<PAGE>
 
     As filed with the Securities and Exchange Commission on May 11, 1999.
                                                           Registration No. 333-
================================================================================
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549
                             --------------------
                                   FORM S-1
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
                             --------------------
                         INTERNET CAPITAL GROUP, INC.
            (Exact name of Registrant as specified in its charter)

<TABLE>
<S>                               <C>                          <C>
            Delaware                         7389                  23-2996071
  (State or Other Jurisdiction    (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number)  Identification No.)
</TABLE>
                             --------------------
                             435 Devon Park Drive
                                 Building 800
                           Wayne, Pennsylvania 19087
                                (610) 989-0111
  (Address, Including Zip Code, and Telephone Number, Including Area Code, of
                   Registrant's Principal Executive Offices)
                             --------------------
                            Walter W. Buckley, III
                     President and Chief Executive Officer
                         Internet Capital Group, Inc.
                             435 Devon Park Drive
                                 Building 800
                           Wayne, Pennsylvania 19087
                                (610) 989-0111
(Name, address including zip code, and telephone number, including area code, of
                              agent for service)
                             --------------------
                                With copies to:
<TABLE>
<S>                                                     <C>
   Christopher G. Karras, Esq.                           Bruce K. Dallas, Esq.
     Dechert Price & Rhoads                              Davis Polk & Wardwell
    4000 Bell Atlantic Tower                              450 Lexington Avenue
        1717 Arch Street                                New York, New York 10017
Philadelphia, Pennsylvania 19103                             (212) 450-4000
         (215) 994-4000
</TABLE>
                             --------------------
     Approximate date of commencement of proposed sale to the public:  As soon
as practicable after the effective date of this Registration Statement.
     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
     If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
                             --------------------
                        CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================
                                           Proposed Maximum
           Title of Each Class of         Aggregate Offering       Amount of
         Securities to be Registered           Price (1)        Registration Fee
--------------------------------------------------------------------------------
<S>                                       <C>                   <C>
Common Stock, par value $.001 per share    $210,000,000          $58,380
================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
    pursuant to Rule 457(o) under the Securities Act of 1933.
                             -------------------- 
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
 
                               Explanatory Note


     This Registration Statement contains two forms of prospectus. One will be
used in connection with an offering of the registrant's common stock to the
general public and the other will be used in the Directed Share Subscription
Program offering of the registrant's common stock to shareholders of Safeguard
Scientifics, Inc. The prospectuses will be identical except that a letter to
shareholders of Safeguard Scientifics, Inc. detailing the procedures for the
Directed Share Subscription Program will be bound to the cover of the prospectus
to be used in that program. The letter to shareholders of Safeguard Scientifics,
Inc. is filed as Exhibit 99.1 to this Registration Statement.
<PAGE>
 
The Information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting offers to buy these securities in
any state where the offer or sale is not permitted.

                             Subject to Completion
                   Preliminary Prospectus dated May 11, 1999
PROSPECTUS
----------
                                                     Shares

                  [Internet Capital Group logo appears here]

                                 Common Stock

                                 ------------

  This is Internet Capital Group, Inc.'s initial public offering of shares of
common stock.

  We expect the public offering price to be between $       and $       per
share. Currently, no public market exists for the shares. After pricing of the
offering, we expect that the common stock will trade on the Nasdaq National
Market under the symbol "ICGE."

  Investing in our common stock involves risks which are described in the "Risk
Factors" section beginning on page 4 of this prospectus.

                                 ------------

                                                          Per Share   Total
                                                          ---------   -----
Public Offering Price.................................        $         $
Underwriting Discount.................................        $         $
Proceeds, before expenses, to Internet                                
 Capital Group, Inc...................................        $         $
 
  The underwriters may also purchase up to an additional         shares at the
public offering price, less the underwriting discount, within 30 days from the
date of this prospectus to cover over-allotments.

  At our request, the underwriters have reserved              shares for sale at
the public offering price to our employees, directors and other persons with
relationships with us. See "Underwriting." As part of this offering, we are
offering           shares at the public offering price to certain shareholders
of Safeguard Scientifics, Inc. See "The Directed Share Subscription Program."

  Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

  The shares of common stock will be ready for delivery in New York, New York on
or about                     , 1999.
                                 ------------
Merrill Lynch & Co.
       BancBoston Robertson Stephens
               BT Alex. Brown
                       NationsBanc Montgomery Securities LLC
                              Wit Capital Corporation

                                 ------------
 
            The date of this prospectus is                  , 1999.
<PAGE>
 
                               TABLE OF CONTENTS
                                                                            Page
                                                                            ----
Prospectus Summary...........................................................  1
Risk Factors.................................................................  4
Use Of Proceeds.............................................................. 14
Dividend Policy.............................................................. 14
The Reorganization........................................................... 14
The Directed Share Subscription Program...................................... 14
Capitalization............................................................... 15
Dilution..................................................................... 16
Selected Consolidated Financial Data......................................... 17
Management's Discussion And Analysis Of Financial Condition And Results Of
     Operations.............................................................. 18
Our Business................................................................. 26
Management................................................................... 44
Certain Transactions......................................................... 57
Principal Shareholders....................................................... 60
Description Of Capital Stock................................................. 63
Shares Eligible For Future Sale.............................................. 66
Underwriting................................................................. 67
Legal Matters................................................................ 70
Experts...................................................................... 70
Where You Can Find More Information.......................................... 71
Index to Consolidated Financial Statements...................................F-1
<PAGE>
 
                          FORWARD-LOOKING STATEMENTS

     This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about Internet Capital Group and our Partner
Companies, including, among other things:

     .  Development of an e-commerce market. We define e-commerce as conducting
        or facilitating business transactions over the Internet.

     .  Our ability to identify trends in our markets and the markets of our
        Partner Companies and to offer new solutions that address the changing
        needs of these markets.

     .  Our ability to successfully execute our business model.

     .  Our Partner Companies' ability to compete successfully against direct
        and indirect competitors.

     .  Our ability to acquire interests in additional companies.

     .  Growth in demand for Internet products and services.

     .  Adoption of the Internet as an advertising medium.

     We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.

                                ------------- 

     The terms "Internet Capital Group," "our" and "we," as used in this
prospectus, refer to Internet Capital Group, L.L.C. and its wholly-owned
subsidiary, Internet Capital Group Operations, Inc. (formerly known as Internet
Capital Group, Inc.), for periods before the reorganization of Internet Capital
Group, L.L.C. into Internet Capital Group, Inc. and refer to Internet Capital
Group, Inc. and this subsidiary for periods after the reorganization, except
where it is clear that the term refers only to the parent company.

     Although we refer to the companies in which we have acquired an equity
interest as our "Partner Companies" and that we have a "partnership" with these
companies, we do not act as an agent or legal representative for any of our
Partner Companies, we do not have the power or authority to legally bind any of
our Partner Companies and we do not have the types of liabilities for our
Partner Companies that a general partner of a partnership would have.

     You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.

     We intend to furnish our shareholders with annual reports containing
consolidated financial statements audited by an independent accounting firm.
<PAGE>
 
                              PROSPECTUS SUMMARY

     This summary is not complete and may not contain all of the information
that may be important to you. You should read the entire prospectus carefully,
including the financial data and related notes, before making an investment
decision. Unless otherwise specifically stated, the information in this
prospectus has been adjusted to reflect the automatic conversion of all
outstanding convertible notes into shares of common stock, but does not take
into account the possible sale of additional shares of common stock to the
underwriters by us pursuant to the underwriters' right to purchase additional
shares to cover over-allotments. In addition, unless otherwise indicated, all
information in this prospectus gives effect to the reorganization described in
"The Reorganization" that was effected before this offering.

                         Internet Capital Group, Inc.

     Internet Capital Group is an Internet holding company primarily engaged in
managing and operating a network of business-to-business, or B2B, e-commerce
companies. Our goal is to become the premier B2B e-commerce company by
establishing an e-commerce presence in major segments of the economy. We believe
that our sole focus on the B2B e-commerce industry allows us to capitalize
rapidly on new opportunities and to attract and develop leading B2B e-commerce
companies. As of April 30, 1999, we owned interests in 29 B2B e-commerce
companies which we refer to as our Partner Companies.

     Our operating strategy is to integrate our Partner Companies into a
collaborative network that leverages our collective knowledge and resources. 
Acting as a long-term partner, we use these collective resources to actively
develop the business strategies, operations and management teams of our Partner
Companies. Our resources include the experience, industry relationships and
specific expertise of our management team, our Partner Companies and our
Advisory Board. Currently, our Advisory Board consists of individuals with
executive-level experience in general management, sales and marketing and
information technology at such leading companies as Cisco Systems, Coca-Cola
Company, Exodus Communications, IBM, MasterCard, Merrill Lynch and Microsoft. We
believe that building successful B2B e-commerce companies enhances the ability
of our collaborative network to facilitate innovation and growth among our
Partner Companies.

     The substantial growth in B2B e-commerce creates tremendous market
opportunities for new emerging companies. International Data Corporation
estimates that the B2B e-commerce market will grow from $35 billion in 1998 to
more than $1.1 trillion by 2003. We focus on two types of B2B e-commerce
companies, which we call market makers and infrastructure service providers.

     .  Market makers bring buyers and sellers together by creating Internet-
        based markets for the exchange of goods, services and information.
        Market makers enable more effective and lower cost commerce for
        traditional businesses by providing access through the Internet to a
        broader range of buyers and sellers. Market makers typically operate in
        a specific industry and tailor their business models to match a target
        market's distinct characteristics. Our Partner Company network currently
        includes significant interests in 13 market makers: Arbinet, BidCom,
        Collabria, CommerX, ComputerJobs.com, Deja.com, e-Chemicals, Internet
        Commerce Systems, ONVIA.com, PlanSponsor Exchange, RapidAutoNet,
        Universal Access and VerticalNet.

     .  Infrastructure service providers sell software and services to 
        businesses engaged in e-commerce. Many businesses need assistance in
        designing business practices to take advantage of the Internet and in
        building and managing the technological infrastructure needed to support
        B2B e-commerce. Our Partner Company network currently includes
        significant interests in 16 infrastructure service providers:
        Benchmarking Partners, Blackboard, Breakaway Solutions, ClearCommerce,
        Context Integration, Entegrity Solutions, LinkShare, MessageQuest,
        PrivaSeek, SageMaker, ServiceSoft, Sky Alland Marketing, SMART
        Technologies, Syncra Software, US Interactive and Vivant!.

     We have grown rapidly since our inception in 1996. In 1998, we added twelve
B2B e-commerce companies to our network and from the beginning of 1999 to April
30, 1999, we added eight B2B e-commerce companies to our network.
<PAGE>
 
     Our principal executive office is located at 435 Devon Park Drive, Building
800, Wayne, Pennsylvania 19087 and our telephone number is (610) 989-0111. We
also maintain offices in San Francisco, California, and Boston, Massachusetts.
We maintain a site on the World Wide Web at www.ICGE.com. The information on our
Web site is not part of this prospectus.

                                 This Offering

     The offering information provided below assumes that the underwriters'
over-allotment option is not exercised and excludes:

     .  shares of common stock reserved for issuance under our 1999 Equity
        Compensation Plan, under which options to purchase 9,631,500 shares were
        outstanding as of April 30, 1999 at a weighted average exercise price of
        $2.30 per share, and

     .  warrants outstanding to purchase             shares at an exercise price
        of $            per share.

Common stock offered................................            shares

Common stock to be outstanding after this offering..            shares

Use of proceeds.....................................  We intend to use the
                                                      offering proceeds for
                                                      repayment of outstanding
                                                      debt, acquisitions and
                                                      working capital.

Risk factors........................................  See "Risk Factors" and the
                                                      other information included
                                                      in this prospectus for a
                                                      discussion of factors you
                                                      should carefully consider
                                                      before deciding to invest
                                                      in shares of our common
                                                      stock.

Nasdaq National Market symbol.......................  ICGE

                    The Directed Share Subscription Program

     As part of this offering, we are offering shares of our common stock to
certain shareholders of Safeguard Scientifics, Inc. in a directed share
subscription program. The program is described in greater detail below under the
heading "The Directed Share Subscription Program."

                                       2
<PAGE>
 
                      Summary Consolidated Financial Data

     The following summary historical and pro forma consolidated financial
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our audited 
Consolidated Financial Statements and related Notes thereto included elsewhere
in this prospectus. The summary pro forma information does not purport to 
represent what our results would have been if these events had occurred at the
dates indicated. The pro forma consolidated statement of operations data
reflects our being taxed as a C-corporation since January 1, 1998, although we
have been taxed as a C-corporation since February 2, 1999. The pro forma
consolidated balance sheet data reflects the issuance of    shares of our common
stock at $    per share from January through March, 1999 and the issuance of $90
million of our convertible notes in May, 1999. The pro forma as adjusted
consolidated balance sheet data reflects the automatic converion of our
convertible notes into      shares of our common stock upon completion of this
offering and the sale of shares of our common stock in this offering at an
assumed initial public offering price of $ per share and after deduction of
estimated underwriting discounts and commissions and estimated offering
expenses.

<TABLE>
<CAPTION>
                                                              March 4, 1996
                                                              (inception) to
                                                               December 31,             Year Ended December 31,
                                                                                 --------------------------------------
                                                                  1996                 1997                 1998
                                                            -----------------    -----------------    -----------------
<S>                                                           <C>                  <C>                  <C>
Consolidated Statement of Operations Data:
 
Revenue
 Partner Company Operations.................................      $   285,140         $    791,822         $  3,134,769
 General ICG Operations.....................................               --                   --                   --
                                                            -----------------    -----------------    -----------------
                                                                  $   285,140         $    791,822         $  3,134,769
                                                            =================    =================    =================
 
Operating Loss
 Partner Company Operations.................................      $  (789,762)        $ (4,663,796)        $(16,065,225)
 General ICG Operations.....................................       (1,360,821)          (2,054,118)          (3,512,586)
                                                            -----------------    -----------------    -----------------
                                                                  $(2,150,583)        $ (6,717,914)        $(19,577,811)
                                                            =================    =================    =================
 
Net Income (Loss)
 Partner Company Operations.................................      $  (796,202)        $ (4,778,902)        $(16,150,496)
 General ICG Operations.....................................       (1,266,283)          (1,800,726)          30,049,424
                                                            -----------------    -----------------    -----------------
                                                                  $(2,062,485)        $ (6,579,628)        $ 13,898,928
                                                            =================    =================    =================
 
Pro forma income tax provision..............................                                               $  5,142,603
Pro forma net income........................................                                                  8,756,325
Pro forma net income per share -- basic and diluted.........
Pro forma shares used in computing net income per share.....
 Basic......................................................
 Diluted....................................................
 
                                                                                  December 31, 1998
                                                            -----------------------------------------------------------
                                                                                                          Pro Forma
                                                                  Actual              Pro Forma          As Adjusted
                                                            -----------------    -----------------    -----------------
 
Consolidated Balance Sheet Data:
 
Cash and cash equivalents...................................      $26,840,904         $116,840,904
Working capital.............................................       20,452,438          110,452,438
Total assets................................................       96,785,975          186,785,975
Long-term debt..............................................          351,924              351,924
Convertible subordinated notes..............................               --           90,000,000
Total shareholders' equity..................................       80,724,378           80,724,378
</TABLE>

                                       3
<PAGE>
 
                                 RISK FACTORS

     Investing in our common stock will provide you with an equity ownership
interest in Internet Capital Group. As one of our shareholders, your investment
will be subject to risks inherent to our business. The price of our common stock
may decline. You should carefully consider the following factors as well as
other information contained in this prospectus before deciding to invest in
shares of our common stock.

RISKS PARTICULAR TO INTERNET CAPITAL GROUP

We have a limited operating history upon which you may evaluate us

     We were formed in March 1996. Although we have grown significantly since
then, we have a limited operating history upon which you may evaluate our
business and prospects. We and our Partner Companies are among the many
companies that have entered into the relatively new B2B e-commerce market. Many
of our Partner Companies are in the early stages of their development. Our
business and prospects must be considered in light of the risk, expense and
difficulties frequently encountered by companies in an early stage of
development, particularly companies in new and rapidly evolving markets such as
B2B e-commerce. If we are unable to effectively allocate our resources and help
grow existing Partner Companies, our stock price may be adversely affected and
we may be unable to execute our strategy of developing a collaborative network
of Partner Companies.

Our business depends upon the performance of our Partner Companies, which is
uncertain

     Economic, governmental, industry and internal company factors outside our
control affect each of our Partner Companies. A significant portion of our
assets is comprised of ownership interests in our Partner Companies. In
particular, the value of our holdings in VerticalNet could represent a
significant portion of our market capitalization. If our Partner Companies do
not succeed, the value of our assets will decline. Some of the risks relating to
our Partner Companies are described below under "Risks Particular to Our Partner
Companies."

Our business model is unproven

     Our strategy is based on an unproven business model. Our business model
depends on the willingness of companies to join our collaborative network and
the ability of the collaborative network to assist our Partner Companies. Our
business model depends on our ability to share information within our network of
Partner Companies. If competition develops among our Partner Companies, we may
be unable to fully benefit from the sharing of information within our network of
Partner Companies. If we cannot convince companies of the value of our business
model, our ability to attract new companies will be adversely affected and our
strategy of building a collaborative network may not succeed.

We may have to take certain actions to avoid registration under the Investment
Company Act of 1940

     We believe that we are primarily and actively engaged in the business of e-
commerce through our Partner Companies and have applied to the Securities and
Exchange Commission for an exemptive order from the Investment Company Act of
1940. If we receive the exemptive order, we would not be regulated by this Act
as long as we continue to be primarily engaged in e-commerce through majority-
owned subsidiaries or controlled companies. However, we cannot be certain that
the Securities and Exchange Commission will grant this exemption. If it does
not, we may need to make significant changes to our business activities.

     Generally, a company must register under the Investment Company Act and
comply with significant restrictions on operations and transactions with
affiliates if its investment securities exceed 40% of the company's total
assets, or if it holds itself out as being primarily engaged in the business of
investing, owning or holding securities. Under an alternative test, a company is
not required to register under the Investment Company Act if not more than 45%
of its total assets consist of, and not more than 45% of its net income is
derived from, securities other than government securities and securities of
majority-owned subsidiaries and companies primarily controlled by it. We are
currently unable to rely on this alternative test as a result of net income
generated from the sale of two minority interests and instead are relying on a
one-year temporary exemption from the registration requirements of the
Investment Company Act.

                                       4
<PAGE>
 
     By May 2000 if the exemptive order has not been obtained, or earlier if we
believe the current temporary exemption is no longer available, we may need to
take certain actions to avoid the requirement to register as an investment
company. For example, we may be compelled to acquire additional income or loss
generating assets that we might not otherwise have acquired, be forced to forego
opportunities to acquire interests in companies that would be important to our
strategy or be forced to forego the sale of minority interests we would
otherwise want to sell. In addition, we may need to sell some assets which are
considered to be investment securities, including interests in Partner
Companies. It is not feasible for us to register as an investment company
because the Investment Company Act regulations are inconsistent with our
strategy of actively managing, operating and promoting collaboration among our
network of Partner Companies.

Fluctuations in our quarterly results may adversely affect our stock price

     We expect that our quarterly results will fluctuate significantly due to
many factors, including:

     .  the operating results of our Partner Companies;

     .  completed acquisitions;

     .  changes in our methods of accounting for our Partner Company interests,
        which may result from changes in our ownership percentages of our
        Partner Companies;

     .  sales of equity securities by our Partner Companies, which could cause
        us to recognize gains or losses under applicable accounting rules;

     .  the development of the B2B e-commerce market;

     .  intense competition;

     .  management of our growth and the growth of our Partner Companies; and

     .  divestitures of interests in our Partner Companies.

We believe that period-to-period comparisons of our operating results are not
meaningful. Additionally, if our operating results in one or more quarters do
not meet securities analysts' or your expectations, the price of our common
stock could decrease.

Our success is dependent on our key personnel and the key personnel of our
Partner Companies

     We believe that our success will depend on continued employment by us and
our Partner Companies of senior management and key technical personnel. Our
success also depends on the continued assistance of our Advisory Board members,
who will from time to time leave our Advisory Board. If one or more members of
our senior management, our Partner Companies' senior management or our Advisory
Board were unable or unwilling to continue in their present positions, our
business and operations could be disrupted.

     Many of our management personnel have worked for us for less than one year.
Our efficiency may be limited while these employees and future employees are
being integrated into our operations. In addition, we may be unable to find and
hire additional qualified management and professional personnel to help lead us
and our Partner Companies.

     The success of some of our Partner Companies also depends on their having
highly trained technical and marketing personnel. Our Partner Companies will
need to continue to hire additional personnel as their businesses grow. A
shortage in the number of trained technical and marketing personnel could limit
the ability of our Partner Companies to increase sales of their existing
products and services and launch new product offerings.

We have had a history of operating losses and expect continued operating losses
in the foreseeable future

     For the year ended December 31, 1998, we realized net income of $13.9
million primarily due to $34.4 million of non-operating income from the sale of
certain minority interests. During that same year, net operating losses totaled
$19.6 million. In addition, we incurred operating losses of $6.7 million in 1997

                                       5
<PAGE>
 
and $2.2 million in 1996. We expect to continue to incur operating losses for
the foreseeable future and, if we ever have operating profits, we may not be
able to sustain them.

     Our expenses will increase as we build an infrastructure to implement our
business model. For example, we expect to hire additional employees, expand
information technology systems and lease more space for our corporate offices.
In addition, we plan to significantly increase our operating expenses to:

     .  broaden our Partner Company support capabilities;

     .  explore acquisition opportunities and alliances with other companies;
        and

     .  facilitate business arrangements among our Partner Companies.

Expenses may also increase due to the potential effect of goodwill amortization
and other charges resulting from completed and future acquisitions. If any of
these and other expenses are not accompanied by increased revenue, our
operating losses will be greater than we anticipate.

Our Partner Companies are growing rapidly and we may have difficulty assisting
them in managing their growth

     Our Partner Companies have grown, and we expect them to continue to grow,
rapidly by adding new products and services and hiring new employees. This
growth is likely to place significant strain on their resources and on the
resources we allocate to assist our Partner Companies. In addition, our
management may be unable to convince our Partner Companies to adopt our ideas
for effectively and successfully managing their growth.

We may compete with some of our shareholders and Partner Companies, and our
Partner Companies may compete with each other

     We may compete with some of our shareholders and Partner Companies for 
Internet-related opportunities. After this offering, Comcast Corporation, 
Compaq Computer Corporation, General Electric Capital Corporation and Safeguard
Scientifics, Inc. will beneficially own      %,         %,            % and    
     % of our common stock, respectively. These shareholders may compete with 
us to acquire interests in B2B e-commerce companies. Comcast Corporation,
General Electric Capital Corporation and Safeguard Scientifics, Inc. currently
each have a designee as a member of our board of directors, which may give these
companies access to our business plan and knowledge about potential
acquisitions. In addition, we may compete with our Partner Companies to acquire
interests in B2B e-commerce companies, and our Partner Companies may compete
with each other for acquisitions or other B2B e-commerce opportunities. In
particular, VerticalNet seeks to expand, in part through acquisition, its number
of B2B communities. VerticalNet, therefore, may seek to acquire companies that
we would find attractive. While we may partner with VerticalNet on future
acquisitions, we have no current contractual obligations to do so. We do not
have any contracts or other understandings with our shareholders or Partner
Companies that would govern the resolution of these potential conflicts. Such
competition, and the complications posed by the designated directors, may deter
companies from partnering with us and may limit our business opportunities.

We face competition from potential acquirors of Internet-related companies

     We face competition from other capital providers including publicly-traded
Internet companies, venture capital companies and large corporations. Many of
these competitors have greater financial resources and brand name recognition
than we do. These competitors may limit our opportunity to acquire interests in
new Partner Companies. If we cannot acquire interests in attractive companies,
our strategy to build a collaborative network of Partner Companies may not
succeed.

Our success could be impaired by future market conditions

     Our strategy involves creating value for our shareholders and the employees
of our Partner Companies by helping our Partner Companies grow and access the
capital markets. We are therefore dependent on the market for Internet-related
companies in general and for initial public offerings of those companies in
particular. To date, there have been a substantial number of Internet-related
initial public offerings and additional offerings are expected to be made in the
future. If the market for Internet-related companies and initial public
offerings were to 

                                       6
<PAGE>
 
weaken for an extended period of time, the ability of our Partner Companies to
grow and access the capital markets will be impaired, and we may need to provide
additional capital to our Partner Companies.

We may be unable to obtain maximum value for our Partner Company interests

     We have significant positions in our Partner Companies. While we generally
do not anticipate selling our interests in our Partner Companies, if we were to
divest all or part of them, we may not receive maximum value for these
positions. For Partner Companies with publicly-traded stock, we may be unable to
sell our interest at then-quoted market prices. Furthermore, for those Partner
Companies that do not have publicly traded stock, the realizable value of our
interests may ultimately prove to be lower than the carrying value currently 
reflected in our consolidated financial statements.

We may not have opportunities to acquire interests in additional companies

     We may be unable to identify companies that complement our strategy, and
even if we identify a company that complements our strategy, we may be unable to
acquire an interest in the company for many reasons, including:

     .  a failure to agree on the terms of the acquisition, such as the amount
        or price of our acquired interest;

     .  incompatibility between us and management of the company;

     .  competition from other acquirors of B2B e-commerce companies;

     .  a lack of capital to acquire an interest in the company; and

     .  the unwillingness of the company to partner with us.

If we cannot acquire interests in attractive companies, our strategy to build a
collaborative network of Partner Companies may not succeed.

Our business may be disrupted or adversely affected by future acquisitions

     We have acquired, and plan to continue to acquire, significant interests in
Internet-related companies that complement our business strategy. In the future,
we may acquire larger percentages or larger interests in companies than we have
in the past, or we may seek to acquire 100% ownership of companies. These larger
acquisitions may place significantly greater strain on our resources, ability to
manage such companies and ability to integrate them into our collaborative
network. Future acquisitions are subject to the following risks:

     .  Our acquisitions may cause a disruption in our ongoing support of our
        Partner Companies, distract our management and other resources and make
        it difficult to maintain our standards, controls and procedures.

     .  We may acquire interests in companies in Internet-related markets in
        which we have little experience.

     .  We may not be able to facilitate collaboration between our Partner
        Companies and new companies that we acquire.

     .  To fund future acquisitions we may be required to incur debt or issue
        equity securities, which may be dilutive to existing shareholders.

Our systems and those of our Partner Companies and third parties may not be Year
2000 compliant which could disrupt our operations and the operations of our
Partner Companies

     Many computer programs have been written using two digits rather than four
digits to define the applicable year. This poses a problem at the end of the
century because these computer programs may recognize a date using "00" as the
year 1900, rather than the year 2000. This in turn could result in major system
failures or miscalculations and is generally referred to as the Year 2000 issue.
We may realize exposure and risk if our 

                                       7
<PAGE>
 
systems and the systems on which our Partner Companies are dependent to conduct
their operations are not Year 2000 compliant. Our potential areas of exposure
include products purchased from third parties, computers, software, telephone
systems and other equipment used internally. If our present efforts and the
efforts of our Partner Companies to address the Year 2000 compliance issues are
not successful, or if distributors, suppliers and other third parties with which
we and our Partner Companies conduct business do not successfully address such
issues, our business and the businesses of our Partner Companies may not be
operational for a period of time. If the Web-hosting facilities of our Partner
Companies are not Year 2000 compliant, their production Web sites would be
unavailable and they would not be able to deliver services to their users.

RISKS PARTICULAR TO OUR PARTNER COMPANIES

Fluctuation in the market price of VerticalNet common stock may affect the
market price of our common stock

     VerticalNet is one of our Partner Companies. As of April 30, 1999, our
holdings in VerticalNet were valued at approximately $700 million. This could
represent a significant portion of our market capitalization. The market price
of VerticalNet's common stock has been highly volatile. Fluctuations in the
market price of VerticalNet's common stock are likely to impact the market price
of our common stock.

     VerticalNet's results of operations, and accordingly the price of its
common stock, may be adversely affected by the following factors:

     .  lack of acceptance of the Internet as an advertising medium;

     .  inability to develop a large base of users of its Web sites who possess
        demographic characteristics attractive to advertisers;

     .  lower advertising rates;

     .  slow development of the e-commerce market;

     .  lack of acceptance of its Internet content;

     .  loss of key content providers;

     .  intense competition;

     .  loss of key personnel; and

     .  inability to manage growth.

The success of our Partner Companies depends on the development of the B2B e-
commerce market, which is uncertain

     All of our Partner Companies rely on the Internet for the success of their
businesses. The development of the e-commerce market is in its early stages. If
widespread commercial use of the Internet does not develop, or if the Internet
does not develop as an effective medium for the provision of products and
services, our Partner Companies may not succeed.

     Our long-term success depends on widespread market-acceptance of B2B e-
commerce. A number of factors could prevent such acceptance, including the
following:

     .  the unwillingness of businesses to shift from traditional processes to
        B2B e-commerce processes;

     .  the necessary network infrastructure for substantial growth in usage of
        B2B e-commerce may not be adequately developed;

     .  increased government regulation or taxation may adversely affect the
        viability of B2B e-commerce;

                                       8
<PAGE>
 
     .  insufficient availability of telecommunication services or changes in
        telecommunication services could result in slower response times for the
        users of B2B e-commerce; and

     .  concern and adverse publicity about the security of B2B e-commerce
        transactions.

There is intense competition for the internet products and services our Partner
Companies offer

     Competition for Internet products and services is intense. As the market
for B2B e-commerce grows, we expect that competition will intensify. Barriers to
entry are minimal, and competitors can offer products and services at a
relatively low cost. Our Partner Companies compete for a share of a customer's:

     .  purchasing budget for services, materials and supplies with other online
        providers and traditional distribution channels;

     .  dollars spent on consulting services with many established information
        systems and management consulting firms; and

     .  advertising budget with online services and traditional off-line media,
        such as print and trade associations.

In addition, some of our Partner Companies compete to attract and retain a
critical mass of buyers and sellers. Several companies offer competitive
solutions that compete with one or more of our Partner Companies. We expect that
additional companies will offer competing solutions on a stand-alone or combined
basis in the future. Furthermore, our Partner Companies' competitors may develop
Internet products or services that are superior to, or have greater market
acceptance than, the solutions offered by our Partner Companies. If our Partner
Companies are unable to compete successfully against their competitors, our
Partner Companies may fail.

     Many of our Partner Companies' competitors have greater brand recognition
and greater financial, marketing and other resources than our Partner Companies.
This may place our Partner Companies at a disadvantage in responding to their
competitors' pricing strategies, technological advances, advertising campaigns,
strategic partnerships and other initiatives.

Some of our Partner Companies may be unable to protect their proprietary rights
and may infringe on the proprietary rights of others

     Proprietary rights are important to the success and competitive position of
many of our Partner Companies. Although our Partner Companies seek to protect
their proprietary rights, their actions may be inadequate to protect any
trademarks and other proprietary rights. In addition, effective copyright and
trademark protection may be unenforceable or limited in certain countries, and
the global nature of the Internet makes it impossible for some of our Partner
Companies to control the dissemination of their work and use of their services.
Some of our Partner Companies also license content from third parties and it is
possible that they could become subject to infringement actions based upon the
content licensed from those third parties. Our Partner Companies generally
obtain representations as to the origin and ownership of such licensed content;
however, this may not adequately protect them. Any of these claims, with or
without merit, could subject our Partner Companies to costly litigation and the
diversion of their technical and management personnel. If our Partner Companies
incur costly litigation and their personnel are not effectively deployed, the
expenses incurred by our Partner Companies will increase and their profits, if
any, will decrease.

Our Partner Companies that publish or distribute content over the Internet may
be subject to legal liability

     Some of our Partner Companies may be subject to legal claims relating to
the content on their Web sites, or the downloading and distribution of this
content. Claims could involve matters such as defamation, invasion of privacy
and copyright infringement. Providers of Internet products and services have
been sued in the past, sometimes successfully, based on the content of material.
In addition, some of the content provided by our Partner Companies on their Web
sites is drawn from data compiled by other parties, including governmental and
commercial sources, and our Partner Companies re-enter the data. This data may
have errors. If any of our Partner Companies' Web site content is improperly
used or if any of our Partner Companies supply incorrect information, it could
result in unexpected liability. Any of our Partner Companies that incur this
type of unexpected liability

                                       9
<PAGE>
 
may not have insurance to cover the claim or its insurance may not provide
sufficient coverage. If our Partner Companies incur substantial cost because of
this type of unexpected liability, the expenses incurred by our Partner
Companies will increase and their profits, if any, will decrease.

Our Partner Companies' computer and communications systems may fail

     Some of our Partner Companies' businesses depend on the efficient and
uninterrupted operation of their computer and communications hardware systems.
Any system interruptions that cause our Partner Companies' Web sites to be
unavailable to Web browsers may reduce the attractiveness of our Partner
Companies' Web sites to third party content providers. If third party content
providers are unwilling to use our Partner Companies' Web sites, our business,
financial condition and operating results could be adversely affected.
Interruptions could result from natural disasters as well as power loss,
telecommunications failure and similar events.

     Capacity limits on some of our Partner Companies' technology, transaction
processing systems and network hardware and software may be difficult to project
and they may not be able to expand and upgrade their systems to meet increased
use.

     As traffic on our Partner Companies' Web sites continues to increase, they
must expand and upgrade their technology, transaction processing systems and
network hardware and software. Our Partner Companies may be unable to accurately
project the rate of increase in use of their Web sites. In addition, our Partner
Companies may not be able to expand and upgrade their systems and network
hardware and software capabilities to accommodate increased use of their Web
sites. If our Partner Companies are unable to appropriately upgrade their
systems and network hardware and software, the operations and processes of our
Partner Companies may be disrupted.

Our Partner Companies may not be able to attract a loyal base of users to their
Web sites

     Some of our Partner Companies rely on the content of their Web sites to
attract business. Our success depends upon the ability of these Partner
Companies to deliver compelling Internet content to their targeted users. If our
Partner Companies are unable to develop Internet content that attracts a loyal
user base, the revenues and profitability of our Partner Companies could be
impaired. Internet users can freely navigate and instantly switch among a large
number of Web sites. Many of these Web sites offer original content. Thus, our
Partner Companies may have difficulty distinguishing the content on their Web
sites to attract a loyal base of users.

