halsey Minor, CEO of Grand Central Communications Inc., is using a novel method to generate more customers for his online software services: He's offering to fund them himself as start-ups.

Minor has taken $50 million of the reported $175 million he made as the founder of CNet and other investments, including a $19.5 million investment in SalesForce.com, and is putting it into his new On Demand Venture Capital Fund. The fund will provide venture capital for companies that build their services on Grand Central's software, which provides an integrated, online hub to connect businesses over the Internet.

Unlike a predecessor venture capital fund, Entrepreneur 12, which included Internet consultant Eric Greenberg and former Xerox Parc director John Seeley Brown, this fund has no contributors or staff other than Minor. In an interview this week, Minor says he'll have little trouble finding prospective investments.

"These people come to us. They show up as customers. We're in a good position to see who's got ideas that make good use of our services," he says.

It's unusual for a venture capitalist to be focused tightly on a set of companies with a common technology base, and even more unusual for the investment fund manager to be picking start-ups that will be built on a business he's currently running.

To further tangle the web, Minor is also the primary investor in Grand Central. He has put $20 million of his money into it so far, according to published reports. In an earlier interview, Minor said the online service provider market where Grand Central plays is "lonely" because there are so few participants. When asked this week about the possibility that both Grand Central and the start-ups using its services could be caught in another boom/bust Internet cycle, the idea struck him as humorous. In response, Minor laughed: "Yes, there is double exposure, but I don't think we're going to go through another rapid expansion. If we are, it's hard to see any evidence of it out there yet."

The Internet start-up bubble was created by a broad swatch of companies that went six or seven years without generating a profit, he notes.

Earlier this year, before starting On Demand Venture Capital, Minor invested in a start-up company called InsideScoop, a supplier of business information from such sources as Dun & Bradstreet and Thomson Financial. The information can be supplied through a sales-force-automation system that gives a sales person vital information as they make a customer call. InsideScoop is built on Grand Central's integrated software infrastructure.

Minor invested $500,000 over the first six months of InsideScoop's life. It was founded in January. In its ninth month, he said, its cash flow turned positive and it's expected to generate $5 million to $7 million in sales next year. It has 7 to 10 customers and only 10 employees, who "knock out business processes" that run atop Grand Central, he said.

Minor says he's looking for a start-up that wants to build a radio-frequency identification database on Grand Central's software services. "RFID could be one of our most explosive areas of use," he says, because RFID information is of little use when hoarded by individual companies but invaluable to all members of the supply chain if added to a central database. An RFID start-up, however, needs an online supplier of database services and so far Grand Central has focused on connectivity and integration, not data warehousing or other database-oriented services.

By using Grand Central's technology, start-ups can keep their initial costs low and reach profitability sooner than their predecessors in the Internet bubble, he says. "InsideScoop was my trial balloon," and its early success has convinced him that $50 million will help create new customers for Grand Central and multiply his potential gains.

"I'm a big believer in the on-demand model," where companies obtain their software through an online supplier rather than establishing and running a data center themselves, he says.

Minor says another reason he's making the $50 million foray back into venture capital is because he knows the move will attract the interest of other venture capitalists. Says Minor, "I'm trying to catalyze others to invest as well."