Our Partner Companies may be unable to acquire or maintain easily identifiable
Web site addresses or prevent third parties from acquiring Web site addresses
similar to theirs

     Some of our Partner Companies hold various Web site addresses relating to
their brands. These Partner Companies may not be able to prevent third parties
from acquiring Web site addresses that are similar to their addresses, which
could adversely affect the use by businesses of our Partner Companies' Web
sites. In these instances, our Partner Companies may not grow as we expect. The
acquisition and maintenance of Web site addresses generally is regulated by
governmental agencies and their designees. The regulation of Web site addresses
in the United States and in foreign countries is subject to change. As a result,
our Partner Companies may not be able to acquire or maintain relevant Web site
addresses in all countries where they conduct business. Furthermore, the
relationship between regulations governing such addresses and laws protecting
trademarks is unclear.

Some of our Partner Companies are dependent on barter transactions that do not
generate cash revenue

     During 1998, revenue from barter transactions constituted a significant
portion of some of our Partner Companies' revenue. Barter revenue may continue
to represent a significant portion of their revenue in future periods. Barter
transactions do not generate any cash revenue and are entered into by our
Partner Companies to promote their brands without any expenditure of cash
resources.

                                       10
<PAGE>
 
RISKS RELATING TO THE INTERNET INDUSTRY

Concerns regarding security of transactions and transmitting confidential
information over the Internet may have an adverse impact on our business

     We believe that concern regarding the security of confidential information
transmitted over the Internet prevents many potential customers from engaging in
online transactions. If our Partner Companies that depend on such transactions
do not add sufficient security features to their future product releases, our
Partner Companies' products may not gain market acceptance or there may be
additional legal exposure to them.

     Despite the measures some of our Partner Companies have taken, the
infrastructure of each of them is potentially vulnerable to physical or
electronic break-ins, viruses or similar problems. If a person circumvents the
security measures imposed by any one of our Partner Companies, he or she could
misappropriate proprietary information or cause interruption in operations of
the Partner Company. Security breaches that result in access to confidential
information could damage the reputation of any one of our Partner Companies and
expose the Partner Company affected to a risk of loss or liability. Some of our
Partner Companies may be required to make significant investments and efforts to
protect against or remedy security breaches. Additionally, as e-commerce becomes
more widespread, our Partner Companies' customers will become more concerned
about security. If our Partner Companies are unable to adequately address these
concerns, they may be unable to sell their goods and services.

Our Partner Companies operate in markets characterized by rapid technology
change

     The markets in which our Partner Companies operate are characterized by
rapid technological change, frequent new product and service introductions and
evolving industry standards. Significant technological changes could render
their existing Web site technology or other products and services obsolete. The
e-commerce market's growth and intense competition exacerbate these conditions.
If our Partner Companies are unable to successfully respond to these
developments or do not respond in a cost-effective way, our business, financial
condition and operating results will be adversely affected. To be successful,
our Partner Companies must adapt to their rapidly changing markets by
continually improving the responsiveness, services and features of their
products and services and by developing new features to meet the needs of their
customers. Our success will depend, in part, on our Partner Companies' ability
to license leading technologies useful in their businesses, enhance their
existing products and services and develop new offerings and technology that
address the needs of their customers. Our Partner Companies will also need to
respond to technological advances and emerging industry standards in a cost-
effective and timely manner.

Government regulations and legal uncertainties may place financial burdens on 
our business and the businesses of our Partner Companies

     As as April 30, 1999, there were few laws or regulations directed 
specifically at e-commerce. However, because of the Internet's popularity and 
increasing use, new laws and regulations may be adopted. These laws and 
regulations may cover issues such as the collection of and use of data from Web 
site visitors and related privacy issues, pricing, content, copyrights, online 
gambling, distribution and the quality of goods and services. The enactment of 
any additional laws or regulations may impede the growth of the Internet and B2B
e-commerce, which could decrease the revenue of our Partner Companies and place
additional financial burdens on our business and the businesses of our Partner 
Companies.

     Laws and regulations directly applicable to e-commerce or Internet 
communications are becoming more prevalent. For example, Congress recently 
enacted laws regarding online copyright infringement and the protection of 
information collected online from children. Although these laws may not have a 
direct adverse effect on our business or those of our Partner Companies, they 
add to the legal and regulatory burden faced by B2B e-commerce companies.

RISKS RELATING TO THE OFFERING

Shares eligible for future sale by our current shareholders may decrease the
price of our common stock

     If our shareholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options, in the public market
following the offering, then the market price of our common stock could fall.
Restrictions under the securities laws and certain lock-up agreements limit the
number of shares of common stock available for sale in the public market. The
holders of               shares of common stock, options exercisable into an
aggregate of                  shares of common stock, and warrants exercisable
into an aggregate of            shares of common stock have agreed not to sell
any of these securities for 180 days after the offering without the prior
written consent of Merrill Lynch. In addition, the holders of the convertible
notes that will automatically convert into                shares of common stock
upon the closing of this offering have also agreed to such restrictions.
However, Merrill Lynch may, in its sole discretion, release all or any portion
of the securities subject to the lock-up agreements.

     The holders of 72,479,549 shares of common stock, the holders of warrants
to purchase shares of common stock and the holders of convertible notes that
will automatically convert into                   shares of common stock upon
the closing of this offering have demand or piggy-back registration rights.
However, the holders of these securities that have demand registration rights
have agreed not to demand that their securities be registered for 180 days after
the offering without the prior written consent of Merrill Lynch. We also may
shortly file a registration statement to register all shares of common stock
under our stock option plans. After such registration statement is 

                                       11
<PAGE>
 
effective, common stock issued upon exercise of stock options under our benefit
plans will be eligible for resale in the public market without restriction.

The interests of certain of our significant shareholders may conflict with our
interests and the interests of our other shareholders

     As a result of their combined stock ownership, Safeguard Scientifics
(Delaware), Inc. and Safeguard 98 Capital L.P., together, will be in a position
to affect significantly our corporate actions such as mergers or takeover
attempts in a manner that could conflict with the interests of our public
shareholders. After the offering, Safeguard Scientifics (Delaware), Inc. and
Safeguard 98 Capital L.P., together, will beneficially own             % of our
common stock.

Anti-takeover provisions and our right to issue preferred stock could make a
third-party acquisition of us difficult

     Our certificate of incorporation provides that our board of directors may
issue preferred stock without shareholder approval. In addition, our bylaws
provide for a classified board, with each board member serving a three-year
term. The issuance of preferred stock and the existence of a classified board
could make it more difficult for a third-party to acquire us without the
approval of our board.

Our common stock has never been publicly traded so we cannot predict the extent
to which a trading market will develop for our common stock

     There has not been a public market for our common stock. We cannot predict
the extent to which a trading market will develop or how liquid that market
might become. The initial public offering price will be determined by
negotiations between representatives of the underwriters and us, and may not be
indicative of prices that will prevail in the trading market.

Our common stock price is likely to be highly volatile

     The market price for our common stock is likely to be highly volatile as
the stock market in general and the market for Internet-related stocks and the
stock of VerticalNet in particular, has been highly volatile. The trading prices
of many technology and Internet-related company stocks have reached historical
highs within the last year and have reflected relative valuations substantially
above historical levels. During the same period, the stocks of these companies
have also been highly volatile and have recorded lows well below such historical
highs. We cannot assure you that our common stock will trade at the same levels
of other Internet stocks or that Internet stocks in general will sustain their
current market prices.

     The following factors will add to our common stock price's volatility:

     .  actual or anticipated variations in our quarterly operating results and
        those of our Partner Companies;

     .  new sales formats or new products or services offered by us, our Partner
        Companies and their competitors;

     .  changes in our financial estimates and those of our Partner Companies by
        securities analysts;

     .  conditions or trends in the Internet industry in general and the B2B e-
        commerce industry in particular;

     .  announcements by our Partner Companies and their competitors of
        technological innovations;

     .  announcements by us or our Partner Companies or our competitors of
        significant acquisitions, strategic partnerships or joint ventures;

     .  changes in the market valuations of our Partner Companies and other
        Internet companies;

     .  our capital commitments;

                                       12
<PAGE>
 
     .  additions or departures of our key personnel and key personnel of our
        Partner Companies; and

     .  sales of our common stock.

Many of these factors are beyond our control. These factors may decrease the
market price of our common stock, regardless of our operating performance.

                                       13
<PAGE>
 
                                USE OF PROCEEDS

     Based on an assumed initial public offering price of $         per share,
our net proceeds from the sale of the           shares of our common stock will
be approximately $               ($             if the underwriters' over-
allotment option is exercised in full), after deduction of underwriting
discounts and commissions and estimated offering expenses payable by us.

     The principal purposes of this offering are to increase our working
capital, to create a public market for our common stock, to facilitate our
future access to public equity markets and to provide us with increased
visibility and credibility. We intend to use the net proceeds from the offering
to repay any balance outstanding on our revolving bank credit facility, acquire
interests in Internet-related companies and for general corporate purposes,
including working capital. Our bank credit facility matures in April 2000 and
bears interest, at our option, at prime and/or LIBOR plus 2.5%. At April 30,
1999, there was no outstanding balance under the bank credit facility. We use
monies borrowed under the bank credit facility primarily to acquire interests in
new or existing Partner Companies. Pending use of the net proceeds for the above
purposes, we intend to invest the funds in interest-bearing, investment-grade
securities, certificates of deposit, or direct or guaranteed obligations of the
United States.

                                DIVIDEND POLICY

     We have never declared or paid dividends on our capital stock, and we do
not intend to pay dividends in the foreseeable future. We plan to retain any
earnings for use in the operation of our business and to fund future growth.

                              THE REORGANIZATION

     Internet Capital Group, Inc. is a successor to a business originally
founded in March 1996 as a Delaware limited liability company under the name
Internet Capital Group, L.L.C. As a limited liability company, Internet Capital
Group, L.L.C. was treated for income tax purposes as a partnership with taxes on
the income generated by Internet Capital Group L.L.C. paid by its members.
Internet Capital Group, L.L.C. merged into Internet Capital Group, Inc., with
Internet Capital Group, Inc. surviving (the "Reorganization"). In connection
with the Reorganization and as required by its limited liability company
agreement to satify the members' tax liabilities, Internet Capital Group, L.L.C.
declared a $10.7 million distribution to its members. Internet Capital Group,
Inc. has assumed all liabilities of Internet Capital Group, L.L.C., including
the distribution to members of Internet Capital Group, L.L.C. Also as part of
the Reorganization, Internet Capital Group, Inc. issued            shares of
common stock to the members of Internet Capital Group, L.L.C. The separate
existence of Internet Capital Group, L.L.C. ceased on February 2, 1999.

                    THE DIRECTED SHARE SUBSCRIPTION PROGRAM

     As part of this offering, we are offering             shares of our common
stock in a directed share subscription program to shareholders of Safeguard
Scientifics, Inc., one of our principal and founding shareholders. Only persons
who owned at least             shares of Safeguard Scientifics, Inc. common
stock as of                  , 1999 are eligible to participate in the program.
Such shareholders may subscribe for one share of our common stock for every ten
shares of Safeguard Scientifics, Inc. common stock held by them, and may not
transfer the opportunity to subscribe to another person except involuntarily by
operation of law. Sales under the program will close on the same day as other
sales under this offering. If any of the shares offered under the program are
not purchased by the shareholders of Safeguard Scientifics, Inc., then Safeguard
Scientifics, Inc. or one or more of its designees will purchase these shares.
The purchase price under the program, whether paid by Safeguard Scientifics,
Inc. or its shareholders, will be the same price per share as set forth on the
cover page of this prospectus.

                                       14
<PAGE>
 
                                CAPITALIZATION

     The following table sets forth our capitalization as of December 31, 1998
(i) on an actual basis, (ii) on a pro forma basis to reflect the issuance of
           shares of our common stock at       per share from January through 
March, 1999 and the issuance of $90 million of our convertible notes in May,
1999, and (iii) on a pro forma basis, as adjusted to reflect the automatic
conversion of our convertible notes into        shares of our common stock upon
completion of this offering and the sale of      shares of our common stock in 
this offering at an assumed initial public offering price of $    per share and
after deduction of estimated underwriting discounts and commissions and
estimated offering expenses.

     The calculation of shareholders' equity reflects our Reorganization on
February 2, 1999. Common stock data also assumes that the underwriters' over-
allotment option is not exercised and excludes shares of common stock reserved
for issuance under our (i) 1999 Equity Compensation Plan, under which options to
purchase 9,631,500 shares were outstanding as of April 30, 1999 at a weighted
average exercise price of $2.30 per share, and (ii) warrants outstanding to
purchase           shares at an exercise price of $            per share.


<TABLE>
<CAPTION>

                                                                                   December 31, 1998
                                                             -----------------------------------------------------------
                                                                                                           Pro Forma
                                                                                                               As    
                                                                   Actual             Pro Forma             Adjusted  
                                                             -----------------    -----------------    -----------------
<S>                                                            <C>                  <C>                  <C>
Long-term debt...............................................      $   351,924         $    351,924         $
 
Convertible subordinated notes...............................               --           90,000,000
 
Shareholders' equity:                                                    
 
Preferred stock, $.001 par value; no shares authorized
 --actual, pro forma and pro forma as adjusted...............               --                   --
 
Common stock, $.001 par value; 130,000,000 shares
 authorized, 66,043,625 shares issued and outstanding -
 actual;                shares issued and outstanding--pro
 forma; shares issued and outstanding--pro forma as                    
 adjusted ...................................................           66,044               66,044 
 
 
 
 
Additional paid-in capital...................................       74,935,262           74,935,262
 
Retained earnings............................................        5,256,815            5,256,815
 
Unamortized deferred compensation............................       (1,266,814)          (1,266,814)
 
Accumulated other comprehensive income.......................        1,733,071            1,733,071
                                                             -----------------    -----------------    -----------------
 
Total shareholders' equity...................................       80,724,378           80,724,378
                                                             -----------------    -----------------    -----------------
 
  Total capitalization.......................................      $81,076,302         $171,076,302         $
                                                             =================    =================    =================
</TABLE>

                                       15
<PAGE>
 
                                   DILUTION

     Our pro forma net tangible book value at December 31, 1998, after giving 
effect to the conversion of all outstanding convertible notes into shares 
of common stock upon completion of this offering, was approximately $          
      , or $               per share. Pro forma net tangible book value per 
share is equal to our total tangible assets less our total liabilities, 
divided by the total number of shares of our common stock outstanding. After 
giving effect to the sale of                      shares of our common stock 
offered hereby at an assumed initial public offering price of $             per
share and after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us, our as adjusted pro forma net 
tangible book value at December 31, 1998 would have been approximately $       
     , or $            per share. This represents an immediate increase in net
tangible book value of $            per share to existing shareholders and an 
immediate dilution of $                per share to new investors purchasing 
shares of our common stock in this offering. The following table illustrates 
the per share dilution to the new investors.

<TABLE>
<CAPTION>
<S>                                                                                            <C>        <C>
Assumed initial public offering price per share .............................................               $
 Pro forma net tangible book value per share at December 31, 1998............................    $
 Increase per share attributable to this offering............................................
As adjusted pro forma net tangible book value per share after the offering...................
                                                                                                          ----------
Dilution per share to new investors in this offering.........................................               $
                                                                                                          ==========
</TABLE>

     The following table summarizes on a pro forma basis, as of December 31,
1998, the total number of shares of our common stock purchased from us, 
the total cash consideration paid and the average price per share paid by the
existing shareholders and by the new investors in this offering at an assumed
initial public offering price of $      per share and before deducting estimated
underwriting discounts and commissions and our estimated offering expenses:

<TABLE>
<CAPTION>
 
                                                                                                 Average
                                                                            Total               Price Per
                                     Shares Purchased                   Consideration             Share
                          ------------------------------------   ---------------------------   ------------
                                 Number             Percent          Amount        Percent
                          ------------------   ---------------   ------------   ------------
<S>                         <C>                  <C>               <C>            <C> 
Existing shareholders.....
New investors (1).........
                          ------------------   ---------------   ------------   ------------
     Total................
                          ==================   ===============   ============   ============
</TABLE>
 
(1) This number of shares assumes that the underwriters' over-allotment option
    is not exercised. If the over-allotment option is exercised in full, we will
    issue and sell an additional                   shares.

     The foregoing discussion and tables assume no exercise of any stock options
outstanding as of December 31, 1998. As of December 31, 1998, there were options
outstanding to purchase a total of 6,697,000 shares of our common stock at a
weighted average exercise price of $1.99 per share and 3,773,000 shares reserved
for future grant under our 1999 Equity Compensation Plan. To the extent that any
of these shares are issued, there will be further dilution to new investors. See
"Capitalization," "Management--Employee Benefit Plans" and Note 8 to 
Consolidated Financial Statements.

                                       16
<PAGE>
 
                     SELECTED CONSOLIDATED FINANCIAL DATA

     You should read the following selected consolidated financial data in
conjunction with our Consolidated Financial Statements, including the Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this prospectus. The consolidated
statement of operations data from March 4, 1996, the date of our inception,
through December 31, 1996 and for the years ended December 31, 1997 and 1998,
and consolidated balance sheet data at December 31, 1997 and 1998 have been
derived from the consolidated financial statements, that have been audited by
KPMG LLP, independent auditors, included elsewhere in this prospectus. The
consolidated balance sheet data at December 31, 1996 has been derived from the
consolidated financial statements that have been audited by KPMG LLP,
independent auditors, which are not included in this prospectus.

<TABLE>
<CAPTION>

                                                               March 4, 1996
                                                               (inception) to
                                                                December 31,             Year Ended December 31,
                                                                                 --------------------------------------
                                                                   1996                1997                 1998
                                                            -----------------    -----------------    -----------------
<S>                                                           <C>                  <C>                  <C>
Revenue.....................................................      $   285,140          $   791,822         $  3,134,769
                                                            -----------------    -----------------    -----------------
 
Operating expenses
  Cost of revenue...........................................          427,470            1,767,017            4,642,528
  Sales and marketing.......................................          268,417            2,300,365            7,894,662
  General and administrative................................        1,652,481            3,442,241            7,619,169
  Minority interest.........................................         (427,185)             106,411           (5,381,640)
  Equity (income) loss......................................          514,540             (106,298)           7,937,861
                                                            -----------------    -----------------    -----------------
  Total operating expenses..................................        2,435,723            7,509,736           22,712,580
                                                            -----------------    -----------------    -----------------
Operating loss..............................................       (2,150,583)          (6,717,914)         (19,577,811)
Other income, net...........................................               --                   --           32,552,151
Interest income, net........................................           88,098              138,286              924,588
                                                            -----------------    -----------------    -----------------
Net income (loss)...........................................      $(2,062,485)         $(6,579,628)        $ 13,898,928
                                                            =================    =================    =================
 
Pro forma information (unaudited):
 
Pro forma net income
  Net income as reported....................................                                               $ 13,898,928
  Pro forma income tax provision............................                                                 (5,142,603)
                                                                                                      -----------------
  Pro forma net income......................................                                               $  8,756,325
                                                                                                      =================
 
Pro forma net income per share
  Basic.....................................................      
  Diluted................................................... 
 
Pro forma shares used in computing net income per share
  Basic.....................................................
  Diluted...................................................
                                                                                    December 31,
                                                            -----------------------------------------------------------
                                                                  1996                 1997                 1998
                                                            -----------------    -----------------    -----------------
 Consolidated Balance Sheet Data:
 
 Cash and cash equivalents..................................      $ 3,215,256          $ 5,967,461         $ 26,840,904
 Working capital............................................        4,883,129            2,390,762           20,452,438
 Total assets...............................................       13,629,407           31,481,016           96,785,975
 Long-term debt.............................................          167,067              399,948              351,924
 Total shareholders' equity.................................       12,858,856           26,634,675           80,724,378
</TABLE>

                                       17
<PAGE>
 
                     MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this prospectus.
The following discussion should be read in conjunction with our audited 
Consolidated Financial Statements and related Notes thereto included elsewhere 
in this prospectus.

General

     Internet Capital Group is an Internet holding company primarily engaged in
managing and operating a network of business-to-business, or B2B, e-commerce
companies. Our goal is to become the premier B2B e-commerce company by
establishing an e-commerce presence in major segments of the economy. We believe
that our sole focus on the B2B e-commerce industry allows us to capitalize
rapidly on new opportunities and to attract and develop leading B2B e-commerce
companies. As of April 30, 1999, we owned interests in 29 B2B e-commerce
companies which we refer to as our Partner Companies.

     Because we acquire significant interests in Internet-related companies,
many of which generate operating losses, we have experienced, and expect to
continue to experience, significant volatility in our quarterly results. We do
not know if we will report net income in any period, and we expect that we
will report operating losses in many quarters for the foreseeable future.

Effect of Various Accounting Methods on our Results of Operations

     The various interests that we acquire in our Partner Companies are
accounted for under three broad methods: consolidation, equity method and cost
method. The applicable accounting method is generally determined based on our
voting interest in a Partner Company.

     Consolidation. Partner Companies in which we directly or indirectly own
more than 50% of the outstanding voting securities are generally accounted for
under the consolidation method of accounting. Under this method, a Partner
Company's results of operations are reflected within our Consolidated Statements
of Operations. Participation of other Partner Company shareholders in the
earnings or losses of a consolidated Partner Company is reflected in the caption
"Minority interest" in our Consolidated Statements of Operations. Minority
interest adjusts our consolidated results of operations to reflect only our
share of the earnings or losses of the consolidated Partner Company. VerticalNet
was our only consolidated Partner Company through December 31, 1998.

     Equity Method. Partner Companies whose results we do not consolidate, but
over whom we exercise significant influence, are accounted for under the equity
method of accounting. Whether or not we exercise significant influence with
respect to a Partner Company depends on an evaluation of several factors
including, among others, representation on the Partner Company's Board of
Directors and ownership level, which is generally a 20% to 50% interest in the
voting securities of the Partner Company, including voting rights associated
with our holdings in common, preferred and other convertible instruments in the
Partner Company. Under the equity method of accounting, a Partner Company's
results of operations are not reflected within our Consolidated Statements of
Operations; however, our share of the earnings or losses of the Partner Company
is reflected in the caption "Equity (income) loss" in the Consolidated
Statements of Operations. As of December 31, 1998, we accounted for nine of our
Partner Companies under the equity method of accounting.

     The net effect of a Partner Company's results of operations on our net
results of operations is generally the same under either the consolidation
method of accounting or the equity method of accounting, as under these methods
only our share of the earnings or losses of a Partner Company is reflected in
our net results of operations in the Consolidated Statements of Operations.

     Cost Method. Partner Companies not accounted for under the consolidation or
the equity method of accounting are accounted for under the cost method of
accounting. Under this method, our share of the earnings or losses of these
companies is not included in our Consolidated Statements of Operations.

                                       18
<PAGE>
 
Effect of Various Accounting Methods on the Presentation of our Financial
Statements

     The presentation of our financial statements may differ from period to
period primarily due to whether or not we apply the consolidation method of
accounting or the equity method of accounting. For example, since our inception
we consolidated VerticalNet's financial statements with our own. However, due to
their initial public offering in February 1999, our ownership interest in
VerticalNet decreased to 37%. Therefore, we will be applying the equity method
of accounting beginning in the three months ended March 31, 1999. The
presentation of our financial statements will look substantially different as a
result of our no longer consolidating VerticalNet.

     To understand our results of operations and financial position without the
effect of consolidating VerticalNet, Note 11 to our Consolidated Financial
Statements summarizes our Parent Company Statements of Operations and Balance
Sheets for the same periods presented in the Consolidated Financial Statements.
These statements differ from the Consolidated Financial Statements by treating
VerticalNet as if it were accounted for under the equity method of accounting.
Our share of VerticalNet's losses is included in "Equity (income) loss" in the
Parent Company Statements of Operations and the losses recorded in excess of
carrying value of VerticalNet are included in "Non-current liabilities" in the
Parent Company Balance Sheets.

Operations Overview

     VerticalNet was our only consolidated Partner Company through December 31,
1998. All of our consolidated revenue and a significant portion of our
consolidated operating expenses since our inception on March 4, 1996 through
December 31, 1998 were attributable to VerticalNet.

     As of April 30, 1999, VerticalNet owned and operated 37 industry-specific 
trade communities. Advertising revenue and Web site development fees
represented all of VerticalNet's revenue in 1996 and 1997. In 1998, most of
VerticalNet's revenue was generated from selling advertisements to industry
suppliers in its trade communities.

     VerticalNet sells storefront and banner advertising and event sponsorships
in its trade communities. The duration of a storefront advertisement is
typically for a period of one year, while banner advertisements are typically
for a period of three months. All advertising revenue is recognized ratably in
the period in which the advertisement is displayed, provided that the collection
is reasonably assured. VerticalNet also generates revenue from career services,
education, and e-commerce, specifically the sale of books and third party
software for which they receive a transaction fee, and from barter transactions.

     A significant portion of our operations are conducted through corporations
in which we hold a significant minority ownership interest accounted for under
the equity method of accounting. As of December 31, 1998, we accounted for nine
of our Partner Companies under the equity method of accounting. Under this
method, the results of operations of these entities are not reflected within our
Consolidated Statements of Operations; however, our share of such companies'
earnings or losses is reflected in the caption "Equity (income) loss" in the
Consolidated Statements of Operations.

                                       19
<PAGE>
 
Results of Operations

     Our consolidated results of operations are composed of Partner Company
Operations and General ICG Operations. Partner Company Operations includes the
effect of consolidating VerticalNet and recording our share of earnings or
losses of Partner Companies accounted for under the equity method of accounting.
General ICG Operations represents the expenses of providing strategic and
operational support to our Partner Companies, as well as the related
administrative costs related to these expenses. General ICG Operations also
includes the effect of transactions and other events incidental to our ownership
interests in our Partner Companies and our operations in general.

<TABLE>
<CAPTION>

                                                             March 4, 1996
                                                          (inception) through                
                                                              December 31,              Year Ended December 31,
                                                                                -------------------------------------- 
                                                                 1996                  1997                 1998
                                                           -----------------    -----------------    -----------------
<S>                                                          <C>                  <C>                  <C> 
Summary of Consolidated Net Income (Loss)
Partner Company Operations.................................      $  (796,202)         $(4,778,902)        $(16,150,496)
General ICG Operations.....................................       (1,266,283)          (1,800,726)          30,049,424
                                                           -----------------    -----------------    -----------------
Net income (loss) - Consolidated Total.....................      $(2,062,485)         $(6,579,628)        $ 13,898,928
                                                           =================    =================    =================
 
Partner Company Operations
 Revenue...................................................      $   285,140          $   791,822         $  3,134,769
                                                           -----------------    -----------------    -----------------
 Operating expenses
   Cost of revenue.........................................          427,470            1,767,017            4,642,528
   Sales and marketing.....................................          268,417            2,300,365            7,894,662
   General and administrative..............................          291,660            1,388,123            4,106,583
                                                           -----------------    -----------------    -----------------
 Operating loss -- Partner Company Operations before
   minority interest and equity income (loss)..............         (702,407)          (4,663,683)         (13,509,004)
 Minority interest.........................................          427,185             (106,411)           5,381,640
 Equity income (loss)......................................         (514,540)             106,298           (7,937,861)
                                                           -----------------    -----------------    -----------------
 Operating loss -- Partner Company Operations..............         (789,762)          (4,663,796)         (16,065,225)
 Other income, net.........................................               --                   --                   --
 Interest expense, net.....................................           (6,440)            (115,106)             (85,271)
                                                           -----------------    -----------------    -----------------
 Net loss -- Partner Company Operations....................      $  (796,202)         $(4,778,902)        $(16,150,496)
                                                           =================    =================    =================
General ICG Operations
 General and administrative................................      $ 1,360,821          $ 2,054,118         $  3,512,586
                                                           -----------------    -----------------    -----------------
 Operating loss - General ICG Operations...................       (1,360,821)          (2,054,118)          (3,512,586)
 Other income, net.........................................               --                   --           32,552,151
 Interest income, net......................................           94,538              253,392            1,009,859
                                                           -----------------    -----------------    -----------------
 Net income (loss) - General ICG Operations................      $(1,266,283)         $(1,800,726)        $ 30,049,424
                                                           =================    =================    =================
Consolidated Total
 Revenue...................................................      $   285,140          $   791,822         $  3,134,769
                                                           -----------------    -----------------    -----------------
 Operating expenses
   Cost of revenue.........................................          427,470            1,767,017            4,642,528
   Sales and marketing.....................................          268,417            2,300,365            7,894,662
   General and administrative..............................        1,652,481            3,442,241            7,619,169
   Minority interest.......................................         (427,185)             106,411           (5,381,640)
   Equity (income) loss....................................          514,540             (106,298)           7,937,861
                                                           -----------------    -----------------    -----------------
 Operating loss............................................       (2,150,583)          (6,717,914)         (19,577,811)
 Other income, net.........................................               --                   --           32,552,151
 Interest income, net......................................           88,098              138,286              924,588
                                                           -----------------    -----------------    -----------------
 Net income (loss) - Consolidated Total....................      $(2,062,485)         $(6,579,628)          13,898,928
                                                           =================    =================   
 Pro forma income tax provision............................                                                 (5,142,603)
                                                                                                     -----------------
 Pro forma net income......................................                                               $  8,756,325
                                                                                                     =================
</TABLE>

                                       20
<PAGE>
 
Results of Operations-Partner Company Operations

     VerticalNet-Analysis of Three Year Period Ended December 31, 1998

     For the periods ended December 31, 1996, December 31, 1997 and December 31,
1998, VerticalNet was our only consolidated Partner Company. The following is a
discussion of VerticalNet's results of operations for the three year period
ended December 31, 1998:

     Revenue. Revenue was $.3 million for the year ended December 31, 1996,
$.8 million for the year ended December 31, 1997 and $3.1 million for the year
ended December 31, 1998. The increase in  revenue was due primarily to an
increase in the number of advertisers as a result of VerticalNet's marketing
efforts and the increase in the number of industry-specific trade communities
from 16 as of December 31, 1997 to 33 as of December 31, 1998.

     Cost of Revenue. Cost of revenue was $.4 million in 1996, $1.8 million in
1997 and $4.6 million in 1998. Cost of revenue consists of editorial,
operational, and product development expenses. The increase in cost of revenue
was due to increased staffing and the costs of enhancing the features, content
and services of VerticalNet's industry-specific trade communities, as well as
increasing the overall number of trade communities.

     Sales and Marketing Expenses. Sales and marketing expenses were $.3 million
for the year ended December 31, 1996, $2.3 million for the year ended December
31, 1997 and $7.9 million for the year ended December 31, 1998. The increase in
sales and marketing expenses was primarily due to increasing the number of sales
and marketing personnel, increasing sales commissions and increased expenses
related to promoting VerticalNet's industry-specific trade communities.

     General and Administrative Expenses. General and administrative expenses
were $.3 million for the year ended December 31, 1996, $1.4 million for the year
ended December 31, 1997 and $4.1 million for the year ended December 31, 1998.
The increase in general and administrative expenses was due primarily to
increased staffing levels, higher facility costs, professional fees to support
the growth of VerticalNet's infrastructure and goodwill amortization related to
VerticalNet's 1998 acquisitions.

     Equity (Income) Loss

     A significant portion of our operations are conducted through companies in
which we hold a significant minority ownership interest. These companies are
accounted for under the equity method of accounting. Equity (income) loss
fluctuates with the number of companies accounted for under the equity method,
our ownership percentage in these companies, and the results of operations of
these companies. In the periods ended December 31, 1996 and 1997, only Sky
Alland was accounted for under the equity method. Sky Alland's results of
operations in 1997 improved compared to 1996.

     The significant change in equity (income) loss from 1997 to 1998 reflects a
decrease in the results of operations at Sky Alland and the effect of Partner
Companies in which we acquired an interest during 1998. One of these companies,
Syncra Software, Inc., represented approximately $4.3 million of our $7.9
million equity loss in 1998. As of December 31, 1998, we accounted for nine of
our Partner Companies under the equity method of accounting. Most of these
companies are in a very early stage of development and incurred substantial
losses in 1998, and our share of these losses was substantial.

     As mentioned previously, our ownership interest in VerticalNet will no
longer be consolidated in our financial statements but will be accounted for
under the equity method of accounting in 1999 as a result of our lower ownership
interest in VerticalNet following the completion of their initial public
offering in February 1999. VerticalNet incurred losses in each of the years in
the three year period ended December 31, 1998, and may incur losses in the
future. In addition, due to the early stage of development of the companies in
which we acquire interests, existing and new Partner Companies accounted for
under the equity method are expected to incur substantial losses. Our share of
these losses is expected to be substantial in 1999.

     While VerticalNet and most of the companies accounted for under the equity
method of accounting have generated losses in each of the years in the three-
year period ended December 31, 1998, and therefore in most cases 

                                       21
<PAGE>
 
did not incur tax liabilities, these companies may generate taxable income in
the future. Our share of these companies' net income would be reduced to the
extent of our share of these companies' tax expense.

Results of Operations - General Operations

     General and Administrative

     Our general and administrative costs consist primarily of employee
compensation, outside services such as legal, accounting and consulting, and
travel-related costs. We commenced operations in March 1996 with offices in
Wayne, Pennsylvania and San Francisco, California. As the number of our
employees grew to support our operations and those of our Partner Companies, our
general and administrative costs increased. In late 1998, we opened an office in
Boston, Massachusetts, and in early 1999, we significantly increased the number
of our employees. We plan to continue to hire new employees, open new offices,
and build our overall infrastructure. While general and administrative costs
increased 71% from 1997 to 1998, we expect these costs will more than double
from 1998 to 1999.

     Other Income

     Other income consists of the effect of transactions and other events
incidental to our ownership interests in our Partner Companies and our
operations in general. Other income is expected to include, among other items,
gains or losses on the sales of all or a portion of minority interests, gains or
losses on the sales of stock by our public Partner Companies to reflect the
change in our share of the net equity of these companies, and impairment charges
related to our ownership interests in Partner Companies. We continually evaluate
the carrying value of our ownership interests in each of our Partner Companies
for possible impairment based on achievement of business plan objectives and
milestones, the value of each ownership interest in the Partner Company relative
to carrying value, the financial condition and prospects of the Partner Company,
and other relevant factors.

     Other income consisted of the following:

<TABLE>
<CAPTION>

                                                                Year Ended
                                                             December 31,1998
                                                            -------------------
<S>                                                          <C>
Sale of Matchlogic to Excite...............................         $12,822,162
Sales of Excite holdings...................................          16,813,844
Sale of WiseWire to Lycos..................................           3,324,238
Sales of Lycos holdings....................................           1,471,907
Partner Company impairment charge..........................          (1,880,000)
                                                            -------------------
                                                                    $32,552,151
                                                            ===================
</TABLE>

     In February 1998, we exchanged all of our holdings of Matchlogic, Inc. for
763,820 shares of Excite, Inc. which resulted in a gain at the date of exchange
of $12.8 million. Throughout the remainder of 1998, we sold 716,082 shares of
Excite which resulted in $30.2 million of proceeds and $16.8 million of gains.

     In April 1998, we exchanged all of our holdings of WiseWire for 196,130
shares of Lycos, Inc. which resulted in a gain at the date of the transaction of
$3.3 million. Throughout the remainder of 1998, we sold 173,756 shares of Lycos
which resulted in $6.2 million of proceeds and $1.5 million of gains.

     The remaining holdings of Excite and Lycos are marked to market at December
31, 1998 with the difference between carrying value and market value recorded in
"Accumulated other comprehensive income" in the shareholders' equity section of
our Consolidated Balance Sheet in accordance with Statement of Financial
Accounting Standards No. 115.

     In December 1998, we recorded an impairment charge of $1.9 million for the
decrease in value of one of our Partner Companies.

     As a result of the initial public offering of VerticalNet completed in
February 1999, we expect to record a gain in 1999 of approximately $28 million
relating to the increase in our share of VerticalNet's net equity.

                                       22
<PAGE>
 
     Interest Income

     Our cash and cash equivalents are invested primarily in money market
accounts. During 1998, we received $38.2 million of proceeds from the sale of
our common stock and $36.4 million of proceeds from the sales of a portion of
our holdings in Excite and Lycos. The increase in interest income in 1998 was
primarily due to the significant increase in our cash and cash equivalents
throughout 1998 as a result of these transactions.

     Income Taxes

     From our inception on March 4, 1996 to February 2, 1999, we were organized
as a limited liability company and were treated as a partnership for income tax
purposes. As a result of our reorganization as a corporation, we will be subject
to corporate federal and state income taxes. For informational purposes, the
Consolidated Statement of Operations for the year ended December 31, 1998
reflects pro forma income on an after-tax basis assuming we had been taxed as a
C corporation since January 1, 1998. We did not have any net operating loss
carry forwards at December 31, 1998.

Liquidity and Capital Resources

     We have funded our operations with a combination of equity proceeds,
proceeds from the sales of a portion of our Excite and Lycos holdings,
borrowings under bank credit facilities, and proceeds from the issuance of
convertible notes.

     We received equity commitments of $40 million in 1996, of which $13.7 
million and $20.1 million was received in 1996 and 1997, respectively, and $6.2
million of which was funded with an in-kind contribution of holdings of a
Partner Company in 1996. We received additional commitments of $70 million in
1998, of which $38 million and $32 million was received in 1998 and 1999,
respectively.

     Sales of Excite and Lycos stock in 1998 generated proceeds of $36.4
million.

     In April, 1999 we entered into a $50 million revolving bank credit
facility. In connection with the facility, we issued 200,000 warrants
exercisable for seven years at $10 per share. The facility matures in April
2000, is subject to a .25% unused commitment fee, bears interest, at our option,
at prime and/or LIBOR plus 2.5%, and is secured by substantially all of our
assets (including all of our holdings in VerticalNet). Borrowing availability
under the facility is based on the fair market value of our holdings of publicly
traded Partner Companies (currently only VerticalNet) and the value, as defined
in the facility, of our private Partner Companies. If the market price of
VerticalNet experiences a significant decline, availability under the credit
facility could be reduced significantly and could have an adverse effect on our
ability to borrow under the facility and could require an immediate repayment of
a portion of our outstanding borrowings, if any. Based on the provisions of the
borrowing base, borrowing availability at April 30, 1999 was $32.6 million, of
which none was outstanding.

     In May, 1999 we issued $90 million of three-year convertible notes. The
notes bear interest at an annual rate of 4.99% during the first year and at the
prime rate for the remaining two years. Prior to May 2000, the notes will
automatically convert into shares of our common stock at our initial public
offering price upon consummation of an initial public offering. If the notes are
converted, all accrued interest is waived. We issued warrants to the holders of
these notes to purchase shares of our common stock. The warrant holders will be
entitled to purchase, at the initial public offering price, the number of shares
of our common stock determined by dividing $18 million by the initial public
offering price. The warrants expire in May, 2002.

     Proceeds from our initial public offering, proceeds from the issuance of
our convertible notes, availability under our revolving bank credit facility,
proceeds from the sales from time to time of all or a portion of our minority 
interests and other internal sources of cash flow are expected to be sufficient
to fund our cash requirements through June 2000, including commitments to new or
existing Partner Companies and general operations requirements. We are
contingently obligated for approximately $3.2 million of guarantee commitments,
and have committed capital of $2 million to an existing Partner Company to be
funded in 1999.

                                       23
<PAGE>
 
     From its inception through its initial public offering, VerticalNet funded
its operations through a combination of equity, investor and bank borrowings,
and leases. These sources included amounts both advanced and guaranteed by us.
VerticalNet raised $58.3 million in its initial public offering. VerticalNet
believes that these initial public offering funds, together with its existing
cash and cash equivalents, should be sufficient to fund its operations through
March, 2000. We have no obligation to provide additional funding to VerticalNet,
and we have no obligations with respect to its outstanding debt arrangements.

     Consolidated working capital increased to $20.5 million at December 31,
1998, compared to $2.4 million at December 31, 1997. The increase was primarily
due to the net effect of the proceeds from the equity we raised in 1998 and the
proceeds from the sales of a portion of our Excite and Lycos holdings, offset by
the ownership interests we acquired in 1998.

     Cash used in operating activities increased in 1997 and 1998 compared to
each of the prior years primarily due to VerticalNet's increased losses in each
of those years.

     Cash used in investing activities primarily reflects the acquisition of
ownership interests in and advances to new or existing Partner Companies, offset
in 1998 by the proceeds of $36.4 million from the sales of a portion of our
available-for-sale securities, Excite and Lycos. We utilized $56.6 million,
including $9 million contributed to VerticalNet, to acquire interests in new or
existing Partner Companies in 1998 and we expect this amount to more than double
in 1999. In 1998, we acquired interests in the following Partner Companies:
Blackboard, CommerX, ComputerJobs.com, Context Integration, Deja.com, e-
Chemicals, Entegrity Solutions, LinkShare, MessageQuest, PrivaSeek,
RapidAutoNet, SageMaker, ServiceSoft, Syncra Software, US Interactive,
VerticalNet and Vivant!. Our operations are not capital intensive, and capital
expenditures in any year normally will not be significant in relation to our
overall financial position. We expect to commit funds in 1999 to the buildout of
our larger new corporate headquarters in Wayne, Pennsylvania and the development
of our information technology infrastructure. There were no material capital
asset purchase commitments as of April 30, 1999.

Recent Accounting Pronouncements

     We do not expect the adoption of recently issued accounting pronouncements
to have a significant impact on our results of operations, financial position or
cash flows.

Year 2000 Readiness Disclosure

     Many computer programs have been written using two digits rather than four
digits to define the applicable year. This poses a problem at the end of the
century because these computer programs may recognize a date using "00" as the
year 1900, rather than the year 2000. This in turn could result in major system
failures or miscalculations and is generally referred to as the Year 2000 issue.

     We currently use the information technology systems and many non-
information technology systems of Safeguard Scientifics, Inc., one of our
principal shareholders. Safeguard has completed its assessment of its computer
information systems. Safeguard has replaced all computer systems and software
which were determined to be Year 2000 non-compliant. Safeguard is in the process
of surveying its vendors of non-information systems including telecommunications
and security systems, and expects to complete remediation, if necessary, during
1999. If Safeguard determines that its non-information systems are non-compliant
and are at risk to not be remedied in time, it intends to develop a contingency
plan. We will not incur any material expenses in connection with Safeguard's
Year 2000 efforts. We plan to survey our vendors of the non-information
technology systems that we use independently of Safeguard and we expect to
complete remediation, if necessary, during 1999. If we determine that these
systems are non-compliant and are at risk to not be remedied in time, we will
develop a contingency plan.

     The Year 2000 readiness of our only consolidated subsidiary, VerticalNet,
is described below. Our Partner Companies are in varying stages of assessing,
remediating and testing their internal systems and assessing Year 2000 readiness
of their vendors, business partners, and customers. Our Partner Companies are
also in varying stages of developing contingency plans to operate in the event
of a Year 2000 problem. The total cost and time which will be incurred by our
Partner Companies on the Year 2000 readiness effort has not been determined.
There can be no assurance that all necessary work will be completed in time, or
that such costs will not materially 

                                       24
<PAGE>
 
adversely impact one or more of such Partner Companies. In addition, required
spending on the Year 2000 effort will cause customers of most of our Partner
Companies to reallocate at least part of their information systems budgets.
Although some of our Partner Companies have offerings which may be useful in
such efforts, such reallocations could materially adversely affect the results
of operations of our Partner Companies.

     VerticalNet

     VerticalNet may realize exposure and risk if the systems on which it is
dependent to conduct its operations are not Year 2000 compliant. VerticalNet's
potential areas of exposure include products purchased from third parties,
information technology including computers and software, and non-information
technology including telephone systems and other equipment used internally.
Additionally, all of the internally-developed production and operation systems
for VerticalNet's Web sites are undergoing a complete re-engineering. All new
programs are being tested and validated for Year 2000 compliance.

     VerticalNet has taken steps to ensure that telephone systems and other non-
information technology are Year 2000 compliant. VerticalNet has replaced its
telephone and voicemail systems with new systems which are Year 2000 compliant.
VerticalNet believes all non-information technology upon which it is materially
dependent is Year 2000 compliant. Additionally, with respect to information
technology, VerticalNet expects to resolve any Year 2000 compliance issues
primarily through normal upgrades of its software or, when necessary, through
replacement of existing software with Year 2000 compliant applications. The cost
of these upgrades or replacements is included in VerticalNet's capital
expenditure budget and is not expected to be material to VerticalNet's financial
position or results of operations. VerticalNet estimates that its total cost to
become Year 2000 compliant will not exceed $250,000, which it expects will be
funded from working capital or borrowings under its bank line of credit.
However, such upgrades and replacements may not be completed on schedule or
within estimated costs or may not successfully address VerticalNet's Year 2000
compliance issues.

     VerticalNet has completed its Year 2000 compliance assessment plan. This
plan includes assessing both its information and non-information technology as
well as its internally-developed production and operation systems. Based on this
assessment, VerticalNet believes that all non-information technology, all
internally-developed production and operations systems and 80% of its technology
are Year 2000 compliant. VerticalNet believes that the remaining 20% of its
information technology that is not Year 2000 compliant is not critical to its
business. VerticalNet intends to complete the replacement or remediation of
these non-compliant technologies, as well as the testing of any replacement or
corrected technologies, by the end of the second quarter of 1999.

     In addition, VerticalNet is in the process of seeking verification from its
key distributors, vendors and suppliers that they are Year 2000 compliant or, if
they are not presently compliant, to provide a description of their plans to
become so. VerticalNet has received certification from 80% of its distributors,
vendors and suppliers that they are either Year 2000 compliant or are taking the
necessary steps to become Year 2000 compliant. To the extent that vendors fail
to provide certification that they are Year 2000 compliant by July, 1999,
VerticalNet will seek to terminate and replace those relationships.

     In the event that VerticalNet's production and operational facilities that
support its Web sites are not Year 2000 compliant, small portions of its Web
site may become unavailable. VerticalNet's review of its systems has shown that
there is no single application that would make its Web sites totally unavailable
and VerticalNet believes that it can quickly address any difficulties that may
arise.

     In the event that VerticalNet's Web-hosting facilities are not Year 2000
compliant, its Web sites would be unavailable and it would not be able to
deliver services to its users.

     VerticalNet does not currently have a contingency plan to deal with the
worst-case scenario that might occur if technologies it is dependent upon are
not Year 2000 compliant and fail to operate effectively after the Year 2000.
VerticalNet intends to develop a plan for this scenario by the end of the second
quarter of 1999.

     If VerticalNet's present efforts to address the Year 2000 compliance issues
are not successful, or if distributors,  suppliers and other third parties with
which it conducts business do not successfully address such issues, its
business, operating results and financial position could be materially and
adversely affected.

                                       25
<PAGE>
 
                                 OUR BUSINESS

Internet Capital Group

     Internet Capital Group is an Internet holding company primarily engaged in
managing and operating a network of business-to-business, or B2B, e-commerce
companies. Our goal is to become the premier B2B e-commerce company by
establishing an e-commerce presence in major segments of the economy. We believe
that our sole focus on the B2B e-commerce industry allows us to capitalize
rapidly on new opportunities and to attract and develop leading B2B e-commerce
companies. As of April 30, 1999, we owned interests in 29 B2B e-commerce
companies which we refer to as our Partner Companies.

     Our operating strategy is to integrate our Partner Companies into a
collaborative network that leverages our collective knowledge and resources.
Acting as a long-term partner, we use these collective resources to actively
develop the business strategies, operations and management teams of our Partner
Companies. Our resources include the experience, industry relationships and
specific expertise of our management team, our Partner Companies and our
Advisory Board. Currently, our Advisory Board consists of individuals with
executive-level experience in general management, sales and marketing and
information technology at such leading companies as Cisco Systems, Coca-Cola
Company, Exodus Communications, IBM, Mastercard, Merrill Lynch and Microsoft. We
believe that building successful B2B e-commerce companies enhances the ability
of our collaborative network to facilitate innovation and growth among our
Partner Companies.

Industry Overview

     Growth of the Internet

     People and businesses are increasingly relying on the Internet to access
and share information as well as to purchase and sell products and services.
International Data Corporation estimates that at the end of 1998 more than 142
million people were using the Internet to communicate, participate in discussion
forums and obtain information about goods and services. IDC projects that this
user base will grow to 502 million people by the end of 2003. A rapidly growing
number of businesses use the Internet to market and sell their products and
streamline business operations. According to Forrester Research, 50% of all
United States businesses will be online by 2002.

     Growth of B2B E-Commerce

     The Internet's substantial growth creates tremendous market opportunities
for companies that connect buyers and sellers, and companies that create
applications and systems for traditional businesses wishing to engage in e-
commerce. Historically, B2B e-commerce has occurred through electronic data
interchange over proprietary networks, which are costly and available only to a
limited number of participants. The Internet provides an open platform with
common communication protocols to build efficient, cost-effective networks that
facilitate e-commerce. As Internet-based network reliability, speed and security
have improved in recent years and as more businesses have connected to the
Internet, traditional businesses are beginning to use the Internet to conduct e-
commerce and exchange information with customers, suppliers and distributors.
While the business-to-consumer e-commerce market currently is significant in
size, estimated by IDC to have been $15 billion in goods and services in 1998,
the B2B e-commerce market is larger and is predicted to grow dramatically. IDC
projects that the B2B e-commerce market will grow from $35 billion in goods and
services in 1998 to over $1.1 trillion by 2003.

     We believe that the B2B e-commerce market is beginning a period of rapid
development and growth for the following reasons:

     .  Expanded Access to New and Existing Customers and Suppliers. Traditional
        businesses have relied on their sales forces and purchasing departments
        to develop and maintain customer and supplier relationships. This model
        is constrained by the time and cost required to exchange current
        information regarding requirements, prices and product availability, and
        the difficulty of cost-effectively locating new customers and suppliers
        and managing existing relationships. Traditional businesses can leverage
        the Internet to obtain real-time, accurate information regarding
        requirements, prices and products to a global audience, including
        suppliers, customers and business 

                                       26
<PAGE>
 
        partners. This makes it easier for businesses to attract new customers
        and suppliers, improve service and increase revenue.

     .  Increased Efficiency and Reduced Cost. Traditional businesses can
        utilize the Internet to automate their internal operations, including
        manufacturing, finance, sales and purchasing functions. The Internet can
        also be used to increase information flow and access throughout an
        organization. This increases operational efficiency by reducing the
        time, costs and resources required to transact business, lowering
        inventory levels and procurement costs, and improving responsiveness to
        customers and suppliers.

     Market Opportunities for Emerging B2B E-Commerce Companies

     We believe that there are significant opportunities for companies that can
assist traditional businesses in using the Internet to create more efficient
markets and enable e-commerce. We call these companies B2B e-commerce companies.
We focus on two types of B2B e-commerce companies: market makers and
infrastructure service providers.

     .  Market Makers. Market makers bring buyers and sellers together by
        creating Internet-based markets for the exchange of goods, services and
        information. Market makers enable more effective and lower cost commerce
        for traditional businesses by providing access through the Internet to a
        broader range of buyers and sellers. Market makers typically operate in
        a specific industry and tailor their business models to match a target
        market's distinct characteristics. To understand the different types of
        markets, we divide market makers into three categories: distributor,
        network and community.

        .  Distributor. Distributor markets are characterized by comparatively
           inefficient distribution channels. To service these markets,
           distributor market makers act as principals in transactions,
           distributing goods and services between buyers and sellers who
           connect with each other over the Internet. Distributor market makers
           may charge a fee based on the value of the transactions facilitated.

        .  Network. Network markets are characterized by comparatively efficient
           distribution channels. Although network market makers do not act as
           principals in transactions, they automate existing business processes
           so as to make them more efficient. Network market makers may generate
           revenue by charging fees for transactions conducted on their Web
           sites, and may charge a fee for access to their Web-based services.

        .  Community. Community market makers bring together buyers and sellers
           that are typically businesses and professionals with common
           interests. Existing relationships among these businesses and
           professionals are unstructured, but community market makers
           facilitate interaction and transactions among them by providing an
           electronic community. Community market makers may charge a fee for
           facilitated transactions and receive advertising revenue.

     .  Infrastructure Service Providers. Infrastructure service providers sell
        software and services to businesses engaged in e-commerce. Many
        businesses need assistance in designing business practices to take
        advantage of the Internet, and in building and managing the
        technological infrastructure needed to support B2B e-commerce.
        Infrastructure service providers help businesses in the following ways:

        .  Strategic Consulting and Systems Integration. Consultants assist
           traditional businesses in developing their e-commerce strategies.
           Systems integrators develop and implement a technological
           infrastructure that enables e-commerce. Systems integrators also
           integrate e-commerce applications with existing enterprise
           applications. Strategic consultants and systems integrators typically
           charge their clients on a project-by-project basis.

        .  Software Providers. Software providers design and sell software
           applications, tools and related services that support e-commerce and
           integrate business functions. Software providers may sell or license
           their products.

                                       27
<PAGE>
 
        .  Outsourced Service Providers. Outsourced service providers offer
           software applications, infrastructure and related services designed
           to help traditional businesses reduce cost, improve operational
           efficiency and decrease time to market. Outsourced service providers
           may charge fees on a per-use or periodic basis.

     Challenges Facing Emerging B2B E-Commerce Companies

     We believe that emerging B2B e-commerce companies face certain challenges,
including:

     .  Developing a Successful Business Model. B2B e-commerce companies must
        develop business models that capitalize on the Internet's capabilities
        to provide solutions to traditional companies in target industries. B2B
        e-commerce companies require industry expertise because each industry
        has distinct characteristics including existing distribution channels,
        levels of concentration and fragmentation among buyers and sellers,
        procurement policies, product information and customer support
        requirements. B2B e-commerce companies also require Internet expertise
        in order to apply its capabilities to their target industries.

     .  Building Corporate Infrastructure. Many B2B e-commerce companies have
        been recently formed and require sales and marketing, executive
        recruiting and human resources, information technology, and finance and
        business development assistance. These companies also require capital as
        significant resources may be required to build technological
        capabilities and internal operations.

     .  Finding the Best People. Entrants into the B2B e-commerce market require
        management with expertise in the applicable market, an understanding of
        the Internet's capabilities, the ability to manage rapid growth and the
        flexibility to adapt to the changing Internet marketplace. We believe
        that very few people have these skills, and those that do are highly
        sought after. To be successful, companies must attract and retain highly
        qualified personnel.

We believe that the most successful B2B e-commerce companies will rapidly
identify market demands and move quickly to satisfy those demands. B2B e-
commerce companies that accomplish this goal may establish new standards, gain
market share, secure critical partnerships and create a brand name, making
competition more difficult for new entrants. In addition, B2B e-commerce
companies must keep abreast of Internet and industry-specific developments and
adapt to a rapidly changing environment.

Our Solution and Strategy

     Our goal is to become the premier B2B e-commerce company by establishing an
e-commerce presence in major segments of the economy. We believe that our sole
focus on the B2B e-commerce industry allows us to capitalize rapidly on new
opportunities and to attract and develop leading B2B e-commerce companies. As of
April 30, 1999, we owned interests in 29 B2B e-commerce companies which we refer
to as our Partner Companies.

     Our operating strategy is to integrate our Partner Companies into a
collaborative network that leverages our collective knowledge and resources.
Acting as a long-term partner, we use these collective resources to actively
develop the business strategies, operations and management teams of our Partner
Companies. Our resources include the experience, industry relationships and
specific expertise of our management team, our Partner Companies and our
Advisory Board.

     Our strategy is to:

     .  create or identify companies with the potential to become industry
        leaders;

     .  acquire significant interests in Partner Companies and incorporate them
        into our collaborative network;

     .  provide strategic guidance and operational support to our Partner
        Companies; and

     .  promote collaboration among our Partner Companies.

                                       28
<PAGE>
 
     In implementing our strategy, we leverage the collective knowledge and
experience of our Partner Companies, strategic investors and Advisory Board
members. Our Advisory Board consists of over 15 experienced executives from
various backgrounds who provide our network with strategic guidance, sales,
marketing and information technology expertise and industry contacts. Ideally, 
we would like to own 40% or more of our Partner Companies, with management and 
public shareholders owning the remaining interests, but we believe that we can 
have significant influence with lower ownership levels.

     Create or Identify Companies With the Potential to Become Market Leaders

     Our expertise in the B2B e-commerce market allows us to build or identify
companies that are positioned to succeed. We apply a disciplined analysis that
capitalizes on this competitive advantage. When we evaluate whether to enter a
market by building a company or acquiring an interest in an existing company, we
weigh the following industry and partnership company factors:

     .  Industry Criteria

        .  Inefficiency. We consider whether the industry suffers from
           inefficiencies that may be alleviated through e-commerce. We also
           consider the relative amount of inefficiency, as more inefficient
           industries present greater profit potential.

        .  Competition. We evaluate the amount of competition that a potential
           Partner Company faces from e-commerce and traditional businesses.

        .  Market Maker Profit Potential. When evaluating market makers, we
           consider the number and dollar value of transactions in the industry.
           In the multi-billion dollar industries that we target, offering even
           incremental efficiency improvements presents significant profit
           potential.

        .  Centralized Information Sources. When evaluating market makers, we
           consider whether the industry has product catalogs, trade journals
           and other centralized sources of information regarding products,
           prices, customers and other factors. The availability of this
           information makes it easier for a market maker to facilitate
           communication and transactions. We generally avoid industries where
           this information is not available.

        .  Infrastructure Service Provider Profit Potential. When evaluating
           infrastructure service providers, we examine the size of the market
           opportunity, the profit potential in serving the target market and
           whether the infrastructure service provider can provide assistance to
           our market maker Partner Companies.

     .  Partnership Company Criteria

        .  Industry Leader. We partner with a company only if we believe that it
           has the products and skills to become a leader in its industry.

        .  Management Quality. We assess the overall quality and industry
           expertise of a potential Partner Company's management.

        .  Significant Ownership. We consider whether we will be able to obtain
           a significant position in the company and exert influence over the
           company.

        .  Network Synergy. We consider the degree to which a potential Partner
           Company may contribute to our network, and benefit from our network
           and operational resources.

     Acquire Interests in Partner Companies

     After we identify an attractive potential Partner Company, we negotiate the
acquisition of a significant interest in the company. As a condition to an
acquisition, we require representation on the company's Board of Directors, to
ensure our ability to provide active guidance to the Partner Company. We
structure acquisitions to permit the Partner Company's management and key
personnel to retain an equity stake in the company. As a result of our
experience, we believe that we have the ability to complete acquisitions quickly
and efficiently.

                                       29
<PAGE>
 
     During our negotiations with potential Partner Companies we emphasize the
value of our collaborative network, which we believe gives us a competitive
advantage over other acquirors in successfully consummating transactions. Our
Partner Companies, strategic investors and Advisory Board members assist in
these discussions and assist in other stages of the acquisition process,
including the initial evaluation of potential Partner Companies and due
diligence.

     Provide Strategic Guidance and Operational Support to Our Partner Companies

     After we make an acquisition or form a Partner Company, we take an active
role in its affairs by providing both strategic guidance and operational
support:

     .  Strategic Guidance. We provide strategic guidance to our Partner
        Companies regarding market positioning, business model development and
        market trends. In addition, we advise Partner Company management and
        directors on day-to-day management and operational issues. Our exclusive
        focus on the B2B e-commerce market and the knowledge base of our Partner
        Companies, strategic investors, management and Advisory Board give us
        valuable experience that we share with our Partner Company network.
        Advisory Board members who provide strategic guidance to our Partner
        Companies include Jeff Ballowe, a former President of Ziff-Davis Inc.
        and the current Chairman of Deja.com, Inc., Alex W. Hart, a former Chief
        Executive Officer of MasterCard International, Ron Hovsepian, Vice
        President of Business Development at IBM Corporation and Yossi Sheffi,
        Ph.D., a co-founder of Syncra Software, Inc. and e-Chemicals, Inc. and
        currently a Professor at Massachusetts Institute of Technology.

     .  Operational Support. B2B e-commerce companies often have difficulty
        obtaining senior executive level guidance in the many areas of expertise
        successful companies need. We assist our Partner Companies by providing
        access to skilled managers who guide our Partner Companies in the
        following functional areas:

        .  Sales and Marketing. Several members of our Advisory Board and
           management team provide guidance to our Partner Companies' sales,
           marketing, product positioning and advertising efforts. These
           individuals include Michael H. Forster, a former Senior Vice
           President of Worldwide Field Operations at Sybase, Inc. and currently
           one of our Senior Partners, Christopher H. Greendale, a former
           Executive Vice President at Cambridge Technology Partners and
           currently one of our Senior Partners, Rowland Hanson, a former Vice
           President of Corporate Communications at Microsoft Corporation and
           currently founder of C. Rowland Hanson & Associates, Charles W.
           Stryker, Ph.D., President, Marketing Information Solutions, at
           IntelliQuest, Inc., and Sergio Zyman, a former Vice President and
           Chief Marketing Officer of the Coca-Cola Company.

        .  Executive Recruiting and Human Resources. Members of our management
           team assist our Partner Companies in recruiting key executive talent.
           In providing this assistance, we leverage the contacts developed by
           our network of Partner Companies, management and Advisory Board. In
           addition, we plan to hire several executives to provide dedicated
           recruiting and other human resource support to our Partner Companies.
           We believe that this is one of the most important functions that we
           perform on behalf of our Partner Companies. B2B e-commerce companies
           must locate executives with both industry and Internet expertise. The
           market for these professionals is highly competitive since few
           persons possess the necessary mix of skills and experience.

        .  Information Technology. Our Chief Technology Officer, Richard G. 
           Bunker, is dedicated to helping our Partner Companies with their
           information systems strategies and solving problems relating to their
           current information technology. Members of our Advisory Board who
           provide guidance in this area include K.B. Chandrasekhar, Chairman of
           the Board of Directors of Exodus Communications, and Peter Solvik,
           the Chief Information Officer of Cisco Systems, Inc.

                                       30
<PAGE>
 
        .  Finance. One of our Managing Directors, John N. Nickolas, an
           experienced finance executive, is dedicated to providing financial
           guidance to our Partner Companies in areas such as corporate finance,
           financial reporting, accounting and treasury operations. In providing
           these services, Mr. Nickolas leverages the skills and experience of
           our internal finance and accounting group, our Partner Company
           network and outside consultants.

        .  Business Development. B2B e-commerce companies may be involved in
           evaluating, structuring and negotiating joint ventures, strategic
           alliances, joint marketing agreements, acquisitions or other
           transactions. We provide assistance to our Partner Companies in all
           these areas. Our management team, Advisory Board, strategic investors
           and Partner Companies all assist in this function.

     Promote Collaboration Among Our Partner Companies

     One of the principal goals of our network is to promote innovation and
collaboration among our Partner Companies, which has resulted in shared
knowledge and business contacts among our Partner Companies and the formation of
numerous strategic alliances. We promote collaboration formally by hosting
regularly scheduled seminars relating to Partner Company operational and
business issues. At these seminars, the executives of Partner Companies share
their experiences with each other, our management team and the Advisory Board.
For example, at a recent seminar, thirteen chief executive officers of our
market maker and infrastructure service provider Partner Companies gathered to
discuss e-commerce strategies and business models. On an informal basis, we
promote collaboration by making introductions and recommending Partner Companies
to each other.

     Recent examples of collaboration among our Partner Companies include:

     .  VerticalNet and e-Chemicals are collaborating to provide customer leads
        for e-Chemicals. This relationship enables VerticalNet to provide a
        greater breadth of services to its customers in the chemicals business
        and provides more buyers for the products distributed by e-Chemicals.

     .  Deja.com, which provides a Web-based community for potential purchasers
        to access user comments on a variety of products and services, has
        formed a strategic alliance with VerticalNet to provide VerticalNet's
        Web sites with discussion content. In addition, Deja.com and
        ComputerJobs.com have created a discussion forum that accesses
        ComputerJobs.com's database of technology employment opportunities,
        increasing ComputerJobs.com's exposure to Deja.com's broad user base.

     The collaboration of our Partner Companies is the result of our role as the
hub of our network. Through the network we identify prospective alliances, make
introductions, assist in strategic planning and monitor the ongoing
relationships among our Partner Companies. We encourage and regulate the
information flow among our Partner Companies. We also control the information
flow by determining the composition of the network. If we believe that a Partner
Company is not contributing to our network or has lost its strategic importance,
we may sell our interest in that Partner Company.

Overview of Current Partner Companies

     We focus our efforts on building and operating companies in two areas of
the B2B e-commerce market--market makers and infrastructure service providers.

     Market Maker Categories

     Market makers operate in particular industries, such as chemicals, food or
auto parts. Each industry comprises a distinct market with its own
characteristics. Market makers must tailor their business models to match their
markets. To understand the different types of markets and help our market maker
Partner Companies position themselves, we place market makers into one of three
categories--distributor, network or community.

     .  Distributor. Distributor markets are characterized by comparatively
        inefficient distribution channels. To service these markets, our
        distributor Partner Companies act as principals in transactions,
        distributing goods and services between buyers and sellers who connect
        with each other over the Internet. Our Partner Companies in this
        category generate revenue by charging fees for transactions 

                                       31
<PAGE>
 
        conducted on their Web sites. An example of one of our distributor
        Partner Companies is e-Chemicals. e-Chemicals believes that traditional
        distribution channels for chemicals burden customers with excessive
        transaction costs, high administrative costs and inefficient logistics.
        To solve these problems, e-Chemicals has developed a Web site through
        which it will sell a wide range of industrial chemicals to business
        customers. e-Chemicals provides products based on streamlined Web-based
        ordering processes, out-sourced logistics systems and online support.

     .  Network. Network markets are characterized by comparatively efficient
        distribution channels. Our network Partner Companies automate existing
        business processes so as to make them more efficient. Our Partner
        Companies in this category may charge a fee based on the value of the
        transactions facilitated and an ongoing fee for access to their Web
        sites. An example of one of our network Partner Companies is Internet
        Commerce Systems, Inc. Internet Commerce Systems is in the process of
        establishing an Internet-based product introduction and promotion
        service for the food industry. Internet Commerce Systems' FoodOne system
        seeks to replace the traditional practice of weekly distribution of
        physical product catalogs and follow-up calls by telemarketers, food
        brokers or field salespeople. Internet Commerce Systems believes that it
        will increase retail store sales coverage and provide market feedback to
        grocery manufacturers while decreasing order entry, sales and marketing
        costs.

     .  Community. Community market makers bring together buyers and sellers
        that are typically businesses and professionals with common interests.
        Existing relationships among these businesses and professionals are
        unstructured, but our Partner Companies stimulate interaction and
        facilitate transactions among them by providing an electronic community.
        Our Partner Companies may charge a fee for each facilitated transaction
        and receive advertising revenue. One example of our community Partner
        Companies is VerticalNet. As of April 30, 1999, VerticalNet owned and
        operated 37 industry-specific Web sites designed to act as online B2B
        communities. These vertical trade communities act as comprehensive
        sources of information, interaction and electronic commerce.

     Market Maker Profiles

     Table of Market Makers. The Partner Companies listed below are integral to
our strategy of owning numerous interests in distributor, network and community
market makers. We believe that establishing an e-commerce presence in major
industrial segments of the economy will enable us to become the premier B2B e-
commerce company. The table shows certain information regarding our market maker
Partner Companies by category as of April 30, 1999. Our ownership positions have
been calculated based on the issued and outstanding common stock of each Partner
Company, assuming the issuance of common stock on the conversion or exercise of
preferred stock and convertible notes, but excluding the effect of options and
warrants.

<TABLE>
<CAPTION>
 
                                                                                                        Our             Partner
                                                                                                      Ownership         Company
     Category and Name                Industry                   Description of Business             Percentage          Since
---------------------------   ----------------------   -----------------------------------------   --------------    --------------
<S>                             <C>                    <C>                                         <C>               <C> 
Distributor:

CommerX Inc.                    Plastics                Provides Internet-based procurement              34%             1998
 www.commerx.com                                        and sales of raw materials, tools and
                                                        maintenance and repair products for
                                                        the plastics industry.
                                                     
e-Chemicals, Inc.               Chemicals               Provides Internet-based sales and                26%             1998
 www.e-Chemicals.com                                    distribution of industrial chemicals.
</TABLE> 

                                       32
<PAGE>
 
<TABLE>
<CAPTION>
 
                                                                                                        Our             Partner
                                                                                                      Ownership         Company
     Category and Name                Industry                   Description of Business             Percentage          Since
---------------------------   ----------------------   -----------------------------------------   --------------    --------------
<S>                             <C>                    <C>                                         <C>               <C> 
ONVIA.com, Inc.                 Small Business          Provides small businesses with a wide            19%             1999
 www.megadepot.com               Services               breadth of tailored products and
                                                        services over the Internet.
 
Universal Access, Inc.          Telecommunications      Provides Internet-based ordering for             11%             1999
 www.universal accessinc.com                            provisioning and access and
                                                        transportation exchange services for
                                                        network service providers focused on
                                                        business customers.
 
Network:
Arbinet                         Telecommunications      Provides an Internet-based trading               16%             1999
 www.arbinet.com                                        floor and clearinghouse for
                                                        telecommunications carriers to
                                                        purchase bandwidth.
 
BidCom                          Construction            Provides Internet-based project                  25%             1999
 www.bidcom.com                                         planning and management services for
                                                        the construction industry.
 
Collabria Inc.                  Printing                Provides Internet-based procurement              10%             1999
 www.collabria.com                                      and production services for the
                                                        commercial printing industry.
 
ComputerJobs.com, Inc.          Technology              Provides Internet-based job screening            33%             1998
 www.computerjobs.com            Employment             and resume posting for information
                                                        technology professionals, corporations
                                                        and staffing firms.
 
Internet Commerce Systems,      Food                    Provides Internet-based product                  43%             1999
 Inc.                                                   introduction and promotion services to
 www.icsfoodone.com                                     wholesale and retail food distributors.
 
RapidAutoNet Corporation        Auto Parts              Provides Internet-based auto parts               15%             1998
 www.rapidautonet.com                                   procurement for professional
                                                        automotive and truck repair shops.
Community:
Deja.com, Inc.                  Media                   Provides a Web-based community for               32%             1997
 www.deja.com                                           potential purchasers to access user
                                                        comments on a variety of products and
                                                        services.

PlanSponsor Exchange            Asset Management        Provides a Web-based community for               24%             1999
 www.plansponsor                                        asset managers to reach fund sponsors.
 exchange.com

VerticalNet, Inc.               Industrial Services     Provides industry-specific Web-based             37%             1996
 www.verticalnet.com                                    trade communities for businesses and
                                                        professionals.
</TABLE>

                                       33
<PAGE>
 
     Set forth below is a more detailed summary of some of our market maker
Partner Companies.

     ComputerJobs.com, Inc. ComputerJobs.com is a network market maker that
provides Internet-based job advertising and resume posting services for
information technology professionals, corporations and staffing firms.
Identifying and attracting information technology professionals is an expensive
and critical success factor for many businesses. ComputerJobs.com is focused on
improving the online recruitment process for both information technology job
seekers and employers, including staffing firms and corporations. Job seekers
visit ComputerJobs.com's regional-specific Web sites to submit their resume and
pursue job opportunities free of charge. ComputerJobs.com allows jobs seekers to
scan job opportunities by information technology-specific skill requirements,
geographic preferences and other job criteria. Job seekers also have access to
extensive career resources and industry news on the site. By attracting a
significant number of job seekers and their resumes, ComputerJobs.com offers
staffing firms and corporations seeking information technology professionals the
ability to post job openings as well as search and receive daily resumes of
information technology candidates for a monthly fee. ComputerJobs.com pre-
screens job ads and resumes prior to placing them into its database and before
dissemination to its Web sites and clients.

     ComputerJobs.com has Web sites for the information technology markets in
Atlanta, the Carolinas, Chicago, Florida, Texas, New York and Washington, D.C.
Based on more than 2,620 responses from recruiters, ComputerJobs.com was ranked
number one by Internet Business Network as the top site in customer satisfaction
in a 1998 study of the top 100 job sites. ComputerJobs.com plans to expand into
additional information technology markets by year end. We identified
ComputerJobs.com through a director of one of our Partner Companies. We are
assisting ComputerJobs.com with overall strategy, operational management,
recruiting, finance and marketing. Douglas A. Alexander, one of our Managing
Directors, is a member of ComputerJobs.com's Board of Directors.
ComputerJobs.com has formed a strategic alliance with Deja.com that has enabled
Deja.com to create a channel for accessing ComputerJobs.com's database of
technology employment opportunities. For 1998, ComputerJobs.com had revenue of
$4.4 million.

     Deja.com, Inc. Deja.com, formerly Deja News, is a community market maker
that is the Web's leading source of shared knowledge in the form of user-
generated ratings and discussions. With over 160 million page views per month,
it is the leading purveyor of online discussion, offering access to more than
45,000 discussion forums. These forums are populated by knowledgeable
participants who are interested in sharing their knowledge and experience on a
wide variety of subjects.

     Deja.com recently extended its franchise in shared knowledge with the
consumer-driven feature Deja Ratings, a tool that extends the site's ability to
support daily decision-making. Deja Ratings captures consumer opinions on a wide
range of products and services through a scaled voting system that includes
product comparisons. The analytical tools that support decision-making are
supplemented by contextual links to e-commerce retailers and vendors.

     Deja.com derives revenue from sponsors and e-commerce partners, and
provides the marketing community with the compelling proposition of reaching a
highly targeted, self-segmenting audience consisting of highly active Internet
consumers intent on investigating considered purchases. Deja.com also delivers
to those marketers a unique means of programming to the specific interests of
their target consumers, all in the context of a commerce-friendly platform.

     We have been very active in recruiting Deja.com's management team and
developing its business strategy. In addition, Kenneth A. Fox and Douglas A.
Alexander, two of our Managing Directors, are members of Deja.com's Board of
Directors. Deja.com is in discussions with several Partner Companies to provide
services to its user community. For 1998, Deja.com had revenue of $5.1 million.

     Universal Access, Inc. Universal Access is a distributor market maker that
provides Internet-based ordering for provisioning and access and transportation
exchange services for network service providers focused on business customers.
For any network service provider, such as Internet service providers or other
telecommunications carriers, to establish a dedicated connection for its
corporate customers, it must provide provisioning and access. Provisioning is
the initial establishment of a dedicated connection, and access is the
availability of a dedicated connection after provisioning. Prior to significant
deregulation in the 

                                       34
<PAGE>
 
telecommunications industry, network service providers typically selected one
telecommunications carrier to service their corporate customers. After
deregulation, network service providers faced increasing challenges in dealing
with a growing number of local and long-distance carriers to establish dedicated
connections. These challenges faced by network service providers have been
exacerbated by rapid growth in demand from their business customers for
dedicated Internet access.

     Universal Access enables network service providers to deal with a single
provider, rather than multiple local and long distance telecommunications
carriers, for seamless provisioning and access among multiple carriers.
Universal Access' proprietary database contains more than 27 telecommunication
carriers' routing availability, pricing and service capabilities which allows it
to determine the most economical and efficient path for bandwidth connectivity.
By providing single party accountability for all of their provisioning, access,
billing and ongoing network reliability needs, Universal Access enables network
service providers to offer their business customers with faster provisioning and
superior customer service.

     Network service providers typically establish high-cost facilities on the
premises of a telecommunications carrier, which makes changing to another
carrier prohibitively expensive. As network service providers expand nationwide,
Universal Access' transport exchange services will allow these network service
providers to locate their equipment with Universal Access, which provides them
the flexibility to change telecommunications carriers. We are actively providing
Universal Access with overall strategy, marketing and finance guidance. Robert
Pollan, one of our Managing Directors, is a member of Universal Access' Board of
Directors. For 1998, Universal Access had revenue of $1.6 million.

     VerticalNet, Inc. VerticalNet is a community market maker that provides
industry-specific Web-based trade communities for businesses and professionals.
VerticalNet owns and operates 37 industry-specific Web sites as of April 30,
1999 designed as online B2B communities, known as vertical trade communities.
These vertical trade communities act as comprehensive sources of information,
interaction and e-commerce. VerticalNet's objective is to continue to be a
leading owner and operator of industry-specific vertical trade communities on
the Internet.

     VerticalNet's 37 vertical trade communities are:

<TABLE>
<CAPTION>
<S>                                                     <C> 
Process Group                                           Communication Group
 .  Adhesives and Sealants Online                        .  Fiber Optics Online (fiberopticsonline.com)
   (adhesivesandsealants.com)                                Design and Production of Fiber Optic 
     Manufacturing and Production of Adhesive,               Networks and Network Components
     Sealant, and Grout Materials                       
                                                        .  Photonics Online (photonicsonline.com)           
 .  Chemical Online (chemicalonline.com)                      Design and Manufacturing of Lasers, Optics,    
     Manufacturing and Processing Chemicals                  Optoelectronics, Fiber Optics and Imaging      
                                                             Devices 
 .  Hydrocarbon Online (hydrocarbononline.com)                                                        
     Hydrocarbons and Petrochemicals Processing         .  Premises Networks.com (premisesnetworks.com)      
                                                             Facilities and Network Infrastructure Design    
 .  Oil and Gas Online (oilandgasonline.com)                  and Administration                              
     Production and Exploration of Oil and Gas                                                              
                                                        .  RF Globalnet (rfglobalnet.com)                    
 .  Paint and Coatings Online                                 Information, Bookstore and Educational         
   (paintandcoatingsonline.com)                              Center for Radio Frequency, Wireless and       
     Manufacturing and Production of Paint Coatings,         Microwave Engineers                             
     Inks and Thick Film Printable Conductors                                                               
                                                        .  Wireless Design Online (wirelessdesignonline.com) 
 .  Pharmaceutical Online (pharmaceuticalonline.com)          Design and Development of Wireless              
     Development, Design and Manufacturing of                Communications Systems and Equipment            
     Pharmaceuticals                                                    
</TABLE>                                                

                                       35
<PAGE>
 
<TABLE> 
<CAPTION> 
<S>                                                     <C>  
Environmental Group                                      Advanced Technologies Group
 .  Pollution Online (pollutiononline.com)                .  Aerospace Online (aerospaceonline.com)
     Industrial Pollution Control                             Design and Manufacturing of Products and Services
                                                              Relating to the Aerospace Industry 
 .  Power Online (poweronline.com)                             
     Power Generation, Electric Utility Deregulation,    .  Computer OEM Online (computeroemonline.com)
     Emissions Control, Alternative Fuels, Power              Design and Manufacturing of Computers and 
     Industry                                                 Comperitzed Electronics Devices 

 .  Public Works Online (publicworks.com)                 .  Medical Design Online (medicaldesignonline.com)                    
     Public Works and Municipal Maintenance                   Design, Manufacturing and Procurement of     
                                                              Medical Devices 
 .  Solid Waste Online (solidwaste.com)                       
     Solid Waste Disposal                                .  Plant Automation.com (plantautomation.com)
                                                              Hardware and Software Used in Industrial 
 .  Water Online (wateronline.com)                             Manufacturing Including Robotics and     
     Municipal Water Supply and Municipal                     Automated Control Systems  
     Wastewater Treatment                                                
                                                         .  Test and Measurement (testandmeasurement.com)    
Food & Packaging Group                                        Design, Manufacturing and Procurement of  
 .  Bakery Online (bakeryonline.com)                           Test, Measurement, Data Acquisition, Data  
     Production and Procurement of Baking                     Analysis and Instrumentation Equipment 
     Ingredients         
                                                         Sciences Group                               
 .  Beverage Online (beverageonline.com)                  .  Bioresearch Online (bioresearchonline.com)                  
     Production and Procurement of Equipment used             Covers all Aspects of Experimental and   
     in the Production of Beverages                           Applied Biology Including Biotechnology,                 
                                                              Genomics and Genetics 
 .  Dairy Network.com (dairynetwork.com)                   
     Production, Procurement and Distribution of         .  Drug Discovery Online (drugdiscoveryonline.com) 
     Dairy Products                                           Early-Stage Pharmaceutical Discovery and 
                                                              Development 
 .  Food Ingredients Online (foodingredientsonline.com)     
     Manufacturing and Processing of Food                .  Laboratory Network.com (laboratorynetwork.com)
     Ingredients                                              Covers all Aspects of the Research Industry 
                                                              Focusing on Analytical Instrumentation and 
 .  Food Online (foodonline.com)                               Materials Science 
     Manufacturing and Processing of Food Products              
                                                         Services Group 
 .  Meat and Poultry Online                               .  Property and Casualty.com 
   (meatandpoultryonline.com)                               (propertyandcasualty.com)                
     Production, Procurement and Distribution of              Property and Casualty Insurance     
     Meat and Poultry Products                                               
                                                         .  Safety Online (safetyonline.com)
 .  Packaging Network.com (packagingnetwork.com)               Industrial and Environmental Safety            
     Production, Purchase, Design and Marketing of             
     Packaging for all Consumer and Industrial 
     Products

Healthcare Group
 .  Hospital Network.com (hospitalnetwork.com)
     Information for Hospital Purchasing Decision-
     Makers

 .  Nurses.com (nurses.com)
     Clinical, Professional and Other Information for 
     Nurses
</TABLE>

     Each VerticalNet community is individually branded, focuses on one business
sector and caters to individuals with similar professional interests.
VerticalNet designs each of its vertical trade communities to attract
professionals responsible for selecting and purchasing highly specialized
industry related products and services. 

                                       36
<PAGE>
 
VerticalNet's communities combine product information, requests for proposals,
discussion forums, electronic commerce opportunities, industry news,
directories, classifieds, job listings, and online professional education
courses.

     VerticalNet satisfies a developing market not currently being adequately
served through traditional channels, including trade publishers, trade shows and
trade associations. VerticalNet believes that this market is not currently being
served by Internet companies, which tend to focus on the consumer and not on the
B2B market.

     VerticalNet's vertical trade communities take advantage of the Internet's
ability to allow users around the world to contact each other online, allowing
buyers to research, source, contact and purchase from suppliers. Although other
companies offer B2B services on the Internet, VerticalNet believes that it is
currently the only company operating a portfolio of specialized B2B communities.
A portfolio strategy permits VerticalNet to:

     .  offer consistent content and services in its current vertical trade
        communities and replicate these offerings as it launches new
        communities;

     .  realize cost savings and operating efficiencies in its technology,
        marketing, infrastructure and management resources; and

     .  increase its overall audience, making its individual sites more
        appealing to a broad array of advertisers and suppliers who sell their
        goods and services over the Internet.

     VerticalNet currently generates the majority of its revenue from Internet
advertising, including the development of "storefronts." A storefront is a Web
page posted on one of its vertical trade communities that provides information
on an advertiser's products, links a visitor to the advertiser's Web site and
generates sales inquiries from interested visitors. VerticalNet believes that
industry professionals using its vertical trade communities possess the
demographic characteristics that are attractive to its advertisers.

     We were first introduced to VerticalNet through one of our major
shareholders. We helped to recruit several of VerticalNet's executive officers,
and worked with them to develop VerticalNet's business strategy. Douglas A.
Alexander, one of our Managing Directors, currently serves as VerticalNet's
Chairman of the Board of Directors and Walter W. Buckley, our President and
Chief Executive Officer, is a member of VerticalNet's Board of Directors. This
year VerticalNet became a public company, trading on the Nasdaq National Market
under the symbol "VERT." VerticalNet has formed a strategic alliance with e-
Chemicals to provide customer leads for e-Chemicals and to expand VerticalNet's
services to its chemical business customers. For 1998, VerticalNet had revenue
of $3.1 million.

     Infrastructure Service Provider Categories

     Infrastructure service providers assist traditional businesses in the
following ways:

     .  Strategic Consulting and Systems Integration. Strategic consultants
        assist traditional businesses in developing their e-commerce strategies.
        Systems integrators develop and implement technological infrastructure
        that enables e-commerce. Systems integrators also integrate e-commerce
        applications with existing enterprise applications. Strategic
        consultants and systems integrators typically bill their clients on a
        project-by-project basis.

     .  Software Providers. Software providers design and sell software
        applications that support e-commerce and integrate business functions.
        Software providers may sell or license their products.

     .  Outsourced Service Providers. Outsourced service providers offer
        software applications, infrastructure and related services designed to
        help traditional businesses reduce cost, improve operational efficiency
        and decrease time to market. Outsourced service providers may charge
        fees on a per-use or periodic basis.

                                       37
<PAGE>
 
     Infrastructure Service Provider Profiles

     Table of Infrastructure Service Providers. The Partner Companies listed
below are important to our strategy because the growth of our Partner Companies
increases the value of our collaborative network. We believe that infrastructure
service providers will facilitate innovation and growth of our market maker
companies by providing them with critical services. The table shows certain
information regarding our infrastructure service provider Partner Companies by
category as of April 30, 1999. Our ownership positions have been calculated
based on the issued and outstanding common stock of each Partner Company,
assuming the issuance of common stock on the conversion or exercise of preferred
stock and convertible notes, but excluding the effect of options and warrants.

<TABLE>
<CAPTION>
                                                                                              Our             Partner
                                                                                           Ownership          Company
     Category and Name                        Description of Business                      Percentage          Since
----------------------------   -------------------------------------------------------   --------------    --------------

Strategic Consulting and Systems Integration:
<S>                              <C>                                                       <C>               <C> 
Benchmarking Partners, Inc.      Provides e-commerce best practices research and                13%             1996
 www.benchmarking.com            consulting services to optimize supply and distribution 
                                 network management.
 
Context Integration, Inc.        Provides systems integration services focused on               18%             1997
 www.context.com                 customer support, data access and e-commerce.

US Interactive, Inc.             Provides a range of consulting and technical                    4%             1996
 www.usinteractive.com           services relating to Internet marketing solutions.
 
Software Providers:

Blackboard, Inc.                 Provides universities and corporations with                    31%             1998
 www.blackboard.com              applications that enable them to host classes and
                                 training on the Internet.
 
ClearCommerce Corp.              Provides comprehensive e-commerce solutions                    17%             1997
 www.clearcommerce.com           including transaction and payment processing, credit
                                 card authorization, fraud tracking and reporting
                                 functions.

Entegrity Solutions              Provides encryption software to secure transactions            12%             1996
 www.entegrity.com               and communications between business applications.

SageMaker, Inc.                  Provides software that combines an enterprise's                22%             1998
 www.sagemaker.com               external and internal information assets into a
                                 single, Web-based knowledge management platform.
 
ServiceSoft Technologies,        Provides tools and services used by its customers to           12%             1998
 Inc.                            create Internet customer service applications consisting 
 www.servicesoft.com             of self-service, e-mail response and live interaction
                                 products.

SMART Technologies, Inc.         Provides enterprise relationship management software            6%             1997
 www.smartdna.com                that enables customers to interact directly with a
                                 company's back-office systems.
</TABLE> 

                                       38
<PAGE>
 
<TABLE>
<CAPTION>
                                                                                              Our             Partner
                                                                                           Ownership          Company
     Category and Name                        Description of Business                      Percentage          Since
----------------------------   -------------------------------------------------------   --------------    --------------
<S>                              <C>                                                       <C>               <C> 
Syncra Software, Inc.            Provides software that improves supply chain                   35%             1998
 www.syncra.com                  efficiency through collaboration of trading partners
                                 over the Internet.

Vivant! Corporation              Provides process automation, decision support                  23%             1998
 Management                      software and services that enable companies to 
 www.vivantcorp.com              strategically manage contractors, consultants and
                                 temporary employees.
 
Outsourced Service Providers:

Breakaway Solutions, Inc.        Provides application service hosting, e-commerce               57%             1999
 www.breakaway.com               consulting and systems integration services to
                                 middle-market companies.

The LinkShare Corporation        Establishes affiliate relationships for online                 34%             1998
 www.linkshare.com               merchants with other Web sites to facilitate
                                 e-commerce.

MessageQuest, Inc.               Provides a messaging service for data sharing across            5%             1998
 www.messagequest.com            separate enterprises. Also provides software,
                                 systems integration services and managed network
                                 services for application integration within
                                 enterprises or with external trading partners and
                                 customers.

PrivaSeek, Inc.                  Provides consumers with control of their Web-based             16%             1998
 www.privaseek.com               personal profiles, allowing merchants to offer
                                 consumers incentives for selective disclosure.
 
Sky Alland Marketing, Inc.       Provides services to improve customer communications           35%             1996
 www.skyalland.com               and relationships.
</TABLE>

     Set forth below is a more detailed summary of some of our infrastructure
service provider Partner Companies.

     Benchmarking Partners, Inc. Benchmarking Partners is a strategic consulting
and systems integration infrastructure service company that provides e-commerce
best practices research and consulting services to optimize supply and
distribution network management. The use of best business practices enabled by
information technology established by Benchmarking Partners allows companies to
efficiently manage their supply and distribution networks. Benchmarking Partners
improves supply and distribution networks in the following ways:

     .  Integration: Coordinating diverse business functions such as
        manufacturing, logistics, sales and marketing to maximize efficiency.

     .  Optimization: Developing strategies that increase the efficiency of
        supply networks.

     .  Collaboration: Creating collaborative solutions that incorporate key
        trading partners.

     Benchmarking Partners' clients include: companies undergoing business
process and information technology transformation; technology solution providers
hoping to gain a better understanding of the market requirements for their
products; and management consultants and systems integrators seeking to refine
their ability to effectively support their clients.

     We were introduced to Benchmarking Partners through a member of our board
of directors. We have helped Benchmarking Partners recruit key managers and are
currently helping it build and position 

                                       39

<PAGE>
 
its best practice e-commerce Web site. Benchmarking Partners assisted us in
assessing enterprise software markets and provides information technology advice
to other Partner Companies. Benchmarking Partners is also working with Sky
Alland Marketing and US Interactive to develop Internet business application
opportunities. For 1998, Benchmarking Partners had revenue of $15.9 million.

     Breakaway Solutions, Inc. Breakaway Solutions is an outsourced service
provider infrastructure service company that is an application service provider
and e-commerce consulting and systems integration services provider to middle-
market companies. Through its application service hosting solutions, Breakaway
Solutions implements, operates and supports software applications that can be
accessed and used over the Internet. Breakaway Solutions also offers custom
developed, e-commerce related B2B interactive marketing and other solutions.
By focusing on Internet-based solutions, Breakaway has created a library of
components that can be redeployed by multiple clients. This allows Breakaway
Solutions to provide rapid, cost-effective service to clients.

     We first met Breakaway Solutions through one of our shareholders and 
Advisory Board members. We helped Breakaway Solutions to complete its management
team and merge with one of our other Partner Companies. In addition, Breakaway 
Solutions is a strategic partner for installing ClearCommerce's Web-based 
transaction and order processing solutions. Breakaway Solutions is also in 
discussions to provide its services to ONVIA.com.

     MessageQuest, Inc. MessageQuest is an outsourced service provider
infrastructure service company that delivers systems integration services,
software, and managed networked services to enterprises seeking to enable
mission-critical business processes within their enterprise or with their
external trading partners and customers. The range of computing environments and
software applications utilized across a typical Fortune 500 enterprise is vast
and growing, often involving multiple legacy and client/server environments,
characterized by heterogeneous computer platforms and various proprietary
information formats. Additionally, the recent growth of the Internet and the use
of intranets has increased the complexity of data sharing among heterogeneous
business applications. MessageQuest currently employs 200 professionals
dedicated to providing software and system integration services around IBM's MQ
series, a messaging-based middleware software solution that facilitates data
sharing among an enterprise's disparate applications, databases and operating
systems.

     MessageQuest's recently launched managed network service leverages its
extensive domain expertise in providing middleware solutions that facilitate
data sharing to provide a highly secure, assured information delivery system
between corporations for use over any network, including the Internet. This
managed network service provides an open platform that seamlessly bridges legacy
e-commerce services, such as electronic data interchange and proprietary value-
added networks, with today's best-of-breed Internet technologies. By offering
multi-platform and multi-network interoperability and extensive customer
support, MessageQuest provides its customers with low cost, rapidly-implemented
messaging services. We believe that the services and software provided by
MessageQuest can be used throughout our Partner Company network, including our
market makers interested in tighter integration with their suppliers and
customers. We have assisted MessageQuest in recruiting senior management and
repositioning it to offer managed network services. To support the introduction
of managed network services, we provided the company with strategic planning,
sales and marketing support and introductions to potential business partners.

Government Regulations and Legal Uncertainties

     As of April 30, 1999, there were few laws or regulations directed
specifically at e-commerce. However, because of the Internet's popularity and
increasing use, new laws and regulations may be adopted. These laws and
regulations may cover issues such as the collection of and use of data from Web
site visitors and related privacy issues, pricing, content, copyrights, online
gambling, distribution and the quality of goods and services. The enactment of
any additional laws or regulations may impede the growth of the Internet and B2B
e-commerce, which could decrease the revenue of our Partner Companies and place
additional financial burdens on them.

     Laws and regulations directly applicable to e-commerce or Internet
communications are becoming more prevalent. For example, Congress recently
enacted laws regarding online copyright infringement and the protection of
information collected online from children. Although these laws may not have a
direct adverse effect on our 

                                       40
<PAGE>
 

business or those of our Partner Companies, they add to the legal and regulatory
burden faced by B2B e-commerce companies. Other specific areas of legislative
activity are:

     .  Taxes. Congress recently enacted a three-year moratorium, ending on
        October 21, 2001, on the application of "discriminatory" or "special"
        taxes by the states on Internet access or on products and services
        delivered over the Internet. Congress further declared that there will
        be no federal taxes on e-commerce until the end of the moratorium.
        However, this moratorium does not prevent states from taxing activities
        or goods and services that the states would otherwise have the power to
        tax. Furthermore, the moratorium does not apply to certain state taxes
        that were in place before the moratorium was enacted.

     .  Online Privacy. Both Congress and the Federal Trade Commission are
        considering regulating the extent to which companies should be able to
        use and disclose information they obtain online from consumers. If any
        regulations are enacted, B2B e-commerce companies may find certain
        marketing activities restricted. Also, the European Union has directed
        its member nations to enact much more stringent privacy protection laws
        than are generally found in the United States, and has threatened to
        prohibit the export of certain personal data to United States companies
        if similar measures are not adopted. Such a prohibition could limit the
        growth of foreign markets for United States B2B e-commerce companies.
        The Department of Commerce is negotiating with the Federal Trade
        Commission to provide exemptions from the European Union regulations,
        but the outcome of these negotiations is uncertain.

     .  Regulation of Communications Facilities. To some extent, the rapid
        growth of the Internet in the United States has been due to the relative
        lack of government intervention in the marketplace for Internet access.
        Lack of intervention may not continue in the future. For example,
        several telecommunications carriers are seeking to have
        telecommunications over the Internet regulated by the Federal
        Communications Commission in the same manner as other telecommunications
        services. Additionally, local telephone carriers have petitioned the
        Federal Communications Commission to regulate Internet service providers
        in a manner similar to long distance telephone carriers and to impose
        access fees on such providers. Some Internet service providers are
        seeking to have broadband Internet access over cable systems regulated
        in much the same manner as telephone services, which could slow the
        deployment of broadband Internet access services. Because of these
        proceedings or others, new laws or regulations could be enacted which
        could burden the companies that provide the infrastructure on which the
        Internet is based, thereby slowing the rapid expansion of the medium and
        its availability to new users.

     .  Other Regulations. The growth of the Internet and e-commerce may lead to
        the enactment of more stringent consumer protection laws. The Federal
        Trade Commission may use its existing jurisdiction to police e-commerce
        activities, and it is possible that the Federal Trade Commission will
        seek authority from Congress to regulate certain online activities. The
        Federal Trade Commission has already issued for public comment proposed
        regulations governing the collection of information online from
        children.

     Generally applicable laws may affect us and our Partner Companies. The
exact applicability of many of these laws to B2B e-commerce, however, is
uncertain.

Employees

     As of April 30, 1999, excluding our Partner Companies, we had 21 employees,
all of whom work with us on a full-time basis. We consider our relationships
with our employees to be good. None of our employees are covered by collective
bargaining agreements.

Legal Proceedings

     We are not a party to any material legal proceedings.

                                       41
<PAGE>
 
Competition

     Competition From our Shareholders and Within our Network

     We may compete with our shareholders and Partner Companies for Internet-
related opportunities. After this offering, Comcast Corporation, Compaq Computer
Corporation, General Electric Capital Corporation and Safeguard Scientifics,
Inc. will beneficially own      %,         %,            % and        % of our
common stock, respectively. These shareholders may compete with us to acquire
interests in B2B e-commerce companies. Comcast Corporation, General Electric
Capital Corporation and Safeguard Scientifics, Inc. currently each have a
designee as a member of our board of directors, which may give such companies
access to our business plan and potential acquisitions. In addition, we may
compete with our Partner Companies to acquire interests in B2B e-commerce
companies, and our Partner Companies may compete with each other for
acquisitions or other B2B e-commerce opportunities. In particular, VerticalNet
seeks to expand, in part through acquisition, its number of B2B communities.
VerticalNet, therefore, may seek to acquire companies that we would find
attractive. While we may partner with VerticalNet on future acquisitions, we
have no current contractual obligations to do so. We do not have any contracts
or other understandings with our shareholders or Partner Companies that would
govern the resolution of these potential conflicts. Such competition, and the
complications posed by the designated directors, may deter companies from
partnering with us and may limit our business opportunities.

     Competition Facing our Partner Companies

     Competition for Internet products and services is intense. As the market
for B2B e-commerce grows, we expect that competition will intensify. Barriers to
entry are minimal, and competitors can offer products and services at a
relatively low cost. Our Partner Companies compete for a share of a customer's:

     .  purchasing budget for services, materials and supplies with other online
        providers and traditional distribution channels;

     .  dollars spent on consulting services with many established information
        systems and management consulting firms; and

     .  advertising budget with online services and traditional off-line media,
        such as print and trade associations.

In addition, some of our Partner Companies compete to attract and retain a
critical mass of buyers and sellers. Several companies offer competitive
solutions that compete with one or more of our Partner Companies. We expect that
additional companies will offer competing solutions on a stand-alone or combined
basis in the future. Furthermore, our Partner Companies' competitors may develop
Internet products or services that are superior to, or have greater market
acceptance than, the solutions offered by our Partner Companies. If our Partner
Companies are unable to compete successfully against their competitors, our
Partner Companies may fail.

     Many of our Partner Companies' competitors have greater brand recognition
and greater financial, marketing and other resources than our Partner Companies.
This may place our Partner Companies at a disadvantage in responding to their
competitors' pricing strategies, technological advances, advertising campaigns,
strategic partnerships and other initiatives.

     Competition for Partner Companies

     We face competition from other capital providers including publicly-traded
Internet companies, venture capital companies and large corporations. Many of
these competitors have greater financial resources and brand name recognition
than we do. These competitors may limit our opportunity to acquire interests in
new Partner Companies. If we cannot acquire interests in attractive companies,
our strategy to build a collaborative network of Partner Companies may not
succeed.

Facilities

     Our corporate headquarters are located at 435 Devon Park Drive, Building 
800 in an office facility located in Wayne, Pennsylvania, where we lease
approximately 3,650 square feet. We plan to move into a larger corporate

                                      42
<PAGE>
 
headquarters in Wayne, Pennsylvania during the second half of 1999. We also
maintain offices in Boston, Massachusetts and San Francisco, California.

                                       43
<PAGE>
 
                                  MANAGEMENT

Executive Officers and Directors

     Our executive officers, key employees and directors, their ages and their
positions as of April 30, 1999, are as follows:

<TABLE>
<CAPTION>

       Name                     Age                             Position
       ----                     ---                             --------
<S>                            <C>             <C>
Walter W. Buckley, III (2)       39             President, Chief Executive Officer and Director
Douglas A. Alexander             37             Managing Director
Richard G. Bunker                37             Managing Director and Chief Technology Officer
Kenneth A. Fox                   28             Managing Director and Director
David D. Gathman                 51             Chief Financial Officer, Secretary and Treasurer
Victor Hwang                     30             Managing Director
Henry N. Nassau (3)              44             Managing Director and General Counsel
John N. Nickolas                 32             Managing Director and Assistant Treasurer
Robert A. Pollan                 38             Managing Director
Michael H. Forster               56             Senior Partner   
Christopher H. Greendale         47             Senior Partner   
Robert E. Keith, Jr. (2)         58             Chairman and Director
Julian A. Brodsky (2)            65             Director
E. Michael Forgash (1)           41             Director
Thomas P. Gerrity (1)            57             Director
Scott E. Gould                   34             Director
</TABLE>
-------------------------- 

(1)  Member of the audit committee

(2)  Member of the compensation committee

(3)  Mr. Nassau has agreed to join us as soon as reasonably possible. He is
     currently counsel to the law firm of Dechert Price & Rhoads.

     Walter W. Buckley, III, is a co-founder and has served as our President and
Chief Executive Officer and as one of our directors since March, 1996. Prior to
co-founding us, Mr. Buckley worked for Safeguard Scientifics, Inc. as Vice
President of Acquisitions from 1991 to February, 1996. Mr. Buckley directed many
of Safeguard Scientifics' investments and was responsible for developing and
executing Safeguard Scientifics' multimedia and Internet investment strategies.
Mr. Buckley serves as a director of VerticalNet, Inc., Sky Alland Marketing,
Who? Vision Systems, Inc., Syncra Software, Inc., PrivaSeek, Inc., Breakaway
Solutions, Inc. and e-Chemicals, Inc.

     Douglas A. Alexander has served as one of our Managing Directors since
September, 1997. Prior to joining us, Mr. Alexander co-founded Reality Online,
Inc. in 1986 and sold it to Reuters Group in 1994. Mr. Alexander continued to
serve as President and Chief Executive Officer of Reality Online after its
acquisition by Reuters Group until September, 1997 while concurrently acting as
a key contributor to Reuter's global Internet initiatives. Mr. Alexander is
Chairman of the board of VerticalNet, Inc. and serves as a director of
Blackboard, Inc., ComputerJobs.com, Inc., Deja.com, Inc., The LinkShare 
Corporation and SageMaker, Inc.

                                       44
<PAGE>
 
     Richard G. Bunker has served as one of our Managing Directors and has been
our Chief Technology Officer since April, 1999. Prior to joining us, Mr. Bunker
was President and Chief Executive Officer of Reality Online, a Reuters company,
from September, 1997 to April, 1999. Before becoming President and Chief
Executive Officer, Mr. Bunker served in various senior management positions at
Reality Online. While President and Chief Executive Officer of Reality Online,
Mr. Bunker built the company into a leading builder and host online securities
trading company. He also served as Senior Vice President and Chief Information
Officer of SEI Investments from January, 1994 to March, 1996, and Vice President
of the investment management and trading technology group at State Street Global
Advisors from October, 1992 to January, 1994.

     Kenneth A. Fox is a co-founder and has served as one of our Managing
Directors since our inception in March, 1996. Mr. Fox has also served as one of
our directors since February, 1999. Prior to co-founding us, Mr. Fox served as
Director of West Coast Operations for Safeguard Scientifics, Inc. and Technology
Leaders II, L.P., a venture capital partnership, from 1994 to 1996. In this
capacity, Mr. Fox led the development of and managed the West coast operations
for these companies. Mr. Fox serves as a director of BidCom, ClearCommerce 
Corporation, CommerX, Inc., Context Integration, Inc., Deja.com,
Inc., Entegrity Solutions Corporation, ONVIA.com, Inc., RapidAutoNet, SMART 
Technologies, Inc. and Vivant! Corporation.

     David D. Gathman has served as our Chief Financial Officer, Secretary and
Treasurer  since January, 1999. Prior to joining us, Mr. Gathman was Chief
Financial Officer and Executive Vice President, Finance and Administration of
Integrated Systems Consulting Group, Inc. from January, 1997 through its merger
with First Consulting Group, Inc. in December, 1998. He also served as Chief
Operating Officer, Vice President, Secretary and Assistant Treasurer of
Integrated Systems Consulting Group, Inc. from April, 1994 to December, 1998 and
as a director of the company. Mr. Gathman brings to us over 30 years of finance-
related experience, the last 16 of which were focused in the information
technology industry.

     Victor Hwang has served as one of our Managing Directors since March, 1999.
Prior to joining us, Mr. Hwang served from January, 1999 to March, 1999 as a
General Partner of Softbank Holdings, responsible for developing an investment
fund targeting late-stage private Internet companies. From August, 1995 to
January, 1999, Mr. Hwang also served as an investment banker at Goldman, Sachs &
Co., where he was involved in numerous financing and merger transactions for a
broad range of Internet, software, semiconductor, communications and hardware
companies. While at Goldman Sachs & Co., Mr. Hwang's clients included e-Bay,
GeoCities and Yahoo!. Mr. Hwang obtained a Masters of Business Administration
from the Graduate Business School of Stanford University where he was in
attendance from September, 1993 to June, 1995.

     Henry N. Nassau has agreed to join us as one of our Managing Directors and
as our General Counsel as soon as reasonably possible. Mr. Nassau is currently
counsel to the law firm of Dechert Price & Rhoads where he was a Partner from
September, 1987 to May, 1999 and was Chair of the Business Department from
January, 1998 to May, 1999. At Dechert Price & Rhoads, Mr. Nassau engaged in the
practice of corporate law, concentrating on mergers and acquisitions.

     John N. Nickolas has served as one of our Managing Directors and has been
our Assistant Treasurer since January, 1999. Prior to joining us, Mr. Nickolas
served from October, 1994 to December, 1998 in various 

                                       45
<PAGE>
 
finance and accounting positions for Safeguard Scientifics, Inc., most recently
serving as Corporate Controller from December, 1997 to December, 1998. Mr.
Nickolas brings to us extensive financial experience including corporate
finance, financial reporting, accounting and treasury operations. Before joining
Safeguard Scientifics, Inc., Mr. Nickolas was Audit Manager and held various
other positions at KPMG LLP from July, 1990 to October, 1994.

     Robert A. Pollan has served as one of our Managing Directors since June,
1998. Prior to joining us, Mr. Pollan served as a Chief Technology Officer and
Vice President of Business Development at General Electric Capital Corporation
from August, 1995 to June, 1998. During his tenure at General Electric Capital
Corporation, Mr. Pollan co-founded and served as President of two supply chain
ventures focused on remote telemetry and third-party logistics, returnable
packaging leasing and logistics. He led several acquisitions in Europe, Asia and
the United States. Mr. Pollan was co-founder and, from September, 1991 to July,
1995, Managing Director of OFR, Ltd., an advisory firm focused on the
organizational and financial restructuring of industrial enterprises in Central
Europe. While in Central Europe, Mr. Pollan founded the first Polish industrial
group and advised the World Bank and a number of Eastern European governments.
Mr. Pollan serves as a director of CommerX, Inc., Internet Commerce Systems,
Inc. and Universal Access, Inc.

     Michael H. Forster has served as one of our Senior Partners since June,
1998. Before joining us, Mr. Forster served as Senior Vice President of
Worldwide Field Operations for Sybase, Inc. from April, 1996 to March, 1999.
Prior to this position with the company, Mr. Forster was Sybase's Senior Vice
President and President of the company's Information Connection Division from
April, 1994 to March, 1996. Mr. Forster has over 30 years of sales, marketing
and general management experience in the information technology industry. Mr.
Forster serves as a director of Tangram Enterprise Solutions, MessageQuest, Inc.
SageMaker, Inc. and Syncra Software, Inc.

     Christopher H. Greendale has served as one of our Senior Partners since
January, 1999. Prior to joining us, Mr. Greendale served as an independent
management consultant from January, 1998 to December, 1998. Prior to becoming a 
consultant, Mr. Greendale served as Executive Vice President of Cambridge
Technology Partners, a company he co-founded in 1991. Cambridge Technology
Partners is a systems integrator that initiated fixed price, fixed time, rapid
systems development. Mr. Greendale has extensive experience in sales and
marketing, and general management in the information technology industry.

     Robert E. Keith, Jr. has served as the Chairman of our Board of Directors
since our inception in March, 1996. Mr. Keith is also Managing General Partner
of Technology Leaders II, L.P. and has had principal operating responsibility
for Technology Leaders II, L.P. since 1988. Mr. Keith also serves as a director
of American Education Centers, Inc., Cambridge Technology Partners
(Massachusetts), Inc., Diablo Research Corporation, LLC, Interactive Media
Systems, Inc., Masterpack International, Inc., MultiGen-Paradigm, Inc., National
Media Corporation, Naviant Technology Solutions, Inc., Sansource, Inc., US
Interactive, Inc., and Whisper Communications, Inc. and is Vice Chairman of the
Board of Safeguard Scientifics, Inc.

     Julian A. Brodsky has served as one of our directors since May, 1996. Mr.
Brodsky is a founder of Comcast Corporation, a developer of broadband cable
networks, cellular and personal communications systems and has served as a
director of Comcast since 1969 and Vice Chairman since 1988. He serves as Vice
President and a director of Sural. Mr. Brodsky serves as a director of Comcast
Cable Communications, Inc., Comcast Cellular Corporation, Comcast UK, Cable
Partners Limited, the RBB Fund, Inc. and Chairman of Comcast Interactive Capital
Group, Inc.

     E. Michael Forgash has served as one of our directors since May, 1998. Mr.
Forgash has been Vice President, Operations of Safeguard Scientifics, Inc. since
January, 1998. Prior to joining Safeguard Scientifics, Mr. Forgash was President
and Chief Executive Officer of Creative Multimedia from August, 1996 to October,
1997. Prior to that, Mr. Forgash was President at Continental HealthCare Systems
from November, 1994 to July, 1996. Mr. Forgash also serves as a director of US
Interactive, Inc., 4anything.com, Inc., eMerge Vision, Who? Vision Systems, Inc.
and Integrated Visions, Inc.

     Dr. Thomas P. Gerrity has served as one of our directors since December,
1998. Dr. Gerrity has also served as Dean of The Wharton School of the
University of Pennsylvania since July, 1990. Dr. Gerrity is also a member of the
board of directors of Fiserv, Inc., Fannie Mae, CVS Corporation, Sunoco, Inc.,
Reliance Group Holdings, Inc., Knight-Ridder, Inc. and Ikon Office Solutions,
Inc. and a trustee of MAS Funds.

     Scott E. Gould has served as one of our directors since December, 1998. Mr.
Gould is Vice President of General Electric Equity Capital Group, Inc., a
wholly-owned subsidiary of General Electric Corporation, in charge of Supply
Chain Technology, Logistics and Transportation Investing since August, 1997.
Prior to joining General Electric Equity Capital Group, Mr. Gould was Director
of Strategic Planning & Information from January, 1996 to August, 1997 and
Director of Finance from February, 1994 to January, 1996 for DSC Logistics, a
logistics outsourcer and software company. Mr. Gould also works with the boards
of McHugh Software International and IFCO Returnable Packaging Systems.

                                       46
<PAGE>
 
Advisory Board

     Our Advisory Board members provide our Partner Companies with strategic
guidance in general management, sales and marketing, and information technology
management. Our Advisory Board members and their backgrounds are:

     General Management Guidance

     Jeff Ballowe has served on our Advisory Board since February, 1998. Mr.
Ballowe served as President, Interactive Media and Development Group, of Ziff-
Davis, Inc.'s Internet publications until the end of 1997. Mr. Ballowe was
instrumental in transforming Ziff-Davis from a national magazine publisher to an
international integrated media company. Prior to joining Ziff-Davis, Mr. Ballowe
worked as a marketing executive at various technology and marketing services
companies. Mr. Ballowe serves as Chairman of the Board of Directors of Deja.com,
Inc. and as director of drkoop.com, Inc., Xoom.com, Inc., Ziff-Davis TV Inc. and
VerticalNet, Inc.

     Alex W. "Pete" Hart has served on our Advisory Board since March, 1998. Mr.
Hart is a consultant in consumer financial services specializing in emerging
payment and distribution systems. Mr. Hart has served in numerous positions,
including Chief Executive Officer, of Advanta Corporation from March, 1994 to
October, 1997. Prior to joining Advanta Corporation, Mr. Hart served as
President and Chief Executive Officer of MasterCard International. Mr. Hart
serves as a director of Sanchez Computer Associates, Who? Vision Systems,
4anything.com, HNC Software, Integrated Vision and Destiny Systems and on the
advisory board of ONVIA.com and Qpass.

     Ron Hovsepian has served on our Advisory Board since October, 1998. Mr.
Hovsepian is the Vice President, Business Development, Distribution Industry,
for IBM Corporation. Prior to this position, Mr. Hovsepian was General Manager
of IBM's Global Retail and Distribution Industry Solution Organization, and had
global responsibility for IBM's retail store system and the consumer driven
supply chain solution units. Mr. Hovsepian joined IBM as a Marketing
Representative in 1983.

     Martha Rogers, Ph.D., has served on our Advisory Board since 1996. Dr.
Rogers is a Professor at the Duke University Fuqua School of Business. Dr.
Rogers has served as Founding Partner of Marketing 1 to 1/Peppers and Rogers
Group since 1994. Marketing 1 to 1/Peppers and Rogers Group is a management
consulting firm that focuses on thought leadership and strategy in the growing
fields of interactivity, marketing, technology, relationship management and
business development. Dr. Rogers frequently appears on a variety of radio and
television programs, including C-SPAN's "American Perspectives" covering
business trends and features.

     Yossi Sheffi has served on our Advisory Board since July, 1998. Dr. Sheffi
is a Professor at Massachusetts Institute of Technology where he serves as
Director of the Center for Transportation Studies. His teaching and research
areas include logistics, optimization, supply chain management and e-commerce.
Dr. Sheffi is the author of a textbook and over fifty technical publications. In
1997, Dr. Sheffi co-founded Syncra Software, Inc. and in 1998, he co-founded e-
Chemicals, Inc. Dr. Sheffi is Chairman of the Boards of Directors of Syncra
Software, Inc. and e-Chemicals, Inc.

     Sales and Marketing Guidance

     Rowland Hanson has served on our Advisory Board September, 1996. Mr. Hanson
is founder and President of C. Rowland Hanson & Associates which provides
strategic planning, marketing and communications to a variety of software
companies. Mr. Hanson has also been involved in the founding, development and
sale or merger of several software companies. Prior to founding C. Rowland
Hanson & Associates, Mr. Hanson served as Vice President of Corporate
Communications at Microsoft Corporation, where he is credited with developing
and executing the company's original branding strategy. Mr. Hanson serves as a
director of Webforia and Sequel Technology.

     Tom Kippola has served on our Advisory Board since February, 1997. Mr.
Kippola is the Managing Partner of The Chasm Group, which provides market 
strategy consulting and training and speaking services for start-up, growing and
established information technology companies. Mr. Kippola is co-author of the
Gorrilla Game: An Investor's Guide to Picking Winners in High Technology. Prior
to his consulting career, Mr. Kippola was director of marketing for a service
automation
                                       47
<PAGE>
 
software vendor. Mr. Kippola has co-authored a book entitled The Gorilla Game:
An Investor's Guide to Picking Winners in High-Technology. Mr. Kippola serves as
a director of Whisper Communications, Inc. and Thru-Put Technologies. In 
addition, Mr. Kippola is an advisory board member of Rubric, Smart Technologies,
Inc., RTMS, Inc. and Voyager Capital.

     Geoffrey A. Moore has served on our Advisory Board since February, 1997.
Mr. Moore is Chairman of the Board and founder of The Chasm Group, where he
continues to provide market development and business strategy services to many
leading high-technology companies. He is also a venture partner with Mohr
Davidow Ventures where he provides market strategy advice to the high-tech
portfolio companies. Prior to finding The Chasm Group, Mr. Moore was a principal
and partner at Regis McKenna, Inc., a leading high-tech marketing strategy and
communications company. Mr. Moore serves as a director of many companies,
including Documentation Inc. and Objectivity, Inc.

     John A. Miller, Jr. has served on our Advisory Board since July, 1996. Mr.
Miller has served as President and Chief Executive Officer of Miller Consulting
Group since founding the company in 1996. Miller Consulting Group is a strategy-
driven public relations firm that integrates market positioning with tactical
public relations for emerging information technology companies. Prior to
founding the Miller Consulting Group, Mr. Miller founded Miller Communications,
which launched Compaq Computer Corporation, Lotus Corporation and more than 75
other emerging information technology firms throughout the 1980s.

     Don Peppers has served on our Advisory Board since August, 1996. Mr.
Peppers is a partner at Marketing 1 to 1/Pepper and Rogers Group, a management
consulting firm. Mr. Peppers is a co-author with Dr. Martha Rogers, of several
books on customer relationship management and one-on-one marketing. Mr. Peppers
serves as a director of DoubleClick, a network of Web advertising sites and ad
serving services, and Modem Media-Poppe Tyson, an interactive marketing and
advertising agency.

     Charles W. Stryker, Ph.D., has served on our Advisory Board since
September, 1997. Dr. Stryker has served as President, Marketing Information
Solutions for IntelliQuest, Inc. Dr. Stryker is a recognized leader in the
information solutions industry with his record as founder of Trinet, Inc., MkIS
User Forum, Information Technology Forum, and President of National Accounts
Division of American Business Information.

     Sergio Zyman has served on our Advisory Board since February, 1999. Mr.
Zyman is founder of The Z Group, a broad consulting and venture firm. Prior to
his consulting career, Mr. Zyman served as Vice President and Chief Marketing
Officer of the Coca-Cola Company. During Mr. Zyman's tenure with Coca-Cola, he
had responsibility for the introduction of Cherry Coke, Diet Coke, Fruitopia and
the new Coke initiative. Since leaving Coca-Cola, Mr. Zyman has also authored a
book entitled The End of Marketing As We Know It. Mr. Zyman serves as a director
of Gap, Inc., Netcentives, Inc. and VC Television Network Corp.

     Information Technology Management Guidance

     K.B. Chandrasekhar has served on our Advisory Board since April, 1999. Mr.
Chandrasekhar is Chairman of the Board of Exodus Communications, a company he
co-founded in 1994. Exodus Communications is a leading server hosting company
for Internet sites. Since establishing its first Internet data center in 1996,
Exodus Communications has expanded to nine cities with more than 1,000 employees
and 1,000 customers. Prior to co-founding Exodus Communications, Mr.
Chandrasekhar founded Fouress, Inc., a network software design and development
firm.

     Esther Dyson has served on our Advisory Board since May, 1996. Ms. Dyson is
Chief Executive Officer of EDventure Holdings, Inc. EDventure Holdings is a
company focused on emerging information technology worldwide, and on the
emerging computer markets of Central and Eastern Europe. EDventure publishes
Release 1.0, a monthly newsletter and sponsors two annual technology forums. Ms.
Dyson serves as a director of Scala Business Solutions N.V., Poland Online, New
World Publishing, Global Business Network, Graphisoft, PRT Group, Inc., Accent,
Medscape Inc. and Cygnus Solutions. Ms. Dyson also serves on the advisory board
of Perot Systems Corporation.

     John McKinley has served on our Advisory Board since July, 1998. Mr.
McKinley is Chief Technology Officer of Merrill Lynch. With Merrill Lynch, Mr.
McKinley has responsibility for 8,200 information technology 

                                       48
<PAGE>
 
professionals and is responsible for driving e-commerce initiatives throughout
the company. Prior to joining Merrill Lynch, Mr. McKinley served as Chief
Technology and Information Officer for General Electric Capital Corporation. Mr.
McKinley serves as a director of Proxicom Inc., a leading Internet-focused
systems integration firm. Mr. McKinley also serves on the Executive Client
Advisory Board of AT&T Corporation.

     William Powar has served on our Advisory Board since June, 1998. Mr. Powar
is a principal of Venture Architects, a company he founded in January, 1997.
Venture Architects is a consulting firm that provides strategic guidance and
business development expertise to companies in the e-commerce industry. Prior to
founding Venture Architects, Mr. Powar served 22 years with Visa USA and Visa
International developing new markets and businesses. From 1994 through 1996, Mr.
Powar directed Visa's venture investments and strategic alliances. Mr. Powar
serves as a director of MobiNetix Systems, Inc.

     Pete Solvik has served on our Advisory Board since August, 1996. Mr. Solvik
has served as Senior Vice President and Chief Information Officer of Cisco
Systems, Inc. since January, 1999, as Vice President and CIO from 1995 to 1999,
and as Director of Information Systems and CIO from 1995 to 1995. Under Mr.
Solvik's leadership, Cisco Systems has been recognized as one of the most
innovative and successful large corporations in the use of the Internet. Mr.
Solvik serves as a director of Context Integration, Inc., SMART Technologies,
Inc., Cohera Corp. and Asera Inc.

     We expect to change the composition of our Advisory Board from time to time
to better match the evolving needs of our Partner Companies.

Classes of the Board

     Our board of directors are divided into three classes that serve staggered
three-year terms as follows:

<TABLE>
<CAPTION>

        CLASS                   EXPIRATION                   MEMBER
----------------------  ------------------------  ------------------------------
<S>                     <C>                       <C>
        Class I                    2000           Messrs. Gould and Brodsky
        Class II                   2001           Messrs. Fox, Keith and Forgash
        Class III                  2002           Messrs. Buckley and Gerrity
</TABLE>

Board Committees

     The compensation committee reviews and makes recommendations to the Board
regarding the compensation to be provided to our Chief Executive Officer and our
directors. In addition, the compensation committee reviews compensation
arrangements for our other executive officers. The compensation committee also
administers our equity compensation plans. The current members of the
compensation committee are Messrs. Buckley, Brodsky and Keith.

     The audit committee reviews and monitors our corporate financial reporting,
external audits, internal control functions and compliance with laws and
regulations that could have a significant effect on our financial condition or
results of operations. In addition, the audit committee has the responsibility
to consider and recommend the appointment of, and to review fee arrangements
with, our independent auditors. The current members of the audit committee are
Messrs. Forgash and Gerrity.

Director Compensation and Other Arrangements

     We do not pay cash compensation to our directors, however they are
reimbursed for the expenses they incur in attending meetings of the board or
board committees. Non-employee directors are eligible to receive options to
purchase common stock awarded under our 1999 Equity Compensation Plan. See "--
Stock Option Plans."

Compensation Committee Interlocks and Insider Participation

     Upon completion of this offering, our compensation committee will make all
compensation decisions. Messrs. Buckley, Brodsky and Keith have served as the
only members of the compensation committee since we formed the committee in
October, 1998. Prior to that time, our full board made compensation decisions.

                                       49
<PAGE>
 
Messrs. Alexander and Buckley serve on the compensation committee of
VerticalNet. As of April 30, 1999, our holdings in VerticalNet were valued at
approximately $700 million. This could represent a significant portion of our
market capitalization. None of our other executive officers, directors or
compensation committee members currently serve, or in the past served, on the
compensation committee of any other company the directors or executive officers
of which served on our compensation committee.

Executive Compensation

     The following table provides certain summary information concerning the
compensation earned by our chief executive officer and the other executive
officers employed by us during the fiscal year ended December 31, 1998. Since
January 1, 1999, we have employed five additional executive officers--Messrs.
Bunker, Gathman, Hwang, Nassau and Nickolas--each of whom are expected to
receive more than $100,000 in compensation in 1999.

                           Summary Compensation Table

<TABLE>
<CAPTION>

                                                                                                                      Long-Term
                                                                                                                     Compensation
                                                                        Annual Compensation                             Awards
                                                 ---------------------------------------------------------------   -----------------

                                                                                                                         Shares 
                                                                                                     Other             Underlying
Name and Principal Position                            Salary                 Bonus             Compensation(1)          Options
---------------------------                      -------------------   -------------------   -------------------   -----------------

<S>                                               <C>                   <C>                   <C>                      <C> 
Walter W. Buckley, III
President and Chief Executive Officer...........           $159,769              $ 96,000                    --
 
Douglas A. Alexander
Managing Director...............................           $225,000              $100,000                    --
 
Kenneth A. Fox
Managing Director...............................           $119,538              $ 75,000                    --
 
Robert A. Pollan
Managing Director...............................           $133,808              $ 50,000                    --
</TABLE>
----------------------
(1) The value of certain perquisites and other personal benefits is not included
    in the amounts disclosed because it did not exceed for any officer in the
    table above the lesser of either $50,000 or 10% of the total annual salary
    and bonus reported for such officer.

                                       50
<PAGE>
 
     The following tables set forth certain information concerning grants to
purchase shares of our common stock of each of the officers named in the summary
compensation table above during the year ended December 31, 1998.

             Option Grants During the Year Ended December 31, 1998

<TABLE>
<CAPTION>
                                                                                             Potential Realizable Value at 
                                      Number of    Percentage of                             Assumed Annual Rates of Stock 
                                     Securities    Total Options                                Price Appreciation for
                                     Underlying     Granted to     Exercise                        Option Term (3)
                                      Options      Employees in    Price per    Expiration
Name                                  Granted (1)      1998        Share (2)       Date            5%            10%
-------------------------------------------------  -------------  -----------  ------------  -------------  --------------
<S>                               <C>              <C>            <C>          <C>           <C>            <C>
Walter W. Buckley, III..........
Douglas A. Alexander............
Kenneth A. Fox..................
Robert A. Pollan................
</TABLE>
---------------------------
(1) All options granted to employees are immediately exercisable and are either
    incentive stock options or nonqualified stock options and generally vest
    over five years at the rate of 20% of the shares subject to the option per
    year. Unvested shares are subject to a right of repurchase upon termination
    of employment. Options expire ten years from the date of grant.

(2) We granted options at an exercise price equal to the fair market value of
    our common stock on the date of grant, as determined by our board of
    directors.

(3) These amounts represent hypothetical gains that could be achieved for the
    respective options if exercised at the end of the option term. These gains
    are based on assumed rates of stock price appreciation of 5% and 10%
    compounded annually from the date the respective options were granted to
    their expiration dates based upon an assumed initial public offering price
    of $                    per share. These assumptions are not intended to
    forecast future appreciation of our stock price. The potential realizable
    value computation does not take into account federal or state income tax
    consequences of option exercises or sales of appreciated stock.

     The following table sets forth certain information concerning option
exercises by our Named Officers.

                   Year-End December 31, 1998 Option Values

<TABLE>
<CAPTION>

                                                                  Number of Securities Underlying   Value of Unexercised In-The
                                                                   Unexercised Options at Fiscal      Money Options at Fiscal
                                     Shares                                  Year End                       Year-End (1)
                                   Acquired on        Value       --------------------------------------------------------------
Name                               Exercise (#)    Realized ($)    Exercisable(2) Unexercisable    Exercisable    Unexercisable
--------------------------------  --------------  --------------  -------------  ---------------  -------------  ---------------
<S>                               <C>             <C>             <C>            <C>              <C>            <C>
Walter W. Buckley, III..........             --              --                                         --
Douglas A. Alexander............             --              --                                         --
Kenneth A. Fox..................             --              --                                         --
Robert A. Pollan................             --              --                                         --
</TABLE>
 
(1) Based on an assumed initial public offering price of $               per
    share, less the exercise price, multiplied by the number of shares
    underlying the option.

(2) All the options listed below were exercised in May, 1999.

Employee Benefit Plans

     Membership Profit Interest Plan

     In 1996, the board of managers of Internet Capital Group, L.L.C. approved
the Membership Profit Interests Plan, which we refer to as our restricted stock
issuances after the Reorganization. Under the terms of the Membership Profit
Interest Plan, certain employees, consultants and advisors who are designated
by Messrs. Buckley and Fox received grants of units of membership interests in
Internet Capital Group, L.L.C. These units of membership interest cannot be
transferred until the rights of the holder in the units vest. Twenty percent of
each of these holder's units of membership interest vest each year over a five
year period beginning on the vesting date

                                       51
<PAGE>
 
established by our board. If any holder's relationship with us is terminated,
his or her units of membership interest that have not vested are forfeited to
us.

     Following the Reorganization, all outstanding grants became grants under
our new Membership Profit Interest Plan. As of December 31, 1998 a total of
6,783,625 shares of common stock have been issued under the Membership Profit
Interest Plan, all of which were outstanding, leaving no shares available for
grant at a later date. The board has the power, subject to the limitations
contained in the Membership Profit Interest Plan, to prescribe the terms and
conditions of any award granted under the Membership Profit Interest Plan,
including the total number of shares awarded to each grantee and any applicable
vesting schedule.

     Internet Capital Group 1999 Equity Compensation Plan

     Our 1998 Equity Compensation Plan and our Managers' Option Plan were
approved by the board of managers of Internet Capital Group, L.L.C. on October
13, 1998. After the Reorganization, we converted the 1998 Equity Compensation
Plan and the Managers' Option Plan into our 1999 Equity Compensation Plan, which
combines the Equity Compensation Plan and the Managers' Option Plan into a
single plan. The 1998 Equity Compensation Plan and Managers' Option Plan
provided for the grant of non-qualified options for membership interests in
Internet Capital Group, L.L.C., restricted stock, stock appreciation rights
("SARs"), and performance awards. Our 1999 Equity Compensation Plan provides
that options outstanding under the 1998 Equity Compensation Plan and Managers'
Option Plan will be considered options issued under the 1999 Plan.

     We have adopted the Internet Capital Group, Inc. 1999 Equity Compensation
Plan, as amended and restated, effective as of February 2, 1999. The terms and
provisions of the 1999 Plan are summarized below. This summary, however, does
not purport to be a complete description of the 1999 Plan and is qualified in
its entirety by the terms of the 1999 Plan.

     Purpose. The purpose of the 1999 Plan is to provide (i) designated
employees of Internet Capital Group and its subsidiaries, (ii) certain advisors
who perform services for Internet Capital Group or its subsidiaries and (iii)
non-employee members of our board of directors with the opportunity to receive
grants of incentive stock options, non-qualified options, share appreciation
rights, restricted shares, performance shares, dividend equivalent rights and
cash awards. We believe that the 1999 Plan will encourage the participants to
contribute materially to our growth and will align the economic interests of the
participants with those of our shareholders.

     General. Subject to adjustment as described below, the plan authorizes
awards to participants of up to 21,000,000 shares of our common stock. No more
than 3,000,000 shares in the aggregate may be granted to any individual in any
calendar year. Such shares may be authorized but unissued shares of our common
stock or may be shares that we have reacquired, including shares we purchase on
the open market. If any options or stock appreciation rights granted under the
plan expire or are terminated for any reason without being exercised, or
restricted shares or performance shares are forfeited, the shares of common
stock underlying that award will again be available for grant under the plan.

     Administration of the Plan. A committee appointed by our board of directors
administers the 1999 Plan. The committee has the sole authority to designate
participants, grant awards and determine the terms of all grants, subject to the
terms of the 1999 Plan. As a result of our becoming a publicly-traded company,
the compensation committee of the board of directors will become responsible for
administering and interpreting the plan. Prior to that time, the board of
directors has fulfilled those roles. The compensation committee will consist of
two or more persons appointed by the board of directors from among its members,
each of whom will be a "non-employee director" as defined by Rule 16b-3 under
the Securities Exchange Act of 1934, and an "outside director" as defined by
Section 162(m) of the Internal Revenue Code and related Treasury regulations.
The committee has the full authority to interpret the 1999 Plan and to make
rules, regulations, agreements and instruments for implementing the plan. The
committee's determinations made under the 1999 Plan are to be conclusive and
binding on all persons having any interest in the plan or any awards granted
under the plan.

     Eligibility. Grants may be made to any employee of Internet Capital Group,
Inc. or any of its subsidiaries and to any non-employee member of the board of
directors. Key advisors who perform services for us or any of our 

                                       52
<PAGE>
 
subsidiaries are eligible if they render bona fide services, not as part of the
offer or sale of securities in a capital-raising transaction. As of December 31,
1998, 6,697,000 options were outstanding under the plan.

     Options. Incentive stock options may be granted only to employees. The
maximum number of shares that may be subject to incentive stock options over the
life of the Plan is 3,000,000. Non-qualified stock options may be granted to
employees, key advisors and non-employee directors. The exercise price of common
stock underlying an option shall be determined by the compensation committee at
the time the option is granted, and may be equal to, greater than, or less than
the fair market value of such stock on the date the option is granted; provided
that the exercise price of an incentive stock option shall be equal to or
greater than the fair market value of a share of common stock on the date such
incentive stock option is granted, and the exercise price of an incentive stock
option granted to an employee who owns more than 10% of the common stock may not
be less than 110% of such fair market value.

     Unless the applicable option agreement provides otherwise, a participant
can exercise an option award at any time, before or after the option has fully
vested, by paying the applicable exercise price in cash, or, with the approval
of the compensation committee, by delivering shares of common stock owned by the
grantee and having a fair market value on the date of exercise equal to the
exercise price of the grants, or by such other method as the compensation
committee shall approve, including payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board. In addition,
the plan provides that we may make loans to participants or guarantee loans made
by third parties to the participant for the purpose of assisting participants to
exercise their options. The compensation committee has the authority to set the
terms and conditions that will apply to any loan or guarantee.

     Options vest according to the terms and conditions determined by the
compensation committee and specified in the grant instrument. In general, the
options that have already been granted under the plan are subject to a five year
vesting schedule with twenty percent of each grant vesting on each anniversary
of the grant date. The compensation committee will determine the term of each
option up to a maximum of ten years from the date of grant except that the term
of an incentive stock option granted to an employee who owns more than 10% of
the common stock may not exceed five years from the date of grant. The
compensation committee may accelerate the exercisability of any or all
outstanding options at any time for any reason.

     Non-Employee Director Option Grants. The 1999 Plan provides that each of
our non-employee directors, other than (i) non-employee directors who at any
time during their membership on our board of directors are employees of
Safeguard Scientifics, Inc. or any of its subsidiaries or affiliates, (ii) non-
employee directors who at any time during their membership on our board of
directors are employees of TL Ventures, Inc. or any of its subsidiaries or
affiliates or (iii) non-employee directors who are granted options under the
general option provisions of the 1999 Plan, is entitled to receive an option to
purchase 47,000 shares of our common stock, vesting in equal installments over
four years, upon his initial election to our board of directors, and a service
grant to purchase 20,000 shares every two years, vesting in equal installments
over two years. The plan also allows our board of directors to grant an option
to any of the eligible non-employee directors who were members of the board of
directors immediately following the execution of the Reorganization to
compensate any of those non-employee directors for the cancellation of
outstanding options held immediately prior to the Reorganization. No non-
employee director may be granted more than 107,000 shares of our common stock
under the automatic and conversion grants described above. Such automatic and
conversion grants will otherwise be generally subject to the terms provided for
options under the 1999 Plan.

     Restricted Stock. The compensation committee shall determine the number of
restricted shares granted to a participant, subject to the maximum plan limit
described above. Grants of restricted shares will be conditioned on such
performance requirements, vesting provisions, transfer restrictions or other
restrictions and conditions as the compensation committee may determine in its
sole discretion. The restrictions shall remain in force during a restriction
period set by the compensation committee. If the grantee is no longer employed
by us during the restriction period or if any other conditions are not met, the
restricted shares grant will terminate as to all shares covered by the grant for
which the restrictions are still applicable, and those shares must be
immediately returned to us.

                                       53
<PAGE>
 
     Stock Appreciation Rights. The compensation committee may grant stock
appreciation rights (SARs) to any participant, subject to the maximum plan limit
described above. At any time, the compensation committee may grant an SAR award,
either separately or in connection with any option; provided, that if an SAR is
granted in connection with an incentive stock option, it must be granted at the
same time that the underlying option is granted. The compensation committee will
determine the base amount of the SAR at the time that it is granted and will
establish any applicable vesting provisions, transfer restrictions or other
restrictions as it may determine is appropriate in its sole discretion. When a
participant exercises an SAR, he or she will receive the amount by which the
value of the stock has appreciated since the SAR was granted, which may be
payable to the participant in cash, shares, or a combination of cash and shares,
as determined by the compensation committee.

     Performance Share Awards. The compensation committee may grant performance
share awards to any employee or key advisor. A performance share award
represents the right to receive an amount based on the value of our stock, but
may be payable only if certain performance goals that are established by the
compensation committee are met. If the compensation committee determines that
the applicable performance goals have been met, a performance share award will
be payable to the participant in cash, shares or a combination of cash and
shares, as determined by the compensation committee.

     Dividend Equivalent Rights. The compensation committee may grant dividend
equivalent rights to any participant. A dividend equivalent right is a right to
receive payments in amounts equal to dividends declared on shares of our common
stock with respect to the number of shares and payable on such dates as
determined by the compensation committee. The compensation committee shall
determine all other terms applicable to dividend equivalent rights.

     Cash Awards. The compensation committee may grant cash awards to employees
under the 1999 Plan. Such awards shall be in such amounts and subject to such
performance goals and other terms and conditions as the compensation committee
determines.

     Amendment and Termination of the Plan. The compensation committee may amend
or terminate the plan at any time. The plan will terminate on the tenth
anniversary of its effective date, unless the compensation committee terminates
it earlier or extends it with the approval of the shareholders.

     Adjustment Provisions. In the event that certain reorganizations of
Internet Capital Group or similar transactions or events occur, the maximum
number of shares of stock available for grant, the maximum number of shares that
any participant in the 1999 Plan may be granted, the number of shares covered by
outstanding grants, the kind of shares issued under the 1999 Plan and the price
per share or the applicable market value of such grants shall be adjusted by the
committee to reflect changes to our common stock as a result of such occurrence
to prevent the dilution or enlargement of rights of any individual under the
1999 Plan.

     Change of Control and Reorganization. Upon a Change of Control, as defined
in the 1999 Plan, the compensation committee may determine that (i) outstanding
grants, whether in the form of options and stock appreciation rights shall
immediately vest and become exercisable; and (ii) the restrictions and
conditions on all outstanding restricted stock or performance share awards shall
immediately lapse. In addition, the compensation committee may (i) require that
grantees surrender their outstanding options and stock appreciation rights in
exchange for payment by us, in cash or common stock, in an amount equal to the
amount by which the then fair market value of the shares of common stock subject
to the grantee's unexercised options or stock appreciation rights exceeds the
exercise price of those options, and/or (ii) after giving grantees an
opportunity to exercise their outstanding options and stock appreciation rights,
terminate any or all unexercised options and stock appreciation rights.

     Upon a Reorganization, as defined in the 1999 Plan, where we are not the
surviving entity or where we survive only as a subsidiary of another entity,
unless the compensation committee determines otherwise, all outstanding option
or SAR grants shall be assumed by or replaced with comparable options or rights
by the surviving corporation. In addition, the compensation committee may (i)
require that grantees surrender their outstanding options in exchange for
payment by us, in cash or common stock, at an amount equal to the amount by
which the then fair market value of the shares of common stock subject to the
grantee's unexercised options 

                                       54
<PAGE>
 
exceeds the exercise price of those options, and/or (ii) after accelerating all
vesting and giving grantees an opportunity to exercise their outstanding options
or SARs, terminate any or all unexercised options and SARs.

     Federal Tax Consequences of Stock Options. In general, neither the grant
nor the exercise of an incentive stock option will result in taxable income to
an option holder or a deduction to Internet Capital Group. To receive special
tax treatment as an incentive stock option under the Internal Revenue Code as to
shares acquired upon exercise of an incentive stock option, an option holder
must neither dispose of such shares within two years after the incentive stock
option is granted nor within one year after the exercise of the option. In
addition, the option holder must be an employee of Internet Capital Group or one
of its subsidiaries at all times between the date of grant and the date three
months, or one year in the case of disability, before the exercise of the
option. Special rules apply in the case of the death of the option holder.
Incentive stock option treatment under the Internal Revenue Code generally
allows the sale of our common stock received upon the exercise of an incentive
stock option to result in any gain being treated as a capital gain to the option
holder, but we will not be entitled to a tax deduction. However, the exercise of
an incentive stock option, if the holding period rules described above are
satisfied, will give rise to income includable by the option holder in his or
her alternative minimum tax in an amount equal to the excess of the fair market
value of the stock acquired on the date of the exercise of the option over the
exercise price.

     If the holding rules described above are not satisfied, gain recognized on
the disposition of the shares acquired upon the exercise of an incentive stock
option will be characterized as ordinary income. Such gain will be equal to the
difference between the exercise price and the fair market value of the shares at
the time of exercise. Special rules may apply to disqualifying dispositions
where the amount realized is less than the value at exercise. We will generally
be entitled to a deduction equal to the amount of such gain included by an
option holder as ordinary income. Any excess of the amount realized upon such
disposition over the fair market value at exercise will generally be long-term
or short-term capital gain depending on the holding period involved.
Notwithstanding the foregoing, in the event that the exercise of the option is
permitted other than by cash payment of the exercise price, various special tax
rules may apply.

     No income will be recognized by an option holder at the time a non-
qualified stock option is granted. Generally, ordinary income will, however, be
recognized by an option holder at the time a vested non-qualified stock option
is exercised in an amount equal to the excess of the fair market value of the
underlying common stock on the exercise date over the exercise price. We will
generally be entitled to a deduction for federal income tax purposes in the same
amount as the amount included in ordinary income by the option holder with
respect to his or her non-qualified stock option. Gain or loss on a subsequent
sale or other disposition of the shares acquired upon the exercise of a vested
non-qualified stock option will be measured by the difference between the amount
realized on the disposition and the tax basis of such shares, and will generally
be long-term capital gain depending on the holding period involved. The tax
basis of the shares acquired upon the exercise of any non-qualified stock option
will be equal to the sum of the exercise price of such non-qualified stock
option and the amount included in income with respect to such option.
Notwithstanding the foregoing, in the event that exercise of the option is
permitted other than by cash payment of the exercise price, various special tax
rules apply.

     Unless the holder of an unvested non-qualified stock option makes an 83(b)
election as described below, there generally will be no tax consequences as a
result of the exercise of an unvested option until the stock received upon such
exercise is no longer subject to a substantial risk of forfeiture or is
transferable. Generally, when the shares have vested, the holder will recognize
ordinary income, and we will be entitled to a deduction, equal to the difference
between the fair market value of the stock at such time and the exercise price
paid by the holder for the stock. Subsequently realized changes in the value of
the stock generally would be treated as long-term or short-term capital gain or
loss, depending on the length of time the shares were held prior to disposition
of such shares. In general terms, if a holder were to make an 83(b) election
under Section 83(b) of the Internal Revenue Code upon the exercise of the
unvested option, the holder would recognize ordinary income on the date of the
exercise of such option, and we would be entitled to a deduction, equal to (i)
the fair market value of the stock received pursuant to such exercise as though
the stock were (A) not subject to a substantial risk of forfeiture or (B)
transferable, minus (ii) the exercise price paid for the stock. If an 83(b)
election were made, there would generally be no tax consequences to the holder
upon the vesting of the stock, and all subsequent appreciation in the stock
would generally be eligible for capital gains treatment.

                                       55
<PAGE>
 
     Additional special tax rules may apply to those option holders who are
subject to the rules set forth in Section 16 of the Securities Exchange Act or
1934, as amended. The foregoing tax discussion is a general description of
certain expected federal income tax results under current law, and all affected
individuals should consult their own advisors if they wish any further details
or have special questions.

     Section 162(m). Section 162(m) of the Internal Revenue Code may preclude us
from claiming a federal income tax deduction if we pay total remuneration in
excess of $1.0 million to the chief executive officer or to any of the other
four most highly compensated officers in any one year. Total remuneration would
generally include amounts received upon the exercise of stock options granted
under the plan and the value of shares received when restricted shares become
transferable or such other time when income is recognized. An exception does
exist, however, for performance-based compensation which includes amounts
received upon the exercise of stock options pursuant to a plan approved by
shareholders that meets certain requirements. We intend to present the 1999 Plan
to the shareholders for their approval before completing this offering. The 1999
Plan is intended to make grants of stock options and stock appreciation rights
that meet the requirements of performance-based compensation. Other awards have
been structured with the intent that such awards may qualify as such performance
based compensation if so determined by the compensation committee.

     Internet Capital Group, Inc. Equity Compensation Loan Program

     In accordance with the 1998 Plan, the 1999 Plan and the applicable employee
option agreements, and in consideration of certain restrictive covenants, we
have offered to loan each employee who has been awarded a non-qualified stock
option under the 1999 Plan an amount necessary to pay the exercise price of
their outstanding options and an amount to pay some portion of the income tax
that such employee will owe upon the exercise of such options. These loans will
generally be available to those eligible employees who elect to exercise their
options on or prior to May 5, 1999. The loans will be full recourse, will bear
an interest rate of 5.22%, and will be for five-year terms. In addition, each
eligible employee will pledge the number of shares acquired pursuant to the
exercise of the applicable option as collateral for the loan. If an eligible
employee sells any shares acquired pursuant to the option exercise, such
eligible employee is obligated under the terms of the loan to use the proceeds
of such sale to repay any outstanding balance of the loan. If the eligible
employee's employment by the Company is terminated for any reason, such eligible
employee must repay the full outstanding loan balance to the Company within 90
days of such termination. Also, if the Company determines that a grantee
breaches any of the terms of the restrictive covenants noted above, such
eligible employee must immediately repay any outstanding loan balance to the
Company.

     Internet Capital Group, Inc. Long-Term Incentive Plan

     Our long-term incentive plan supports our growth strategy since the plan
permits participants to share directly in the growth of our Partner Companies.
Each year, we will allocate up to 12% of each acquisition made during the year
for the benefit of the participants in the long-term incentive plan. The plan
permits the compensation committee to award grants in the form of interests in
limited partnerships established by us to hold the interests acquired by us in a
given year, restricted stock in a Partner Company, or share units which entitle
a participant to share in the appreciation of the value of the stock of a
Partner Company above established threshold levels. We intend primarily to grant
limited partnership interests to plan participants to more closely align the
participants' interests with our interests.

     All grants are subject to vesting over a period of years and the attainment
of specified threshold levels. Partnership interests are generally paid out in
stock of a Partner Company after a fixed period of years. The compensation
committee can accelerate vesting and payout upon the attainment of the threshold
value. Restricted stock awards are subject to certain restrictions and are held
in escrow until the attainment of the established threshold levels. Share units
are payable in cash or in stock of a Partner Company after a fixed period of
years, subject to acceleration by the compensation committee if the threshold
levels are achieved.

     Internet Capital Group 401(k) Plan

     We sponsor the Internet Capital Group 401(k) Plan, a defined contribution
plan that is intended to qualify under Section 401(a) of the Code. All employees
who are at least 21 years old and have been employed by us for 

                                       56
<PAGE>
 
one month are eligible to participate in our 401(k) Plan. An eligible employee
of the Company may begin to participate in our 401(k) Plan on the first day of
the plan quarter after satisfying our 401(k) Plan's eligibility requirements. A
participating employee may make pre-tax contributions of a percentage (not less
than 1% and not more than 15%) of his or her eligible compensation, subject to
the limitations under the federal tax laws. Employee contributions and the
investment earnings thereon are fully vested at all times. We may make
discretionary contributions to the 401(k) Plan but we have never done so.

                             CERTAIN TRANSACTIONS

     During 1998 and 1999, we leased our corporate offices in Wayne,
Pennsylvania from Safeguard Scientifics, Inc. From January 31, 1998 to April 30,
1999, our monthly lease payments to Safeguard Scientifics, Inc. totaled
approximately $40,000. Prior to this offering, Safeguard Scientifics, Inc.,
beneficially owned 25.8% of our common stock. We believe that our lease in Wayne
with Safeguard Scientifics, Inc. is on terms no less favorable to us than those
that would be available to us in an arm's-length transaction with a third party.

     In the second half of 1999, we intend to lease new corporate office space
in Wayne, Pennsylvania from Safeguard Scientifics, Inc. We expect that our new
lease with Safeguard Scientifics, Inc. will be on terms no less favorable to us
than those terms that would be available to us in an arm's-length transaction
with a third party.

     During 1998 and 1999, we paid Safeguard Scientifics for telephone and
accounting services, health and general insurance coverage, and other services.
From January 31, 1998 to April 30, 1999, our payments to Safeguard Scientifics
totaled approximately $158,000 for these services. We believe that the services
provided to us are on terms no less favorable to us than those that would be
available to us in an arm's-length transaction with a third party.

     In March, 1999 we leased office space in Boston, Massachusetts from
Safeguard Scientifics, Inc. We pay Safeguard Scientifics, Inc. $4,636 each month
under the lease. We believe that our lease in Boston with Safeguard Scientifics,
Inc. is on terms no less favorable to us than those that would be available to
us in an arm's-length transaction with a third party.

     After 180 days from the date of this prospectus, each of Comcast ICG, Inc.,
CPQ Holdings, Inc., Internet Assets, Inc., Safeguard 98 Capital L.P., Safeguard
Scientifics (Delaware), Inc., R.A.F. Ventures VII L.P., Technology Leaders II
L.P. and Technology Leaders II Offshore C.V. will have the right to demand on no
more than two occasions that we register the shares of our common stock held by
them prior to this offering and all shares of our common stock held by them
after exercise of any warrants issued to these shareholders prior to this
offering. Prior to this offering, these shareholders, together, are the holders
of 48,725,000 shares of our common stock and            warrants to purchase
shares of our common stock.

     In January, 1998 we loaned Douglas A. Alexander, one of our Managing
Directors, $117,669. Mr. Alexander used the proceeds from the loan to purchase a
portion of our interest in VerticalNet at our cost. Mr. Alexander agreed to pay
the principal amount of the loan with interest at an annual rate equal to the
prime rate plus 1% within 30 days of the date we request payment. On January 5,
1999, Mr. Alexander paid us $128,820, representing the outstanding principal
amount of the loan plus accrued interest.

     In April, 1999, in connection with our obtaining a bank credit facility,
Safeguard Scientifics, Inc. delivered a letter to the agent for the banks
stating that it intends to take any action that may in the future be necessary
to promptly cure certain defaults that could occur under our bank credit
facility.

                                       57
<PAGE>
 
     In May, 1999 we issued $90 million of three-year convertible notes to our
largest shareholders, directors, executive officers, certain members of the
immediate families of our executive officers and others in a round of financing
led by Comcast ICG. The notes bear interest at an annual rate of 4.99% during
the first year and at the prime rate for the remaining two years. The notes
mature on May 10, 2002. If this offering occurs prior to May, 2000, the notes
will automatically convert into shares of our common stock at our initial public
offering price and all accrued interest will be waived. We issued warrants to
the holders of these notes to purchase shares of our common stock. The warrant
holders will be entitled to purchase, at the initial public offering price, the
number of shares of our common stock determined by dividing $18 million by the
initial public offering price. The warrants expire in May, 2002.

     The following table sets forth the names of the holders of certain
convertible notes and warrants, their relationship to us and the amounts of each
of their convertible notes.

<TABLE>
<CAPTION>
                                                        Relationship to                 Amount of
              Name of Holder                        Internet Capital Group           Convertible Note
------------------------------------------   ------------------------------------   ------------------
<S>                                            <C>                                    <C>
Ann B. Alexander..........................     family member of executive officer          $    63,000
Bradley Alexander.........................     family member of executive officer              155,000
Douglas E. Alexander......................     family member of executive officer              160,000
Susan R. Buckley..........................     family member of executive officer               50,000
Walter W. Buckley, Jr.....................     family member of executive officer              200,000
Walter W. Buckley, III....................     executive officer and director                  577,000
Comcast ICG, Inc..........................     principal shareholder                        15,000,000
E. Michael Forgash........................     director                                        100,000
Kenneth A. Fox............................     executive officer and director                1,000,000
David D. Gathman..........................     executive officer                                25,000
Thomas P. Gerrity.........................     director                                         77,000
Internet Assets, Inc......................     principal shareholder                         1,525,000
Robert E. Keith, Jr.......................     director                                         46,000
Robert A. Pollan..........................     executive officer                                31,000
R.A.F. Ventures VII, L.P..................     principal shareholder                           915,000
</TABLE>

                                       58
<PAGE>
 
     In May, 1999, some of our officers and directors exercised options to
purchase our common stock. Instead of paying us cash, the officers and directors
delivered promissory notes to us in the aggregate amount of $18,105,000. The
promissory notes bear interest at the rate of 5.22% and mature on May 5, 2004.
The following table sets forth the names of the holders of the promissory notes,
their relationship to us and the amounts owed to us by each of these holders.

<TABLE>
<CAPTION>

                                      Relationship to              Amount of
       Name of holder             Internet Capital Group        Promissory Note   
----------------------------  ------------------------------  ------------------  
<S>                           <C>                             <C>                 
Walter W. Buckley, III......  executive officer and                $2,600,000
                               director                  
Douglas A. Alexander........  executive officer                     2,500,000
Richard G. Bunker...........  executive officer                     1,350,000
Kenneth A. Fox..............  executive officer and                 2,500,000
                               director                  
David D. Gathman............  executive officer                     1,300,000
Victor Hwang................  executive officer                     4,005,000
John N. Nickolas............  executive officer                       800,000
Robert A. Pollan............  executive officer                     2,650,000
Thomas P. Gerrity....,......  director                                400,000
</TABLE>  

                                       59
<PAGE>
 
                            PRINCIPAL SHAREHOLDERS

     The following table sets forth certain information regarding beneficial
ownership of our common stock as of April 30, 1999, and as adjusted to reflect
the sale of shares offered hereby, and by (i) each person (or group of
affiliated persons) who is known by us to own more than five percent of the
outstanding shares of our common stock, (ii) each of our directors and our 
executive officers named in the summary compensation table and (iii) all of 
our executive officers and directors as a group.

<TABLE>
<CAPTION>

5% Beneficial Owners, Directors,                                 Number of Shares             Percent of Shares Outstanding (3)
                                                                                         -------------------------------------------

Nominees for Director, Named Officers                        Beneficially Owned (1)(2)    Before the Offering    After the Offering
----------------------------------------------------------  ---------------------------  ---------------------  --------------------

<S>                                                          <C>                          <C>                     <C>
Comcast ICG, Inc. (4)....................................                   10,623,500                   
   c/o Comcast Corporation
   1500 Market Street
   Philadelphia, Pennsylvania 19102
CPQ Holdings, Inc. (5)...................................                    5,000,000                   
   c/o Compaq Computer Corporation
   20555 SH 249
   Building 11
   Houston, Texas 77070
Internet Assets, Inc. (6)................................                    5,000,000                    
   Sahab Tower
   Fahad Alsalim Street, 10th Floor
   P.O. Box 3216
   Safat, 13033, Kuwait
Safeguard 98 Capital L.P. (7)............................                   21,125,000                   
   103 Springer Building
   3400 Silverside Road
   Wilmington, Delaware 19810
Safeguard Scientifics (Delaware), Inc. (8)...............                   21,125,000                   
   103 Springer Building
   3400 Silverside Road
   Wilmington, Delaware 19810
R.A.F. Ventures VII, L.P. (9)............................                    6,536,550                   
   One Pitcairn Place, Suite 2100
   165 Township Line Road
   Jenkintown, Pennsylvania 19046-3953
Douglas Alexander (10)...................................
Julian A. Brodsky (11)...................................
Walter W. Buckley, III (12)..............................
E. Michael Forgash (13)..................................
Kenneth A. Fox (14)......................................
Dr. Thomas P. Gerrity (15)...............................
Scott E. Gould...........................................
Robert E. Keith, Jr. (16)................................
Robert Pollan (17).......................................
All executive officers and directors as a group (14
   persons) (10) (11) (12) (13) (14) (15) (16) (17)......
</TABLE>
------------------------------ 
* Less than 1%

(1) Beneficial ownership is determined in accordance with the rules of the
    Securities and Exchange Commission and generally includes voting or
    investment power with respect to securities. Unless otherwise noted, we
    believe that all persons named in the table have sole voting and sole
    investment power with 

                                       60
<PAGE>
 
    respect to all shares beneficially owned by them. All figures include shares
    of Common Stock issuable upon the exercise of options or warrants
    exercisable within 60 days of April 30, 1999.

(2) Includes $       of convertible notes which automatically convert to shares
    of common stock issued at the initial public offering price. See "Certain
    Transactions" for a description of the convertible notes.

(3) Options or warrants that are exercisable for common stock and other
    ownership rights in common stock that vest within 60 days of April 30, 1999
    are deemed to be outstanding and to be beneficially owned by the person
    holding such options or warrants for the purpose of computing the percentage
    ownership of such person but are not treated as outstanding for the purpose
    of computing the percentage ownership of any other person.

(4) Includes                shares of common stock issuable upon the exercise of
    warrants and            shares of common stock issuable upon the exercise of
    options exercisable within 60 days of April 30, 1999. Excludes options to
    purchase           shares of common stock which are not currently
    exercisable.

(5) Includes              shares of common stock issuable upon the exercise of
    warrants exercisable within 60 days of April 30, 1999.

(6) Includes             shares of common stock issuable upon the exercise of
    warrants exercisable within 60 days of April 30, 1999.

(7) Includes 13,000,000 shares held by Safeguard Scientifics (Delaware) Inc. as
    to which Safeguard 98 Capital L.P. disclaims beneficial ownership. Assumes
    all the shares offered in the directed share subscription program will be
    purchased by the shareholders of Safeguard Scientifics, Inc. and not
    Safeguard Scientifics, Inc. See "The Directed Share Subscription Program."

(8) Includes 8,125,000 shares held by Safeguard 98 Capital L.P. as to which
    Safeguard Scientifics (Delaware) disclaims beneficial ownership. Also
    includes 858,000 shares of common stock issued to employees of Safeguard
    Scientifics, Inc. for which Safeguard Scientifics (Delaware), Inc. has sole
    voting and investment power. Assumes all the shares offered in the directed
    share subscription program will be purchased by the shareholders of
    Safeguard Scientifics, Inc. and not Safeguard Scientifics, Inc. See "The
    Directed Share Subscription Program."

(9) Includes           shares held by Kenneth A. Fox, son of Robert A. Fox and
    Esther G. Fox, and brother of Debra E., Nancy J. and Amy A. Fox, who
    together own 94% of R.A.F. Ventures VII, L.P. as Limited Partners. R.A.F.
    Ventures VII, L.P. disclaims beneficial ownership of shares held by Kenneth
    A. Fox and Kenneth A. Fox disclaims beneficial ownership of shares held by
    R.A.F. Ventures VII, L.P. Also includes               shares of common stock
    issuable upon the exercise of warrants exercisable within 60 days of April
    30, 1999.

(10) Includes               shares of common stock issuable upon the exercise of
     warrants exercisable within 60 days of April 30, 1999. Also includes
     shares of restricted common stock which have not vested pursuant to the
     Membership Profit Interest Plan. See "Employee Benefit Plans" for a
     description of the Membership Profit Interest Plan.

(11) Julian A. Brodsky is a Director and Vice-Chairman of Comcast Corporation.
     Mr. Brodsky disclaims beneficial ownership of shares held by Comcast ICG,
     Inc., a subsidiary of Comcast Corporation.

(12) Includes                 shares of common stock issuable upon the exercise
     of warrants exercisable within 60 days of April 30, 1999. Also includes
     shares of restricted common stock which have not vested pursuant to the
     Membership Profit Interest Plan.

                                       61
<PAGE>
 
(13) Includes             shares of common stock issuable upon the exercise of
     warrants exercisable within 60 days of April 30, 1999. Mr. Forgash is Vice
     President-Operations of Safeguard Scientifics, Inc. and disclaims
     beneficial ownership of shares owned by Safeguard Scientifics (Delaware),
     Inc. and Safeguard 98 Capital L.P.

(14) Includes                  shares of common stock issuable upon the exercise
     of warrants exercisable within 60 days of April 30, 1999. Also includes
     shares of restricted common stock which have not yet vested pursuant to the
     Membership Profit Interest Plan.

(15) Includes           shares of common stock issuable upon the exercise of
     warrants exercisable within 60 days of April 30, 1999.

(16) Includes            shares of common stock issuable upon the exercise of
     warrants exercisable within 60 days of April 30, 1999.

(17) Includes               shares of common stock issuable upon the exercise of
     warrants exercisable within 60 days of April 30, 1999.

                                       62
<PAGE>
 
                         DESCRIPTION OF CAPITAL STOCK

General

     Our authorized capital stock consists of 300,000,000 shares of common
stock, par value $.001 per share, and 10,000,000 shares of preferred stock. Upon
completion of this offering, we will have approximately
shares (                     shares if the underwriters' over-allotment option
is exercised in full) of common stock issued and outstanding.

     The following is qualified in its entirety by reference to our certificate
of incorporation and bylaws, copies of which are filed as exhibits to the
Registration Statement of which this prospectus is a part.

Common Stock

     As of April 30, 1999, there were            shares of our common stock
outstanding. As of April 30, 1999, 838,500 shares of our common stock were
reserved for issuance pursuant to our 1998 Equity Compensation Plan Option Plan,
Directors' Option Plan and Membership Participation Plan. In February 1999, our
board of directors approved the Internet Capital Group 1999 Equity Compensation
Plan under which 21,000,000 shares of our common stock are reserved for
issuance. Upon completion of the offering, there will be shares of common stock
outstanding.

     The holders of our common stock are entitled to dividends as our board of
directors may declare from funds legally available therefor, subject to the
preferential rights of the holders of our preferred stock, if any. The holders
of our common stock are entitled to one vote per share on any matter to be voted
upon by shareholders. Our certificate of incorporation does not provide for
cumulative voting in connection with the election of directors, and accordingly,
holders of more than 50% of the shares voting will be able to elect all of the
directors. No holder of our common stock will have any preemptive right to
subscribe for any shares of capital stock issued in the future.

     Upon any voluntary or involuntary liquidation, dissolution, or winding up
of our affairs, the holders of our common stock are entitled to share ratably in
all assets remaining after payment of creditors and subject to prior
distribution rights of our preferred stock, if any. All of the outstanding
shares of common stock are, and the shares offered by us will be, fully paid and
non-assessable.

Preferred Stock

     As of the closing of this offering, no shares of our preferred stock will
be outstanding. Our certificate of incorporation provides that our board of
directors may by resolution establish one or more classes or series of preferred
stock having such number of shares and relative voting rights, designation,
dividend rates, liquidation, and other rights, preferences, and limitations as
may be fixed by them without further shareholder approval. The holders of our
preferred stock may be entitled to preferences over common shareholders with
respect to dividends, liquidation, dissolution, or our winding up in such
amounts as are established by our board of directors resolutions issuing such
shares.

     The issuance of our preferred stock may have the effect of delaying,
deferring or preventing a change in control of Internet Capital Group without
further action by the shareholders and may adversely affect voting and other
rights of holders of our common stock. In addition, issuance of preferred stock,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, could make it more difficult for a third party to
acquire a majority of the outstanding shares of voting stock. At present, we
have no plans to issue any shares of preferred stock.

Registration Rights

     Certain holders of our securities (the "Holders") possess certain
registration rights with respect to our common stock. Certain Holders or their
transferees who are the holders of                shares of our common stock
after completion of this offering (the "Strategic Partners") are entitled to
certain demand rights with respect to the registration of such shares under the
Securities Act. The Strategic Partners have agreed to not demand registration of
their common stock for 180 days after the date of this offering. After this 180-
day period, if we propose to register any of our securities under the Securities
Act, either for our own account or the account of other 

                                       63
<PAGE>
 
shareholders, the Holders are entitled to notice of such registration and,
subject to certain conditions and limitations, are entitled to include such
shares therein. In addition, at any time, any Strategic Partner may require us,
on not more than two occasions, to file a Registration Statement under the
Securities Act with respect to at least twenty-five percent (25%) of his, her or
its Registrable Securities if the gross offering price would exceed $5.0
million. We are required to use our best efforts to effect such registration,
subject to certain conditions and limitations. If a Holder requests that we file
a registration statement on Form S-3, the Holders may register their common
stock along with any such registration. The expenses incurred in connection with
such registrations will be borne by us, except that we will pay expenses of only
one registration on Form S-3 at a Holder's request per year.

Section 203 of the Delaware General Corporation Law; Certain Anti Takeover,
Limited Liability and Indemnification Provisions

     Section 203 of the Delaware General Corporation Law

     The following is a description of certain provisions of the Delaware
General Corporation Law, and our certificate of incorporation and bylaws. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Delaware General Corporation Law, and our certificate of
incorporation and bylaws.

     We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 of the Delaware General Corporation Law prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an "interested stockholder," unless
the business combination is approved in a prescribed manner. A "business
combination" includes certain mergers, asset sales, and other transactions
resulting in a financial benefit to the "interested stockholder." Subject to
certain exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within the past three years did own, 15% of
the corporation's voting stock.

     Certain provisions of our certificate of incorporation and bylaws could
have anti-takeover effects. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of our corporate
policies formulated by our board of directors. In addition, these provisions
also are intended to ensure that our board of directors will have sufficient
time to act in what the board of directors believes to be in the best interests
of us and our shareholders. These provisions also are designed to reduce our
vulnerability to an unsolicited proposal for our takeover that does not
contemplate the acquisition of all of our outstanding shares or an unsolicited
proposal for the restructuring or sale of all or part of Internet Capital Group.
The provisions are also intended to discourage certain tactics that may be used
in proxy fights. However, these provisions could delay or frustrate the removal
of incumbent directors or the assumption of control of us by the holder of a
large block of common stock, and could also discourage or make more difficult a
merger, tender offer, or proxy contest, even if such event would be favorable to
the interest of our shareholders.

     Classified Board of Directors

     Our certificate of incorporation provides for our board of directors to be
divided into three classes of directors, with each class as nearly equal in
number as possible, serving staggered three-year terms (other than directors
which may be elected by holders of preferred stock). As a result, approximately
one-third of our board of directors will be elected each year. The classified
board provision will help to assure the continuity and stability of our board of
directors and our business strategies and policies as determined by our board of
directors. The classified board provision could have the effect of discouraging
a third party from making an unsolicited tender offer or otherwise attempting to
obtain control of us without the approval of our board of directors. In
addition, the classified board provision could delay shareholders who do not
like the policies of our board of directors from electing a majority of our
board of directors for two years.

     No Shareholder Action by Written Consent; Special Meetings

     Our certificate of incorporation provides that shareholder action can only
be taken at an annual or special meeting of shareholders and prohibits
shareholder action by written consent in lieu of a meeting. Our bylaws provide
that special meetings of shareholders may be called only by our board of
directors or our Chief Executive 

                                       64
<PAGE>
 
Officer. Our shareholders are not permitted to call a special meeting of
shareholders or to require that our board of directors call a special meeting.

     Advance Notice Requirements for Shareholder Proposals and Director Nominees

     Our bylaws establish an advance notice procedure for our shareholders to
make nominations of candidates for election as directors or to bring other
business before an annual meeting of our shareholders (the "Shareholder Notice
Procedure"). The Shareholder Notice Procedure provides that only persons who are
nominated by, or at the direction of, our board of directors or its Chairman, or
by a shareholder who has given timely written notice to our Secretary or any
Assistant Secretary prior to the meeting at which directors are to be elected,
will be eligible for election as our directors. The Shareholder Notice Procedure
also provides that at an annual meeting only such business may be conducted as
has been brought before the meeting by, or at the direction of, our board of
directors or its Chairman or by a shareholder who has given timely written
notice to our Secretary of such shareholder's intention to bring such business
before such meeting. Under the Shareholder Notice Procedure, if a shareholder
desires to submit a proposal or nominate persons for election as directors at an
annual meeting, the shareholder must submit written notice to Internet Capital
Group not less than 90 days nor more than 120 days prior to the first
anniversary of the previous year's annual meeting. In addition, under the
Shareholder Notice Procedure, a shareholder's notice to Internet Capital Group
proposing to nominate a person for election as a director or relating to the
conduct of business other than the nomination of directors must contain certain
specified information. If the chairman of a meeting determines that business was
not properly brought before the meeting, in accordance with the Shareholder
Notice Procedure, such business shall not be discussed or transacted.

     Number of Directors; Removal; Filling Vacancies

     Our certificate of incorporation and bylaws provide that our board of
directors will consist of not less than 5 nor more than 9 directors (other than
directors elected by holders of our preferred stock), the exact number to be
fixed from time to time by resolution adopted by our directors. Further, subject
to the rights of the holders of any series of our preferred stock, if any, our
certificate of incorporation and bylaws authorize our board of directors to
elect additional directors under specified circumstances and fill any vacancies
that occur in our board of directors by reason of death, resignation, removal,
or otherwise. A director so elected by our board of directors to fill a vacancy
or a newly created directorship holds office until the next election of the
class for which such director has been chosen and until his successor is elected
and qualified. Subject to the rights of the holders of any series of our
preferred stock, if any, our certificate of incorporation and bylaws also
provide that directors may be removed only for cause and only by the affirmative
vote of holders of a majority of the combined voting power of the then
outstanding stock of Internet Capital Group. The effect of these provisions is
to preclude a shareholder from removing incumbent directors without cause and
simultaneously gaining control of our board of directors by filling the
vacancies created by such removal with its own nominees.

     Indemnification

     We have included in our certificate of incorporation and bylaws provisions
to (i) eliminate the personal liability of our directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by the
Delaware General Corporation Law and (ii) indemnify our directors and officers
to the fullest extent permitted by Section 145 of the Delaware General
Corporation Law, including circumstances in which indemnification is otherwise
discretionary. We believe that these provisions are necessary to attract and
retain qualified persons as directors and officers.

     Certificate of Incorporation

     The provisions of our certificate of incorporation that could have anti-
takeover effects as described above are subject to amendment, alternation,
repeal, or rescission either by (i) our board of directors without the assent or
vote of our shareholders or (ii) the affirmative vote of the holder of not less
than two-thirds (66 2/3%) of the outstanding shares of voting securities. This
requirement makes it more difficult for shareholders to make changes to the
provisions in our certificate of incorporation which could have anti-takeover
effects by allowing the holders of a minority of the voting securities to
prevent the holders of a majority of voting securities from amending these
provisions of our certificate of incorporation.

                                       65
<PAGE>
 
     Bylaws

     Our certificate of incorporation provides that our bylaws are subject to
adoption, amendment, alteration, repeal, or rescission either by (i) our board
of directors without the assent or vote of our shareholders or (ii) the
affirmative vote of the holders of not less than two-thirds (66 2/3%) of the
outstanding shares of voting securities. This provision makes it more difficult
for shareholders to make changes in our bylaws by allowing the holders of a
minority of the voting securities to prevent the holders of a majority of voting
securities from amending our bylaws.

Transfer Agent and Registrar

     The Transfer Agent and Registrar for our common stock is ChaseMellon
Shareholder Services. The Transfer Agent's address is 4 Station Square,
Pittsburgh, Pennsylvania, and its telephone number is (412)236-8157.

                        SHARES ELIGIBLE FOR FUTURE SALE

     Upon completion of this offering, there will be                     shares
of our common stock outstanding (assuming conversion of all of our outstanding
convertible notes, no exercise of the underwriters' over-allotment option and no
exercise of outstanding options and warrants). Of these shares, the
shares sold in this offering will be freely transferable without restriction or
further registration under the Securities Act, except for any shares held by an
existing "affiliate" of Internet Capital Group, as that term is defined by the
Securities Act (an "Affiliate"), which shares will be subject to the resale
limitations of Rule 144 adopted under the Securities Act.

     Upon completion of this offering,                        "restricted
shares" as defined in Rule 144 will be outstanding. None of these shares will be
eligible for sale in the public market as of the effective date of this
registration statement (the "Effective Date"). Beginning 180 days after the
Effective Date approximately                  additional shares will become
eligible for sale subject to compliance with Rule 144 upon the expiration of
agreements not to sell such shares entered into between the underwriters and
certain of our shareholders, including the officers and directors. Restrictions
pursuant to such agreements not to sell may be waived by Merrill Lynch, Pierce,
Fenner & Smith Incorporated. See "Underwriting."

     In general, under Rule 144 as currently in effect, beginning 90 days after
the offering, a person (or persons whose shares are aggregated) who owns shares
that were purchased from us (or any Affiliate) at least one year previously,
including a person who may be deemed our Affiliate, is entitled to sell within
any three-month period a number of shares that does not exceed the greater of
(i) 1% of the then outstanding shares of our common stock (approximately
shares immediately after the offering) or (ii) the average weekly trading volume
of our common stock on the Nasdaq National Market during the four calendar weeks
preceding the date on which notice of the sale is filed with the Securities and
Exchange Commission (the "Commission"). Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and the availability of
current public information about us. Any person (or persons whose shares are
aggregated) who is not deemed to have been our Affiliate at any time during the
90 days preceding a sale, and who owns shares within the definition of
"restricted securities" under Rule 144 under the Securities Act that were
purchased from us (or any Affiliate) at least two years previously, would be
entitled to sell such shares under Rule 144(k) without regard to the volume
limitations, manner of sale provisions, public information requirements or
notice requirements.

     We have agreed not to offer, sell or otherwise dispose of any shares of our
common stock or any securities convertible into or exercisable or exchangeable
for our common stock or any rights to acquire our common stock for a period of
180 days after the date of this prospectus, without the prior written consent of
the representatives of the underwriters, subject to certain limited exceptions.
See "Underwriting."

     The holders of                      shares of our common stock have agreed
not to demand registration of their common stock for 180 days after the date of
this prospectus without the prior written consent of the underwriters.

     After such period, if such holders cause a large number of shares to be
registered and sold in the public market, such sales could have an adverse
effect on the market price for the common stock.

                                       66
<PAGE>
 
                                 UNDERWRITING

General

     Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
BancBoston Robertson Stephens, Inc., BT Alex. Brown Incorporated, NationsBanc
Montgomery Securities LLC and Wit Capital Corporation are acting as
representatives (the "Representatives") of each of the underwriters. Subject to
the terms and conditions set forth in the Purchase Agreement (the "Purchase
Agreement") among us and the underwriters, we have agreed to sell to each of the
underwriters, and each of the underwriters, severally and not jointly, has
agreed to purchase from us the number of shares of our common stock set forth
opposite its name below.

<TABLE>
<CAPTION>

                Underwriters                                  Number of Shares
                ------------                                  ----------------
<S>                                                         <C> 
Merrill Lynch, Pierce, Fenner & Smith Incorporated........
BancBoston Robertson Stephens, Inc........................
BT Alex. Brown Incorporated...............................
NationsBanc Montgomery Securities LLC.....................
Wit Capital Corporation...................................
 
 
 
 
 
 
 
 
 
                                                              ----------------
 
 
       Total..............................................
                                                              ================
</TABLE>

     In the Purchase Agreement, the several underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the shares of our
common stock being sold pursuant to the Purchase Agreement if any shares of our
common stock are purchased. Under certain circumstances, under the terms of the
Purchase Agreement, the commitments of the non-defaulting underwriters may be
increased or the Purchase Agreement may be terminated. We have agreed to
indemnify the underwriters against some liabilities, including some liabilities
under the Securities Act, or to contribute to payments the underwriters may be
required to make in respect of those liabilities.

     The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the underwriters and certain
other conditions. The underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part.

                                       67
<PAGE>
 
Commissions and Discounts

     The Representatives have advised us that they propose initially to offer
the shares of our common stock to the public at the initial public offering
price set forth on the cover page of this prospectus, and to certain dealers at
such price less a concession not in excess of $        per share of common
stock. The underwriters may allow, and such dealers may reallow, a discount not
in  excess of $          per share of common stock on sales to certain other
dealers. After the initial public offering, the public offering price,
concession and discount may be changed.

     The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us. This information is presented assuming either no exercise
or full exercise by the underwriters of their over-allotment options.

<TABLE>
<CAPTION>
                                                                                        Without          With
                                                                         Per Share       Option         Option
                                                                       ------------   ------------   ------------
<S>                                                                      <C>            <C>            <C>
Public offering price..................................................      $              $              $
Underwriting discount..................................................      $              $              $
Proceeds, before expenses, to Internet Capital Group...................      $              $              $
</TABLE>

     The expenses of the offering, exclusive of the underwriting discount, are
estimated at $         million and are payable by us.

Over-Allotment Option

     We have granted to the underwriters an option exercisable for 30 days after
the date of this prospectus, to purchase up to an aggregate of an additional
shares of common stock at the initial public offering price set forth on the
cover of this prospectus, less the underwriting discount. The underwriters may
exercise this option solely to cover over-allotments, if any, made on the sale
of our common stock offered hereby. To the extent that the underwriters exercise
this option, each underwriter will be obligated, subject to certain conditions,
to purchase a number of additional shares of our common stock proportionate to
such underwriter's initial amount reflected in the foregoing table.

Directed Shares

     At our request, the underwriters have reserved approximately
shares of our common stock for sale at the initial public offering price to our
employees, directors and certain other persons with relationships to Internet
Capital Group. The number of shares of our common stock available for sale to
the general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares which are not so orally confirmed for
purchase within one day of the pricing of the offering will be offered by the
underwriters to the general public on the same basis as the other shares offered
by this prospectus.

Directed Share Subscription Program

    
     As part of this offering, we are offering          shares of our common 
stock in a directed share subscription program to certain shareholders of 
Safeguard Scientifics, Inc., one of our principal and founding shareholders. 
Only persons who owned at least        shares of Safeguard Scientifics, Inc. 
common stock as of        , 1999 are eligible to participate in the program. 
Such shareholders may subscribe for one share of our common stock for every ten
shares of Safeguard Scientifics, Inc. common stock held by them, and may not
transfer the opportunity to subscribe to another person except involuntarily by
operation of law. Sales under the program will close on the same day as other
sales under this offering. If any of the shares offered under the program are
not purchased by the shareholders of Safeguard Scientifics, Inc., then Safeguard
Scientifics, Inc. or one or more of its designees will purchase these shares.
The purchase price under the program, whether paid by Safeguard Scientifics,
Inc. or its shareholders, will be the same price per share as set forth on the
cover page of this prospectus.

No Sales of Similar Securities

     We, our executive officers and directors, Safeguard Scientifics (Delaware),
Inc., Safeguard 98 Capital, L.P., Comcast ICG, Inc., CPQ Holdings, Inc.,
Internet Assets, Inc., RAF Ventures VII, L.P., Technology Leaders II L.P. and
Technology Leaders II Offshore C.V. have agreed, with certain exceptions, not to
directly or indirectly:

     .  offer, pledge, sell, contract to sell, sell any option or contract to
        purchase, purchase any option or contract to sell, grant any option,
        right or warrant for the sale of, lend or otherwise dispose of or
        transfer any shares of our common stock or securities convertible into
        or exchangeable or exercisable for or repayable with our common stock,
        whether now owned or later acquired by the person executing the
        agreement or with respect to which the person executing the agreement
        later acquires the power of disposition, or file a registration
        statement under the Securities Act relating to any shares of our common
        stock for a period of 180 days after the date of this prospectus; or

     .  enter into any swap or other agreement that transfers, in whole or in
        part, the economic consequence of ownership of our common stock whether
        any such swap or transaction is to be settled by delivery of our common
        stock or other securities, in cash or otherwise, without the prior
        written consent of 

                                       68
<PAGE>
 
        Merrill Lynch on behalf of the underwriters for a period of 180 days
        after the date of this prospectus. See "Shares Eligible for Future
        Sale."

Quotation on the Nasdaq National Market

     Prior to this offering, there has been no public market for our common
stock. The initial public offering price was determined through negotiations
among us and the Representatives. Among the factors considered by us and the
Representatives in determining the initial public offering price of our common
stock, in addition to prevailing market conditions, are the trading multiples of
publicly traded companies that the Representatives believe to be comparable to
us, certain of our financial information, the history of, and the prospects for,
our company and the industry in which we compete, and an assessment of our
management, its past and present operations, the prospects for, and timing of,
our future revenue, the present state of our development, the percentage
interest of Internet Capital Group being sold as compared to the valuation for
the entire company and the above factors in relation to market values and
various valuation measures of other companies engaged in activities similar to
ours. There can be no assurance that an active trading market will develop for
our common stock or that our common stock will trade in the public market
subsequent to the offering at or above the initial public offering price.

     We have applied for a listing of our common stock on the Nasdaq National
Market under the symbol "ICGE."

     The underwriters have advised us that they do not expect sales to accounts
over which the underwriters exercise discretionary authority to exceed five
percent of the total number of shares of our common stock offered by them.

Price Stabilization, Short Positions and Penalty Bids

     Until the distribution of our common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
certain selling group members to bid for and purchase our common stock. As an
exception to these rules, the Representatives are permitted to engage in certain
transactions that stabilize the price of our common stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of our common stock.

     If the underwriters create a short position in our common stock in
connection with the offering, that is, if they sell more shares of common stock
than are set forth on the cover page of this prospectus, the Representatives may
reduce that short position by purchasing common stock in the open market. The
Representatives may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.

     The Representatives may also impose a penalty bid on certain underwriters
and selling group members. This means that if the Representatives purchase
shares of our common stock in the open market to reduce the underwriters' short
position or to stabilize the price of our common stock, they may reclaim the
amount of the selling concession from the underwriters and selling group members
who sold those shares as part of the offering.

     In general purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of our common stock to the extent that it
discourages resales of our common stock.

     Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
we nor any of the underwriters makes any representation that the Representatives
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.

Electronic Format

     Wit Capital is making a prospectus in electronic format available on its
Internet Web site. All dealers purchasing shares from Wit Capital in the
offering similarly have agreed to make a prospectus in electronic format
available on Web sites maintained by each of the dealers. The information on
these Web sites relating to the 

                                       69
<PAGE>
 
Internet Capital Group offering is filed as an exhibit to the registration
statement. Please see the exhibit for a more complete description of the
information relating to the offering contained on those Web sites.

     Wit Capital, a member of the National Association of Securities Dealers,
Inc., will participate in the offering as one of the underwriters. The National
Association of Securities Dealers, Inc. approved the membership of Wit Capital
on September 4, 1997. Since that time, Wit Capital has acted as an underwriter,
e-Manager(TM) or selected dealer in more than 70 public offerings. Except for
its participation in this offering and as disclosed below, Wit Capital has no
relationship with Internet Capital Group or any of its founders or significant
shareholders.

     Robert Lessin, the Chairman, Chief Executive Officer and a significant
shareholder of Wit Capital, owned 154,861 shares of VerticalNet's Series C
Preferred Stock, which converted into 154,861 shares of VerticalNet's common
stock prior to consummation of VerticalNet's initial public offering. Except for
its participation as e-Manager(TM) in VerticalNet's initial public offering, or
as otherwise disclosed in the underwriting section of VerticalNet's initial
public offering prospectus, Wit Capital has no relationship with VerticalNet or
any of its founders or significant shareholders. Walter W. Buckley, President,
Chief Executive Officer and a director of Internet Capital Group, owns 50,000
shares of Wit Capital Corporation. Kenneth A. Fox, a Managing Director and
director of Internet Capital Group, owns 50,000 shares of Wit Capital
Corporation.

                                 LEGAL MATTERS

     The validity of our common stock offered hereby will be passed upon for us
by Dechert Price & Rhoads, Philadelphia, Pennsylvania. An attorney associated
with Dechert Price & Rhoads beneficially owns (i)           shares of our common
stock, (ii) an aggregate principal amount of $504,000 convertible notes that
will automatically convert into shares of our common stock at the initial public
price, (iii) warrants exercisable at the initial public offering price per share
to purchase an aggregate number of shares of our common stock equal to $100,800
divided by the initial public offering price. This attorney disclaims beneficial
ownership as to $475,000 aggregate principal amount of the convertible notes and
warrants exercisable at the initial public offering price per share to purchase
an aggregate number of shares of our common stock equal to $95,000 divided by
the initial public offering price.

     Certain legal and regulatory matters in connection with the offering will
be passed upon for the underwriters by Davis Polk & Wardwell, New York, New
York. Members of and an attorney associated with Davis Polk & Wardwell
beneficially own (i) an aggregate principal amount of $150,000 of convertible
notes that will automatically convert into shares of our common stock at the
initial public offering price and (ii) warrants exercisable at the initial
public offering price per share to purchase an aggregate number of shares of our
common stock equal to $30,000 divided by the initial public offering price.

                                    EXPERTS

     The consolidated financial statements of Internet Capital Group, Inc. as of
December 31, 1997 and 1998 and for the period March 4, 1996 (inception) through
December 31, 1996, and for each of the years in the two-year period ended
December 31, 1997 and 1998 have been included herein in reliance upon the report
of KPMG LLP, independent certified public accountants, appearing elsewhere
herein, and upon authority of said firm as experts in auditing and accounting.

     The financial statements of ComputerJobs.com, Inc. as of December 31, 1997
and 1998, and for the period from January 16, 1996 (inception) through December
31, 1996 and for the years ended December 31, 1997 and 1998 appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth on their report thereon appearing elsewhere
herein, and are included in reliance upon such report given on the authority of
said firm as experts in auditing and accounting.

     The financial statements of Syncra Software, Inc. as of December 31, 1998
and for the period from February 11, 1998 (inception) through December 31, 1998
included in this prospectus, have been so included in reliance on the report of
PricewaterhouseCoopers LLP given on the authority of said firm as experts in
auditing and accounting.


                                       70
<PAGE>
 
                      WHERE YOU CAN FIND MORE INFORMATION

     We have filed with the Commission, Washington, D.C. 20549, a Registration
Statement on Form S-1 under the Securities Act with respect to our common stock
offered hereby. This prospectus does not contain all of the information set
forth in the registration statement and the exhibits to the registration
statement. For further information with respect to Internet Capital Group and
our common stock offered hereby, reference is made to the Registration Statement
and the exhibits filed as a part of the Registration Statement. Statements
contained in this prospectus concerning the contents of any contract or any
other document are not necessarily complete; reference is made in each instance
to the copy of such contract or any other document filed as an exhibit to the
registration statement. Each such statement is qualified in all respects by such
reference to such exhibit. The registration statement, including exhibits
thereto, may be inspected without charge at the Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World
Trade Center, 13th Floor, New York, New York 10048 after payment of fees
prescribed by the Commission. The Commission also maintains a World Wide Web
site which provides online access to reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission at the address http://www.sec.gov.

                                       71
<PAGE>
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
 
                                                                                PAGE
                                                                                ----
<S>                                                                             <C>
INTERNET CAPITAL GROUP, INC.

Report of Independent Auditors................................................   F-2
Consolidated Balance Sheets...................................................   F-3
Consolidated Statements of Operations.........................................   F-4
Consolidated Statements of Shareholders' Equity...............................   F-5
Consolidated Statements of Comprehensive Income (Loss)........................   F-5
Consolidated Statements of Cash Flows.........................................   F-6
Notes to Consolidated Financial Statements....................................   F-7

COMPUTERJOBS.COM, INC.

Report of Independent Auditors................................................  F-23
Balance Sheets................................................................  F-24
Statements of Income..........................................................  F-25
Statements of Changes in Stockholders' Equity (Deficit).......................  F-26
Statements of Cash Flows......................................................  F-27
Notes to Financial Statements.................................................  F-28

SYNCRA SOFTWARE, INC.

Report of Independent Accountants.............................................  F-34
Balance Sheet.................................................................  F-35
Statement of Operations.......................................................  F-36
Statement of Changes in Redeemable Preferred Stock and Stockholders' Deficit..  F-37
Statement of Cash Flows.......................................................  F-38
Notes to Financial Statements.................................................  F-39
</TABLE>

                                      F-1
<PAGE>
 

                        Report of Independent Auditors


The Board of Directors and Shareholders
Internet Capital Group, Inc.:

We have audited the accompanying consolidated balance sheets of Internet Capital
Group, Inc. and subsidiaries as of December 31, 1997 and 1998, and the related
consolidated statements of operations, shareholders' equity, comprehensive
income (loss) and cash flows for the period March 4, 1996 (inception) to
December 31, 1996 and for the years ended December 31, 1997 and 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the financial
statements of certain nonsubsidiary investee companies, which Internet Capital
Group, Inc. originally acquired an interest in during 1998. The Company's
ownership interests in and advances to these nonsubsidiary investee companies at
December 31, 1998 was $8,392,155, and its equity in net (income) loss of these
nonsubsidiary investee companies was $3,876,148 for the year ended December 31,
1998. The financial statements of these nonsubsidiary investee companies were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included for these nonsubsidiary
investee companies, is based solely on the reports of the other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Internet Capital Group, Inc. and
subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for the period March 4, 1996 (inception) to
December 31, 1996 and for the years ended December 31, 1997 and 1998, in
conformity with generally accepted accounting principles.

KPMG LLP
Philadelphia, Pennsylvania
May 7, 1999

                                      F-2
<PAGE>
 
                         INTERNET CAPITAL GROUP, INC.

                          Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                  DECEMBER 31,
                                                                    --------------------------------------
                                                                            1997                 1998
                                                                    -----------------    -----------------
<S>                                                                   <C>                  <C>
Assets
--------------------------------------------------------------------
CURRENT ASSETS
 Cash and cash equivalents..........................................      $ 5,967,461          $26,840,904
 Accounts receivable, less allowances for doubtful accounts
   ($30,000-1997; $61,037-1998).....................................          721,381            1,842,137
 Prepaid expenses and other current assets..........................          148,313            1,119,062
                                                                    -----------------    -----------------
   Total current assets.............................................        6,837,155           29,802,103
 
 Fixed assets, net..................................................          544,443            1,151,268
 Ownership interests in and advances to Partner Companies...........       24,045,080           59,491,940
 Available-for-sale securities......................................               --            3,251,136
 Intangible assets, net.............................................           34,195            2,476,135
 Other..............................................................           20,143              613,393
                                                                    -----------------    -----------------
TOTAL ASSETS........................................................      $31,481,016          $96,785,975
                                                                    =================    =================
 
LIABILITIES AND SHAREHOLDERS' EQUITY
--------------------------------------------------------------------
CURRENT LIABILITIES
 Current maturities of long-term debt...............................      $   150,856          $   288,016
 Line of credit.....................................................        2,500,000            2,000,000
 Accounts payable...................................................          696,619            1,348,293
 Accrued expenses...................................................          388,525            1,823,407
 Note payable to Partner Company....................................               --            1,713,364
 Deferred revenue...................................................          710,393            2,176,585
                                                                    -----------------    -----------------
   Total current liabilities........................................        4,446,393            9,349,665
 
 Long-term debt.....................................................          399,948              351,924
 
 Minority interest and other liabilities............................               --            6,360,008
 
 Commitments and contingencies (Note 14)
 
SHAREHOLDERS' EQUITY
 Preferred stock, $.001 par value; no shares authorized.............               --                   --
 Common stock, $.001 par value; authorized 130,000,000 shares;
   46,783,625 (1997) and 66,043,625 (1998) issued and
   outstanding......................................................           46,784               66,044
 Additional paid-in capital.........................................       36,144,814           74,935,262
 Retained earnings (accumulated deficit)............................       (8,642,113)           5,256,815
 Unamortized deferred compensation..................................         (914,810)          (1,266,814)
 Accumulated other comprehensive income.............................               --            1,733,071
                                                                    -----------------    -----------------
   Total shareholders' equity.......................................       26,634,675           80,724,378
                                                                    -----------------    -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..........................      $31,481,016          $96,785,975
                                                                    =================    =================
</TABLE>

                See notes to consolidated financial statements.

                                      F-3
<PAGE>
 
                         INTERNET CAPITAL GROUP, INC.

                     Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                            
                                                              MARCH 4, 1996 
                                                              (INCEPTION) TO             YEAR ENDED DECEMBER 31,
                                                               DECEMBER 31,     --------------------------------------
                                                                   1996                 1997                 1998
                                                           -----------------    -----------------    -----------------
 
<S>                                                          <C>                  <C>                  <C>
REVENUE....................................................      $   285,140          $   791,822         $  3,134,769
                                                           -----------------    -----------------    -----------------
OPERATING EXPENSES
  Cost of revenue..........................................          427,470            1,767,017            4,642,528
  Sales and marketing......................................          268,417            2,300,365            7,894,662
  General and administrative...............................        1,652,481            3,442,241            7,619,169
  Minority interest........................................         (427,185)             106,411           (5,381,640)
  Equity (income) loss.....................................          514,540             (106,298)           7,937,861
                                                           -----------------    -----------------    -----------------
   Total operating expenses................................        2,435,723            7,509,736           22,712,580
                                                           -----------------    -----------------    -----------------
OPERATING LOSS.............................................       (2,150,583)          (6,717,914)         (19,577,811)
  Other income, net (Note 13)..............................               --                   --           32,552,151
  Interest income, net.....................................           88,098              138,286              924,588
                                                           -----------------    -----------------    -----------------
NET INCOME (LOSS)..........................................      $(2,062,485)         $(6,579,628)        $ 13,898,928
                                                           =================    =================    =================
 
PRO FORMA INFORMATION (UNAUDITED) (NOTE 2):
 
Pro forma net income
  Net income as reported...................................                                               $ 13,898,928
  Pro forma income tax provision...........................                                                 (5,142,603)
                                                                                                     -----------------
  Pro forma net income.....................................                                               $  8,756,325
                                                                                                     =================
 
Pro forma net income per share
  Basic....................................................                                                      $0.16
  Diluted..................................................                                                      $0.16
 
Pro forma shares used in computing net income per share
  Basic....................................................                                                 56,102,289
  Diluted..................................................                                                 56,149,289
</TABLE>


                See notes to consolidated financial statements.

                                      F-4
<PAGE>
 
                         INTERNET CAPITAL GROUP, INC.

                Consolidated Statements of Shareholders' Equity

<TABLE>
<CAPTION>
                                                                                        Retained                             
                                            Common Stock            Additional          Earnings          Unamortized         
                                    -------------------------         Paid-In         (Accumulated         Deferred           
                                        Shares        Amount          Capital           Deficit)         Compensation         
                                    ------------------------------------------------------------------------------------      
<S>                                   <C>            <C>          <C>                <C>                <C>                   
BALANCE AS OF MARCH 4, 1996                   --      $    --        $        --       $         --        $        --            
Issuance of common stock, net.......  13,723,426       13,723         13,672,290                 --                 --        
Issuance of common stock (Note 9)...   6,139,074        6,139          1,102,313                 --                 --        
Issuance of restricted stock........   6,027,017        6,027          1,013,639                 --         (1,019,666)       
Amortization of deferred                                                                                                      
 compensation.......................          --           --                 --                 --            126,876        
                                                                                                                              
Net loss............................          --           --                 --         (2,062,485)                --        
                                    ------------------------------------------------------------------------------------      
BALANCE AS OF DECEMBER 31, 1996       25,889,517       25,889         15,788,242         (2,062,485)          (892,790)       
Issuance of common stock............  20,137,500       20,138         20,117,367                 --                 --        
Issuance of restricted stock........   1,773,053        1,773            416,562                 --           (418,335)       
Forfeitures of restricted stock.....  (1,016,445)      (1,016)          (177,357)                --            178,373        
Amortization of deferred                                                                                                      
 compensation.......................          --           --                 --                 --            217,942        
                                                                                                                              
Net loss............................          --           --                 --         (6,579,628)                --        
                                    ------------------------------------------------------------------------------------      
BALANCE AS OF DECEMBER 31, 1997       46,783,625       46,784         36,144,814         (8,642,113)          (914,810)       
Issuance of common stock, net.......  19,260,000       19,260         38,185,359                 --                 --        
Issuance of stock options to                                                                                                  
 non-employees......................          --           --            605,089                 --           (605,089)       
                                                                                                                              
Net unrealized appreciation in                                                                                                
 available-for-sale securities......          --           --                 --                 --                 --        
                                                                                                                              
Amortization of deferred                                                                                                      
 compensation.......................          --           --                 --                 --            253,085        
                                                                                                                              
Net income..........................          --           --                 --         13,898,928                 --        
                                    ------------------------------------------------------------------------------------      
BALANCE AS OF DECEMBER 31, 1998       66,043,625      $66,044        $74,935,262        $ 5,256,815        $(1,266,814)       
                                    ====================================================================================      

                                        Accumulated                  
                                           Other                     
                                       Comprehensive                 
                                           Income            Total   
                                    ---------------------------------
BALANCE AS OF MARCH 4, 1996                $  --             $  --   
<S>                                    <C>               <C>         
Issuance of common stock, net.......               --      13,686,013
Issuance of common stock (Note 9)...               --       1,108,452
Issuance of restricted stock........               --              --
Amortization of deferred                                             
 compensation.......................               --         126,876
                                                                     
Net loss............................               --      (2,062,485)
                                    ---------------------------------
BALANCE AS OF DECEMBER 31, 1996                    --      12,858,856
Issuance of common stock............               --      20,137,505
Issuance of restricted stock........               --              --
Forfeitures of restricted stock.....               --              --
Amortization of deferred                                             
 compensation.......................               --         217,942
                                                                     
Net loss............................               --      (6,579,628)
                                    ---------------------------------
BALANCE AS OF DECEMBER 31, 1997                    --      26,634,675
Issuance of common stock, net.......               --      38,204,619
Issuance of stock options to                                         
 non-employees......................               --              --
                                                                     
Net unrealized appreciation in                                       
 available-for-sale securities......        1,733,071       1,733,071
                                                                     
Amortization of deferred                                             
 compensation.......................               --         253,085
                                                                     
Net income..........................               --      13,898,928
                                    ---------------------------------
BALANCE AS OF DECEMBER 31, 1998            $1,733,071     $80,724,378
                                    ================================= 
</TABLE> 
             Consolidated Statements of Comprehensive Income (Loss)

<TABLE>
<CAPTION>
                                                                              MARCH 4, 1996
                                                                         (INCEPTION) TO DECEMBER
                                                                                   31,                  YEAR ENDED DECEMBER 31,
                                                                      ------------------------------------------------------------
                                                                                  1996                   1997             1998
                                                                      ------------------------------------------------------------
<S>                                                                     <C>                          <C>              <C>
NET INCOME (LOSS).....................................................               $(2,062,485)     $(6,579,628)     $13,898,928
                                                                      ------------------------------------------------------------
OTHER COMPREHENSIVE INCOME
 Unrealized holding gains on available-for-sale                                                                          
   securities.........................................................                        --               --        1,733,071 
 Reclassification adjustments.........................................                        --               --               --
                                                                      ------------------------------------------------------------
 Net unrealized appreciation in available-for-sale
   securities.........................................................                        --               --        1,733,071
                                                                      ------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS)...........................................               $(2,062,485)     $(6,579,628)     $15,631,999
                                                                      ============================================================
</TABLE>


                See notes to consolidated financial statements.

                                      F-5
<PAGE>
 
                         INTERNET CAPITAL GROUP, INC.

                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                              MARCH 4, 1996
                                                              (INCEPTION) TO
                                                               DECEMBER 31,             YEAR ENDED DECEMBER 31,
                                                           -----------------    ------------------------------------
                                                                   1996                 1997               1998
                                                           -----------------    ------------------    --------------
<S>                                                          <C>                  <C>                 <C>
OPERATING ACTIVITIES
 Net income (loss).........................................      $(2,062,485)        $ (6,579,628)      $ 13,898,928
 Adjustments to reconcile to net cash used in operating
   activities:
   Other income............................................               --                   --        (32,552,151)
   Depreciation and amortization...........................          481,796              446,289          1,135,269
   Equity (income) loss....................................          514,540             (106,298)         7,937,861
   Minority interest.......................................         (427,185)             106,411         (5,381,640)
 Changes in assets and liabilities, net of effect of
   acquisitions:
   Accounts receivable, net................................       (2,176,869)           1,574,374         (1,183,360)
   Prepaid expenses and other assets.......................          (69,558)            (142,384)        (1,346,515)
   Accounts payable........................................           43,727              565,672            620,127
   Deferred revenue........................................          147,100              493,960          1,249,624
   Accrued expenses........................................          145,977              204,645          1,415,265
                                                           -----------------    ------------------    --------------
        Net cash used in operating activities..............       (3,402,957)          (3,436,959)       (14,206,592)
INVESTING ACTIVITIES
 Capital expenditures......................................         (100,480)            (272,488)          (545,432)
 Proceeds from sales of available-for-sale securities......               --                   --         36,431,927
 Acquisitions of ownership interests in and
   advances to Partner Companies...........................       (6,994,129)         (16,315,874)       (47,624,193)
 Other acquisitions (Note 4)...............................               --                   --         (1,858,389)
                                                           -----------------    ------------------    --------------
        Net cash used in investing activities..............       (7,094,609)         (16,588,362)       (13,596,087)
FINANCING ACTIVITIES
 Issuance of common stock, net.............................       13,686,013           20,137,505         38,204,619
 Long-term debt and capital lease repayments...............          (30,191)             (57,979)          (321,857)
 Line of credit borrowings.................................        1,208,000            2,500,000          2,000,000
 Line of credit repayments.................................       (1,106,000)              (2,000)        (2,500,000)
 Treasury stock purchase by subsidiary.....................          (60,000)                  --                 --
 Issuance of stock by subsidiary...........................           15,000              200,000         11,293,360
                                                           -----------------    ------------------    --------------
        Net cash provided by financing activities..........       13,712,822           22,777,526         48,676,122
                                                           -----------------    ------------------    --------------
Net increase in cash and cash equivalents..................        3,215,256            2,752,205         20,873,443
Cash and cash equivalents at beginning of period...........               --            3,215,256          5,967,461
                                                           -----------------    ------------------    --------------
Cash and cash equivalents at end of period.................      $ 3,215,256         $  5,967,461       $ 26,840,904
                                                           =================    ==================    ==============
</TABLE>


                See notes to consolidated financial statements.

                                      F-6
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements


1.  SIGNIFICANT ACCOUNTING POLICIES

     DESCRIPTION OF THE COMPANY

     Internet Capital Group, Inc. (the "Company") was formed on March 4, 1996.
The Company is an Internet holding company primarily engaged in managing and
operating a network of business-to-business, or B2B, e-commerce companies. The
Company defines e-commerce as conducting or facilitating business transactions
over the Internet. As of December 31, 1998, the Company owned interests in more
than 20 companies engaged in e-commerce, which the Company calls its "Partner
Companies". The Company's goal is to become the premier B2B e-commerce company.
The Company's operating strategy is to integrate its Partner Companies into a
collaborative network that leverages the collective knowledge and resources of
the Company.

     BASIS OF PRESENTATION

     On February 2, 1999, the Company converted from a Limited Liability
Corporation ("LLC") to a C Corporation. All shareholder transactions have been
presented as if the conversion occurred on March 4, 1996 (inception).

     PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiary, Internet Capital Group Operations, Inc. (the
"Operations Company") and its majority owned subsidiary, VerticalNet, Inc.
("VerticalNet"). The various interests that the Company acquires in its Partner
Companies are accounted for under three broad methods: consolidation, equity
method and cost method. The applicable accounting method is generally determined
based on the Company's voting interest in a Partner Company.

     Consolidation. Partner Companies in which the Company directly or
indirectly owns more than 50% of the outstanding voting securities are generally
accounted for under the consolidation method of accounting. Under this method, a
Partner Company's results of operations are reflected within the Company's
Consolidated Statements of Operations. All significant intercompany accounts and
transactions have been eliminated. Participation of other Partner Company
shareholders in the earnings or losses of a consolidated Partner Company is
reflected in the caption "Minority interest" in the Company's Consolidated
Statements of Operations. Minority interest adjusts the Company's consolidated
results of operations to reflect only the Company's share of the earnings or
losses of the consolidated Partner Company.

     Equity Method. Partner Companies whose results are not consolidated, but
over whom the Company exercises significant influence, are accounted for
under the equity method of accounting. Whether or not the Company exercises
significant influence with respect to a Partner Company depends on an evaluation
of several factors including, among others, representation on the Partner
Company's Board of Directors and ownership level, which is generally a 20% to
50% interest in the voting securities of the Partner Company, including voting
rights associated with the Company's holdings in common, preferred and other
convertible instruments in the Partner Company. Under the equity method of
accounting, a Partner Company's results of operations are not reflected within
the Company's Consolidated Statements of Operations; however, the Company's
share of the earnings or losses of the Partner Company is reflected in the
caption "Equity (income) loss" in the Consolidated Statements of Operations.

     The amount by which the Company's carrying value exceeds its share of the
underlying net assets of Partner Companies accounted for under the consolidation
or equity method of accounting is amortized on a straight-line basis over three
years which adjusts the Company's share of the Partner Company's earnings or
losses.

     Cost Method. Partner Companies not accounted for under the consolidation or
the equity method of accounting are accounted for under the cost method of
accounting. Under this method, the Company's share of the earnings or losses of
such companies is not included in the Consolidated Statements of Operations.

                                      F-7
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     The Company continually evaluates the carrying value of its ownership
interests in each of its Partner Companies for possible impairment based on
achievement of business plan objectives and milestones, the value of each
ownership interest in the Partner Company relative to carrying value, the
financial condition and prospects of the Partner Company, and other relevant
factors.

     AVAILABLE-FOR-SALE SECURITIES

     Available-for-sale securities are reported at fair value, based on quoted
market prices, with the net unrealized gain or loss reported as a component of
accumulated other comprehensive income in shareholders' equity.

     Unrealized gains or losses related to available-for-sale securities will be
recorded net of deferred taxes subsequent to February 2, 1999, the date the
Company converted from an LLC to a C Corporation.

     ACCOUNTING ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

     CASH AND CASH EQUIVALENTS

     The Company considers all highly liquid instruments with an original
maturity of 90 days or less at the time of purchase to be cash equivalents. Cash
and cash equivalents at December 31, 1998 are invested principally in money
market accounts.

     FINANCIAL INSTRUMENTS

     Cash and cash equivalents, accounts receivable, accounts payable and
accrued expenses are carried at cost which approximates fair value due to the
short-term maturity of these instruments. Long-term debt is carried at cost
which approximates fair value as the debt bears interest at rates approximating
current market rates.

     INTANGIBLES

     Goodwill, the excess of cost over net assets of businesses acquired, is
amortized on a straight-line basis over three years. Goodwill at December 31,
1998 of $2.5 million, net of accumulated amortization of $.3 million, was
attributable to acquisitions by VerticalNet.

     FIXED ASSETS

     Fixed assets are carried at cost less accumulated depreciation, which is
based on the estimated useful lives of the assets (approximately three to seven
years) computed using the straight-line method.

     Equipment acquired under long-term capital lease arrangements is recorded
at amounts equal to the net present value of the future minimum lease payments
using the interest rate implicit in the lease. Amortization is provided by use
of the straight-line method over the estimated useful lives of the related
assets.

     REVENUE RECOGNITION

     All of the Company's revenue from March 4, 1996 (inception) through
December 31, 1998 was attributable to VerticalNet.

     VerticalNet's revenue is derived principally from advertising contracts
which include the initial construction of storefronts. The advertising contracts
generally do not extend beyond one year. Advertising revenue is recognized
ratably over the period of the advertising contract.

                                      F-8
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     VerticalNet also generates revenue through providing educational courses
and selling books. Revenue from educational courses is recognized in the period
in which the course is completed and revenue from the sale of books is
recognized in the period in which the books are shipped.

     Barter transactions are recorded at the lower of estimated fair value of
goods or services received or the estimated fair value of the advertisements
given. Barter revenue is recognized when the VerticalNet advertising impressions
(VNAI) are delivered to the customer and advertising expense is recorded when
the customer advertising impressions (CAI) are received from the customer. If
the CAI are received from the customer prior to VerticalNet delivering the VNAI,
a liability is recorded, and if VerticalNet delivers the VNAI to the customer
prior to receiving the CAI, a prepaid expense is recorded. For the period March
4, 1996 (inception) through December 31, 1997, VerticalNet barter transactions
were immaterial. For the year ended December 31, 1998, VerticalNet recognized
approximately $.6 million and $.5 million of advertising revenues and expenses,
respectively, from barter transactions. Included in prepaid expenses and other
current assets at December 31, 1998 is approximately $.2 million relating to
barter transactions.

     CONCENTRATION OF CREDIT RISK

     VerticalNet performs ongoing credit evaluations of its customers' financial
condition and generally does not require collateral on accounts receivable.
VerticalNet maintains allowances for credit losses and such losses have been
within management's expectations. No single customer accounted for greater than
10% of total revenue during the period from March 4, 1996 (inception) to
December 31, 1996 and the years ended December 31, 1997 and 1998.

     ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS

     In accordance with Statement of Financial Accounting Standards Board No.
121, the Company records an impairment loss on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount.

     DEFERRED OFFERING COSTS

     As of December 31, 1998, specific incremental costs directly attributable
to a planned initial public offering (IPO) of VerticalNet shares have been
deferred. These deferred costs, totaling $.5 million, are included in non-
current other assets on the Consolidated Balance Sheet. These costs were charged
against VerticalNet's additional paid-in-capital in connection with the
consummation of VerticalNet's IPO in February 1999.

     STOCK BASED COMPENSATION

     The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25) for stock options and other stock-based
awards while disclosing pro forma net income and net income per share as if the
fair value method had been applied in accordance with Statement of Financial
Accounting Standards Board No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation".

     COMPREHENSIVE INCOME

     In 1998, the Company adopted Statement of Financial Accounting Standard No.
130, "Reporting Comprehensive Income" (SFAS 130), which requires companies to
report and display comprehensive income and its components in financial
statements. Comprehensive income is the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. Excluding net income, the Company's source of
comprehensive income is from net unrealized appreciation on its available-for-
sale securities. Reclassification adjustments result from the recognition in net
income of gains or losses that were included in comprehensive income in prior
periods.

                                      F-9
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     SEGMENT INFORMATION

     At December 31, 1998, the Company adopted Statement of Financial Accounting
Standard No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131) which requires companies to present financial and
descriptive segment information (Note 10).

     INCOME TAXES

     Income taxes are accounted for under the asset and liability method whereby
deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which the temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

     From the Company's inception in March 1996 to February 1999, the Company
was not subject to federal and state income taxes. The Company has no net
operating loss carry forwards at December 31, 1998 (Note 2).

     NET INCOME PER SHARE

     Net income per share (EPS) is computed using the weighted average number of
common shares outstanding during each year. Dilutive EPS includes common stock
equivalents (unless anti-dilutive) which would arise from the exercise of stock
options and conversion of other convertible securities and is adjusted, if
applicable, for the effect on net income (loss) of such transactions.

     Pursuant to SEC Staff Accounting Bulletin No. 98, common stock and
convertible preferred stock issued for nominal consideration, prior to the
anticipated effective date of an IPO, are required to be included in the
calculation of basic and diluted net income per share as if they were
outstanding for all periods presented. To date, the Company has not had any
issuances or grants for nominal consideration.

     GAIN OR LOSS ON ISSUANCES OF STOCK BY PARTNER COMPANIES

     Pursuant to SEC Staff Accounting Bulletin No. 84, at the time a public
Partner Company accounted for under the consolidation or equity method of
accounting sells its stock at a price different from the Partner Company's book
value per share, the Company's share of the Partner Company's net equity
changes. If at that time, the Partner Company is an operating entity and not
engaged principally in research and development, the Company records the change
in its share of the Partner Company's net equity as a gain or loss in its
Consolidated Statements of Operations (Note 15).

     RECENT ACCOUNTING PRONOUNCEMENTS

     The Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position or cash flows.

2.   PRO FORMA INFORMATION (UNAUDITED)

     On February 2, 1999, the Company converted from an LLC to a C corporation.
The Company became subject to corporate federal and state income taxes
concurrent with the conversion to a C corporation. The accompanying Consolidated
Statement of Operations for 1998 includes pro forma information with respect to
income taxes, net income and net income per share assuming the Company had been
taxed as a C Corporation since January 1, 1998. The unaudited pro forma
information provided does not necessarily reflect the income taxes, net income
and net income per share that would have occurred had the Company been taxed as
a C corporation since January 1, 1998.

                                      F-10
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     PRO FORMA INCOME TAXES

     The Company's 1998 pro forma effective tax rate of 37% differed from the
federal statutory rate of 35% principally due to non-deductible permanent
differences.

     Based upon the cumulative temporary differences (primarily relating to the
difference between the book and tax carrying value of its Partner Companies),
the Company would have recognized a pro forma net deferred federal and state tax
asset of $8.2 million at December 31, 1998. In the opinion of management, it is
more likely than not that such asset would be realized and accordingly, a
valuation allowance was not considered necessary in calculating this pro forma
amount.

     PRO FORMA NET INCOME PER SHARE

     Pro forma net income per share was calculated as follows:

<TABLE>
<CAPTION>
                                                                      PRO FORMA YEAR
                                                                      ENDED DECEMBER
                                                                         31, 1998
                                                                    -----------------
Basic:
<S>                                                                   <C>
 Pro forma net income...............................................      $ 8,756,325
 Pro forma shares used in computing basic net income per share......       56,102,289
                                                                    -----------------
 Basic pro forma net income per share...............................      $      0.16
                                                                    =================
Diluted:
 Pro forma net income...............................................      $ 8,756,325
 Pro forma shares used in computing basic net income per share......       56,102,289
 Effect of dilutive options.........................................           47,000
                                                                    -----------------
 Pro forma shares used in computing diluted net income per share....       56,149,289
                                                                    -----------------
 Diluted pro forma net income per share.............................      $      0.16
                                                                    =================
</TABLE>

3.   OWNERSHIP INTERESTS IN AND ADVANCES TO PARTNER COMPANIES

     The following summarizes the Company's ownership interests in and advances
to Partner Companies accounted for under the equity method or cost method of
accounting. The ownership interests are classified according to applicable
accounting methods at December 31, 1997 and 1998. Cost basis represents the
Company's original acquisition cost less any impairment charges in such
companies.

<TABLE>
<CAPTION>
                                                          DECEMBER 31, 1997                       DECEMBER 31, 1998
                                               -------------------------------------   -------------------------------------
                                                 CARRYING VALUE        COST BASIS        CARRYING VALUE        COST BASIS
                                               -----------------   -----------------   -----------------   -----------------
<S>                                              <C>                 <C>                 <C>                 <C>
Equity Method..................................      $ 1,200,210         $ 1,608,452         $22,242,349         $30,588,452
Cost Method....................................       22,844,870          22,844,870          37,249,591          37,249,591
                                               -----------------                       -----------------
                                                     $24,045,080                             $59,491,940
                                               =================                       =================
</TABLE>

                                      F-11
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements



     The following summarized financial information for Partner Companies
accounted for under the equity method of accounting at December 31, 1997 and
1998 has been compiled from the financial statements of the respective Partner
Companies:

BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                             DECEMBER 31,
                                                                                -------------------------------------
                                                                                       1997                1998
                                                                                -----------------   -----------------
<S>                                                                               <C>                 <C>
Current assets..................................................................      $ 7,042,767         $34,239,732
Non-current assets..............................................................        3,876,167           8,003,286
                                                                                -----------------   -----------------
   Total assets.................................................................       10,918,934          42,243,018
                                                                                -----------------   -----------------
Current liabilities.............................................................        5,406,510          12,159,173
Non-current liabilities.........................................................        1,203,524             758,840
Shareholders' equity............................................................        4,308,900          29,325,005
                                                                                -----------------   -----------------
   Total liabilities and shareholders' equity...................................      $10,918,934         $42,243,018
                                                                                =================   =================
</TABLE>

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                
                                                                  MARCH 4, 1996 
                                                                  (INCEPTION) TO            YEAR ENDED DECEMBER 31,
                                                                   DECEMBER 31,     -------------------------------------
                                                                      1996                 1997                1998
                                                               -----------------    -----------------   -----------------
<S>                                                              <C>                  <C>                 <C> 
Revenue........................................................      $ 9,365,872          $18,911,691        $ 21,495,832
Net income (loss)..............................................      $(1,369,774)         $   255,280        $(17,038,167)
</TABLE>

4.   OTHER ACQUISITIONS

     In 1998, VerticalNet acquired all of  the outstanding capital stock of
Boulder Interactive Technology Services Company (BITC) for $1.9 million in cash
and all of the outstanding capital stock of Informatrix Worldwide, Inc.
(Informatrix) for 49,892 shares of VerticalNet's common stock valued at $.2
million. These acquisitions were accounted for using the purchase method of
accounting. The excess of the purchase price over the fair value of the net
assets acquired of approximately $2.8 million was recorded as goodwill and is
being amortized over three years. Accumulated amortization relating to this
goodwill totaled $.3 million at December 31, 1998.

     The following unaudited pro forma financial information presents the
combined results of operations as if VerticalNet had owned BITC and Informatrix
since January 1, 1997 and October 15, 1997 (inception), respectively, after
giving effect to certain adjustments including goodwill and income taxes. The
unaudited pro forma financial information does not necessarily reflect the
results of operations that would have occurred had the Company, VerticalNet,
BITC and Informatrix constituted a single entity during such periods.

<TABLE>
<CAPTION>
                                                                                              (UNAUDITED)
                                                                                        YEAR ENDED DECEMBER 31,
                                                                                --------------------------------------
                                                                                        1997                1998
                                                                                -----------------    -----------------
<S>                                                                               <C>                  <C>
Revenue.........................................................................      $ 1,118,030           $3,606,027
Pro forma net income (loss) (1).................................................      $(7,590,016)          $8,023,846
Pro forma net income per share (1)..............................................                            $     0.14
                                        
(1) Includes for 1998 the effect of the pro forma adjustments described in Note 2.
</TABLE> 

                                      F-12
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

5.  FIXED ASSETS

    Fixed assets consists of the following:

<TABLE>
<CAPTION>
                                                                                              DECEMBER 31,
                                                                                --------------------------------------
                                                                                        1997                 1998
                                                                                -----------------    -----------------
<S>                                                                               <C>                  <C>
Computer equipment and software.................................................        $ 681,656           $1,564,297
Office equipment and furniture..................................................          148,430              271,809
Trade show equipment............................................................           34,079               40,587
Leasehold improvements..........................................................           29,402               45,864
                                                                                -----------------    ----------------- 
                                                                                          893,567            1,922,557
Less: accumulated depreciation and amortization.................................         (349,124)            (771,289)
                                                                                -----------------    ----------------- 
                                                                                        $ 544,443           $1,151,268
                                                                                =================    =================
</TABLE>
6.   DEBT

     REVOLVING CREDIT FACILITIES

     In March 1998, the Company entered into an unsecured $3 million revolving
credit facility. Borrowings under this facility accrued interest at a premium to
prime ranging from .75% to 1.5%. The Company borrowed up to $2 million under
this facility during 1998. No amounts were outstanding at December 31, 1998 and
the facility expired in March 1999.

     In April 1999, the Company entered into a $50 million revolving bank credit
facility. In connection with the facility, the Company issued 200,000 warrants
exercisable for seven years at $10 per share. The facility matures in April
2000, is subject to a .25% unused commitment fee, bears interest, at the
Company's option, at prime and/or LIBOR plus 2.5%, and is secured by
substantially all of the Company's assets (including the Company's holdings in
VerticalNet). Borrowing availability under the facility is based on the fair
market value of the Company's holdings of publicly traded Partner Companies
(currently only VerticalNet) and the value, as defined in the facility, of the
Company's private Partner Companies. Based on the provisions of the borrowing
base, borrowing availability at April 30, 1999 was $32.6 million, of which none
was outstanding. As of May 7, 1999, the Company had borrowed $13 million under
the facility.

     VerticalNet had a line of credit with a bank in the amount of $2.5 million
at December 31, 1997. Borrowings under the facility were collateralized by a
security interest in all assets of VerticalNet and required VerticalNet to meet
specified financial ratios. As of December 31, 1997, VerticalNet was in
technical default, as it did not meet the specified financial ratios, but the
bank waived these violations. The facility accrued interest at prime plus 1.5%
(10% at December 31, 1997). The weighted average interest rate for borrowings
under this facility was 10% for the year ended December 31, 1997.

     As of June 1998, VerticalNet modified the agreement, reducing its line of
credit with the bank to $.5 million. On November 25, 1998, the agreement was
additionally amended allowing the Company to execute a $2.0 million note with
the bank. The note accrues interest at prime plus 1.5% and matures at the
earlier of March 31, 1999 or the completion of VerticalNet's next financing. In
connection with the loan, VerticalNet issued warrants to purchase 20,513 shares
of VerticalNet's common stock at an exercise price of $16 per share with an
estimated fair value of $.1 million. As of December 31, 1998, the outstanding
balance for borrowings under this facility was $2 million and the weighted
average interest rate for the year ended December 31, 1998 was 10%. Upon the
completion of VerticalNet's IPO in February 1999, VerticalNet repaid $2 million
and the line of credit with the bank was reduced to $.5 million.

                                      F-13
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     LONG-TERM DEBT

     All of the Company's long-term debt is attributable to VerticalNet and
consists of the following:

<TABLE>
<CAPTION>
                                                                                              DECEMBER 31,
                                                                                --------------------------------------
                                                                                        1997                 1998
                                                                                -----------------    -----------------
<S>                                                                               <C>                  <C>
Term notes with related parties.................................................        $ 100,000           $       --
Term bank notes.................................................................           32,852                   --
Capital leases..................................................................          417,952              639,940
                                                                                -----------------    ----------------- 
                                                                                          550,804              639,940
Less: current portion...........................................................         (150,856)            (288,016)
                                                                                -----------------    ----------------- 
Long-term debt..................................................................        $ 399,948            $ 351,924
                                                                                =================    =================
</TABLE>

     VerticalNet had three unsecured term notes due to shareholders with an
interest rate of 7%. The notes were to mature on February 2001. One of the
holders of these notes is a Board member of the Company. These notes were repaid
in May 1998.

     VerticalNet had a term loan with another bank with an interest rate at
prime plus 2.75% (11.25% at December 31, 1997) which was payable in 36 monthly
installments. This note was repaid in May 1998.

     VerticalNet has several capital leases on its equipment with lease terms
ranging from three to five years. The interest rates implicit in the leases are
8% to 20%. At December 31, 1997 and 1998, the book value of assets held under
capital leases was approximately $.3 million and $.5 million, respectively, and
the aggregate remaining minimum lease payments at December 31, 1998 were
approximately $.7 million including interest of approximately $.1 million.

     At December 31, 1998, long-term debt is scheduled to mature as follows:

<TABLE>
<S>                                                 <C>
1999..............................................         $288,016
2000..............................................          230,338
2001..............................................           95,718
2002..............................................           19,810
2003..............................................            6,058
                                                  -----------------
Total.............................................         $639,940
                                                  =================
</TABLE>

        Interest paid in the periods ended December 31, 1997 and 1998 was $.1
million and $.2 million, respectively.

7.    ACCRUED EXPENSES

      Accrued expenses consists of the following:

<TABLE> 
<CAPTION> 
                                                                                             DECEMBER 31,
                                                                                -------------------------------------
                                                                                       1997                1998
                                                                                -----------------   -----------------
<S>                                                                               <C>                 <C>
Accrued compensation and benefits...............................................         $ 90,833          $  454,230
Accrued marketing costs.........................................................               --             446,334
Other...........................................................................          297,692             922,843
                                                                                -----------------   -----------------
                                                                                         $388,525          $1,823,407
                                                                                =================   =================
</TABLE>

8.   SHAREHOLDERS' EQUITY

     The Company's authorized capital stock consists of 130,000,000 shares of
common stock, par value $.001 per share. The holders of common stock are
entitled to one vote per share and are entitled to dividends as declared.

                                      F-14
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

Dividends may be restricted by the inability to liquidate ownership interests in
Partner Companies to fund cash dividends and may be subject to the preferential
rights of the holders of the Company's preferred stock, if any.

     The Company may establish one or more classes or series of preferred stock.
The holders of the preferred stock may be entitled to preferences over common
stock or shareholders with respect to dividends, liquidation, dissolution, or
winding up of the Company, as established by the Company's Board of Directors.
No preferred stock is authorized at December 31, 1998.

     Certain shareholders were granted registration rights which become
effective after completion of a public offering.

     Shareholders' equity contributions are recorded when received. The Company
issued 15,990,000 shares of common stock for net proceeds of $32 million in 
1999. These shares had been subscribed for at December 31, 1998.

     RESTRICTED STOCK

     During 1996 and 1997, 6,027,017 and 756,608 shares of restricted common
stock ("restricted stock") were granted, net of forfeitures, to employees,
consultants and advisors at no cost as performance incentives. The restricted
stock vests in equal annual installments over a five year period.

     At December 31, 1997 and 1998, the 6,783,625 shares of restricted stock had
been granted at a weighted average fair value of $0.19 per share or an aggregate
of $1.3 million based on independent valuations of the shares. These independent
valuations took into account certain factors, primarily the restrictions on the
ability of restricted shareholders to receive distributions of dividends or
profits and the uncertainty of realization of any return from these shares. The
$1.3 million of deferred compensation is classified as a reduction of
shareholders' equity and is being amortized over the five-year vesting period.
Compensation expense related to the restricted stock totaling $.1 million, $.2
million and $.3 million was recorded in 1996, 1997 and 1998, respectively.

     STOCK OPTION PLANS

     Incentive or non-qualified stock options may be granted to Company
employees, directors and consultants under several stock option plans ("Plans").
Generally, the options vest over a four to five year period and expire eight to
ten years after the date of grant. At December 31, 1998, the Company reserved
10,470,000 shares of common stock for possible future issuance under the Plans.
VerticalNet and most Partner Companies also maintain their own stock option
plans.

     The following table summarizes the activity of the Company's stock option
plans:

<TABLE>
<CAPTION>
                                                                                                           WEIGHTED
                                                                                                           AVERAGE
                                                                                       SHARES           EXERCISE PRICE
                                                                                -----------------    -----------------
<S>                                                                               <C>                  <C> 
Outstanding at January 1, 1997                                                                 --                $  --
Options granted.................................................................           94,000                 1.00
Options canceled/forfeited......................................................               --                   --
                                                                                -----------------
Outstanding at December 31, 1997................................................           94,000                 1.00
Options granted.................................................................        6,650,000                 2.00
Options canceled/forfeited......................................................          (47,000)               (1.00)
                                                                                -----------------
Outstanding at December 31, 1998................................................        6,697,000               $ 1.99
                                                                                =================    
</TABLE>

     No options were issued by the Company in 1996. At December 31, 1997 there
were no options exercisable under the Plans. At December 31, 1998 there were
11,750 options exercisable at $1.00 per share under the Plans.

                                   F-15
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     The following table summarizes information about stock options outstanding:

<TABLE>
<CAPTION>                                                       WEIGHTED AVERAGE  
                                NUMBER OUTSTANDING AT         REMAINING CONTRACTUAL
     EXERCISE PRICE               DECEMBER 31, 1998              LIFE (IN YEARS)   
-------------------------   ---------------------------   ---------------------------
<S>                          <C>                           <C>
         $1.00                          47,000                          7
         $2.00                       6,650,000                         10
</TABLE>

     Included in the 1998 option grants are 450,000 stock options to non-
employees. The fair value of these options of $.6 million was recorded as
deferred compensation in 1998 and is being amortized over the five year vesting
period. The fair value of these options was determined using the Black-Scholes
method assuming a volatility of 80%, a dividend yield of 0%, an average expected
option life of 5 years, and a risk-free interest rate of 5.2%.

     The Company applies APB 25 and related interpretations in accounting for
its stock option plans. Had compensation cost been recognized pursuant to SFAS
123, the Company's net income (loss) would have been as follows:

<TABLE>
<CAPTION>
                                                                                        YEAR ENDED DECEMBER 31,
                                                                                --------------------------------------
                                                                                        1997                1998
                                                                                -----------------    -----------------
<S>                                                                               <C>                  <C>  
Net income (loss)
   As reported (pro forma in 1998)..............................................      $(6,579,628)          $8,756,325
   SFAS 123 pro forma...........................................................      $(6,648,952)          $8,293,979
 
Net income per share:
   Pro forma as reported........................................................                            $     0.16
   SFAS 123 pro forma...........................................................                            $     0.15
</TABLE>

     The per share weighted-average fair value of options issued to employees 
by the Company during 1997 and 1998 was approximately $0.22 and $0.45,
respectively.

     The following assumptions were used to determine the fair value of stock
options granted to employees by the Company, its subsidiaries, and Partner
Companies accounted for under the equity method using the minimum value option-
price model:

<TABLE>
<S>                                                 <C>
Dividend yield....................................               0%
Average expected option life......................            5 years
Risk-free interest rate...........................              5.2%
</TABLE>

     In 1999, the Company granted 2,934,500 options to employees and non-
employees at exercise prices ranging from $2.00 to $4.88.

9.  RELATED PARTIES

     A principal shareholder satisfied a portion of its initial 1996 funding
commitment by contributing its interests valued at $6.1 million in the
securities of a Partner Company. As this shareholder controlled the Company at
the time of the transfer, the shareholder's cost basis in the shares of the
Partner Company ($1.1 million), together with a $.5 million equity contribution
made by the Company, comprise the Company's cost basis in the Partner Company.

     The Company entered into various cost sharing arrangements with the same
principal shareholder during 1996, 1997, and 1998, whereby the Company
reimbursed, under fair market terms, this shareholder for certain operational
expenses. The amounts incurred for such items were $.1 million, $.1 million and
$.2 million in 1996, 1997, and 1998, respectively.

     The Company loaned an officer $.1 million during 1998, evidenced by a term
note with an interest rate of prime plus 1% (8.75% at December 31, 1998) to
purchase a portion of the Company's interest in a Partner Company at the 

                                      F-16
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

Company's cost. This note was repaid in January 1999 and is included in other 
current assets in the December 31, 1998 Consolidated Balance Sheets.

     In September 1998 the Company entered into a $.2 million one-year
consulting contract with a Partner Company.

     The Company shares certain acquisition rights with certain of its principal
shareholders whereby these shareholders have the ability to purchase a portion
of the Company's interest in certain Partner Companies. During 1998 and 1999,
one shareholder exercised this right and acquired a portion of the Company's
interest in three Partner Companies at the Company's cost basis of approximately
$3.4 million. The agreement under which these rights were granted will terminate
automatically upon an initial public offering.

     Certain executives of the Company and its Partner Companies have the option
to purchase a portion of the Company's ownership interest in various Partner
Companies at the Company's cost.

10.  OPERATING SEGMENTS

     In 1998, the Company adopted SFAS 131, which requires the reporting of
operating segments using the "management approach" versus the "industry
approach" previously required. The Company's reportable segments consist of
Partner Company Operations and General ICG Operations. Partner Company
Operations includes the effect of consolidating VerticalNet and recording the
Company's share of earnings and losses of Partner Companies accounted for under
the equity method. VerticalNet operations include creating and operating
industry-specific trade communities on the Internet. Partner Companies accounted
for under the equity method of accounting operate in various Internet-related
businesses. General ICG Operations represents the expenses of providing
strategic and operational support to the Internet related Partner Companies, as
well as the related administrative costs related to such expenses. General ICG
Operations also includes the effect of transactions and other events incidental
to the Company's general operations and the Company's ownership interests in
Partner Companies. The Company's and Partner Companies' operations were
principally in the United States of America during 1996, 1997 and 1998.

                                      F-17
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     The following summarizes information related to the Company's segments. All
significant intersegment activity has been eliminated. Assets are owned or
allocated assets used by each operating segment.

<TABLE>
<CAPTION>
                                                              MARCH 4, 1996
                                                               (INCEPTION)
                                                                 THROUGH
                                                               DECEMBER 31,              YEAR ENDED DECEMBER 31,
                                                           -----------------    --------------------------------------
                                                                   1996                 1997                 1998
                                                           -----------------    -----------------    -----------------
PARTNER COMPANY OPERATIONS
<S>                                                          <C>                  <C>                  <C>
 Revenue...................................................      $   285,140          $   791,822         $  3,134,769
                                                           -----------------    -----------------    ----------------- 
 Operating expenses
   Cost of revenue.........................................          427,470            1,767,017            4,642,528
   Sales and marketing.....................................          268,417            2,300,365            7,894,662
   General and administrative..............................          291,660            1,388,123            4,106,583
                                                           -----------------    -----------------    ----------------- 
 Operating loss -- Partner Company Operations before
   minority interest and equity income (loss)..............         (702,407)          (4,663,683)         (13,509,004)
 Minority interest.........................................          427,185             (106,411)           5,381,640
 Equity income (loss)......................................         (514,540)             106,298           (7,937,861)
                                                           -----------------    -----------------    -----------------
 Operating loss -- Partner Company Operations..............         (789,762)          (4,663,796)         (16,065,225)
 Other income, net.........................................               --                   --                   --
 Interest expense, net.....................................           (6,440)            (115,106)             (85,271)
                                                           -----------------    -----------------    ----------------- 
 Net loss -- Partner Company Operations....................      $  (796,202)         $(4,778,902)        $(16,150,496)
                                                           =================    =================    ================= 
 
GENERAL ICG OPERATIONS
 General and administrative................................      $ 1,360,821          $ 2,054,118         $  3,512,586
                                                           -----------------    -----------------    -----------------
 Operating loss -- General ICG Operations..................       (1,360,821)          (2,054,118)          (3,512,586)
 Other income, net.........................................               --                   --           32,552,151
 Interest income, net......................................           94,538              253,392            1,009,859
                                                           -----------------    -----------------    ----------------- 
 Net income (loss) -- General ICG Operations...............      $(1,266,283)         $(1,800,726)        $ 30,049,424
                                                           =================    =================    =================
 
 
                                                                                              December 31,
                                                                                --------------------------------------
                                                                                       1997                 1998
                                                                                -----------------    -----------------
Total Assets
   Partner Company Operations..............................                           $ 2,104,087         $ 12,342,975
   General ICG Operations..................................                            29,376,929           84,443,000
                                                                                -----------------    -----------------
                                                                                      $31,481,016         $ 96,785,975
                                                                                =================    =================
</TABLE>

11.  PARENT COMPANY FINANCIAL INFORMATION

     Parent Company financial information is provided to present the results of
operations and financial position of the Company assuming VerticalNet was
accounted for under the equity method of accounting instead of consolidation.

                                      F-18
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     The following summarizes the Company's Parent Company Balance Sheets which
differ from the Consolidated Balance Sheets due to not consolidating VerticalNet
with the Company but instead including the losses recorded in excess of the
Company's carrying value in VerticalNet in the caption "Non-current
liabilities".

BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                             DECEMBER 31,
                                                                                -------------------------------------
                                                                                       1997                1998
                                                                                -----------------   -----------------
Assets
<S>                                                                               <C>                 <C>
   Current assets...............................................................      $ 5,245,064         $21,596,575
   Ownership interests in and advances to Partner Companies.....................       24,045,080          59,491,940
   Other........................................................................           86,785           3,354,485
                                                                                -----------------   ----------------- 
Total assets....................................................................       29,376,929          84,443,000
Liabilities and shareholders' equity
   Current liabilities..........................................................          318,729           2,082,463
   Non-current liabilities......................................................        2,423,525           1,636,159
   Shareholders' equity.........................................................       26,634,675          80,724,378
                                                                                -----------------   ----------------- 
Total liabilities and shareholders' equity......................................      $29,376,929         $84,443,000
                                                                                =================   =================
</TABLE>

     The following summarizes the Company's Parent Company Statements of
Operations which differ from the Consolidated Statements of Operations due to
not consolidating VerticalNet with the Company but instead including the
Company's share of VerticalNet's losses in the caption "Equity (income) loss".

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                  MARCH 4, 1996
                                                                  (INCEPTION) TO
                                                                   DECEMBER 31,              YEAR ENDED DECEMBER 31,
                                                                                    --------------------------------------
                                                                       1996                 1997                 1998
                                                               -----------------    -----------------    -----------------
 
Revenue                                                               $  --                $  --                $  --
                                                               -----------------    -----------------    -----------------
<S>                                                              <C>                  <C>                  <C>
Operating expenses                                                              
 General and administrative....................................        1,360,821            2,054,118            3,512,586
 Equity (income) loss..........................................          796,202            4,778,902           16,150,496
                                                               -----------------    -----------------    ----------------- 
 Total operating expenses......................................        2,157,023            6,833,020           19,663,082
                                                               -----------------    -----------------    ----------------- 
Operating loss.................................................       (2,157,023)          (6,833,020)         (19,663,082)
Other income, net..............................................               --                   --           32,552,151
Interest income, net...........................................           94,538              253,392            1,009,859
                                                               -----------------    -----------------    ----------------- 
Net income (loss)..............................................      $(2,062,485)         $(6,579,628)        $ 13,898,928
                                                               =================    =================    =================
</TABLE>

12.  DEFINED CONTRIBUTION PLAN

     In 1997, the Company established a defined contribution plan that covers
all of its employees. Participants may contribute 1% to 15% of pre-tax
compensation, as defined. The Company may make discretionary contributions to
the plan but has never done so.

                                      F-19
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

13.  OTHER INCOME

     Other income consists of the following for the year ended December 31,
1998:

<TABLE>
<CAPTION>
 
<S>                                                             <C>
Sale of Matchlogic to Excite..................................      $12,822,162
Sale of Excite holdings.......................................       16,813,844
Sale of WiseWire to Lycos.....................................        3,324,238
Sale of Lycos holdings........................................        1,471,907
Partner Company impairment charge.............................       (1,880,000)
                                                              -----------------
                                                                    $32,552,151
                                                              =================
</TABLE>

     Gains on sales of Partner Companies and available-for-sale securities are
determined using average cost.

     In February 1998, the Company exchanged all of its holdings in Matchlogic
for 763,820 shares of Excite resulting in a gain at the date of exchange of
$12.8 million. Throughout the remainder of 1998, the Company sold 716,082 shares
of Excite which resulted in $30.2 million of proceeds and a gain of $16.8
million.

     In April 1998, the Company exchanged all of its holdings in WiseWire
for 196,130 shares of Lycos, Inc. resulting in a gain at the date of exchange of
$3.3 million. Throughout the remainder of 1998, the Company sold 173,756 shares
of Lycos which resulted in $6.2 million of proceeds and a gain of $1.5 million.

     In December 1998, the Company recorded an impairment charge of $1.9 million
for the decrease in value of a Partner Company.

14.  COMMITMENTS AND CONTINGENCIES

     The Company and its subsidiaries are involved in various claims and legal
actions arising in the ordinary course of business. In the opinion of
management, the amount of the ultimate liability with respect to these actions
will not materially affect the financial position, results of operations or cash
flows of the Company and its subsidiaries.

     In connection with its ownership interests in certain Partner Companies,
the Company guaranteed $3.2 million of bank loan and other commitments and has
committed capital of $2 million to an existing Partner Company to be funded in
1999.

     The Company and VerticalNet lease their facilities under operating lease
agreements expiring through 2004. Future minimum lease payments as of December
31, 1998 under the leases are as follows:

<TABLE>
<S>                                                 <C>
1999..............................................         $385,316
2000..............................................          402,565
2001..............................................          266,970
2002..............................................          239,984
2003..............................................          246,274
Thereafter........................................          103,385
</TABLE>

     Rent expense under the noncancelable operating leases was approximately $.1
million and $.3 million for the years ended December 31, 1997 and 1998,
respectively.

     On June 30, 1998, VerticalNet entered into a three year Sponsorship
Agreement with Excite, Inc. (Excite). The Sponsorship Agreement provides for
VerticalNet and Excite to sponsor and promote thirty co-branded Web pages and
for each company to sell advertising on the Web pages. Excite has guaranteed a
minimum number of advertising impressions for each of the three years. The
agreement is cancelable by either party, as 

                                      F-20
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

defined, and requires VerticalNet to pay Excite $0.9 million, $2.0 million and
$3.0 million, respectively, in year one, two and three under the agreement. Such
payments will be charged to expense as the advertising impressions are provided
by Excite. In addition, each company will provide the other with $.2 million in
barter advertising during the term of the Sponsorship Agreement. As of December
31, 1998, each company has satisfied the barter provisions under the Sponsorship
Agreement.

     On January 19, 1999, VerticalNet entered into a one-year agreement with
Compaq Computer Corporation (Compaq) and its Internet Web site known as
AltaVista. The agreement provides for VerticalNet and AltaVista to sponsor and
promote thirty-one co-branded Web pages. The agreement requires VerticalNet to
pay Compaq $1.0 million over the term of the agreement based on the number of
advertising impressions delivered. Such amount will be charged to expense as the
advertising impressions are provided by AltaVista. In addition, each company
will provide the other with $.3 million in barter advertising during the term of
the agreement.

     VerticalNet has entered into non-cancelable obligations with several
content service providers and Internet search engines. Under these agreements,
exclusive of the Excite and AltaVista agreements discussed above, VerticalNet's
obligations are as follows:

<TABLE>
<S>                                                 <C>
1999..............................................       $1,488,734
2000..............................................           65,500
</TABLE>

     VerticalNet has entered into employment agreements with several employees.
The agreements are cancelable, but require severance upon termination. As of
December 31, 1998, VerticalNet would be required to pay approximately $1 million
in severance in the event that these employment agreements are canceled.

15.  SUBSEQUENT EVENTS

     ISSUANCE OF COMMON STOCK

     The Company issued 15,990,000 shares of common stock for net proceeds of
$32 million from January through March, 1999 (Note 8).

     In April, 1999 the Company's Board of Directors authorized the acceptance
of full recourse promissory notes from its employees and a director as
consideration for exercising all or a portion of their vested and unvested stock
options. The Company has the right, but not the obligation, to repurchase
unvested shares under certain circumstances. The exercise of unvested options by
the employees and director and the acceptance of promissory notes by the Company
are in accordance with the terms of the Company's equity compensation plans and
related option agreements. The Company's Board of Directors also approved
loaning employees the funds, under the terms of full recourse promissory notes,
to pay the income taxes that become due in connection with the option exercises.

     VERTICALNET INITIAL PUBLIC OFFERING

     In February 1999, VerticalNet completed its initial public offering (IPO)
of 4,025,000 shares of its common stock at $16.00 per share. Net proceeds to 
VerticalNet were approximately $58.3 million. As a result of the VerticalNet
IPO, the Company expects to record a gain in 1999 of approximately $28 million
relating to the increase in the Company's share of VerticalNet's net equity.

     TAX DISTRIBUTION

     In March 1999 the Company made a distribution of $10.7 million to
former LLC members in accordance with the LLC agreements to satisfy the members'
tax liabilities.

     OWNERSHIP INTERESTS IN AND ADVANCES TO PARTNER COMPANIES

     Through May 7, 1999, the Company expended approximately $60 million to
acquire interests in or make advances to new and existing Partner Companies.

     REVOLVING BANK CREDIT FACILITY

     In April 1999, the Company entered into a $50 million revolving bank credit
facility (Note 6).

     CONVERTIBLE SUBORDINATED NOTES

     On May 5, 1999, the Company's Board of Directors authorized the issuance of
up to $90 million of convertible subordinated notes. The notes bear interest at
an annual rate of 4.99% during the first year and at the prime rate for the
remaining two years. Prior to May 2000, the notes will automatically convert
into shares of the 

                                      F-21
<PAGE>
 
                          INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

Company's common stock at the initial public offering price upon consummation of
an initial public offering or at the per share value of a private round of
equity financing of at least $50 million. If the notes are converted, all
accrued interest is waived. The Company's Board of Directors also approved the
issuance of warrants to the holders of these convertible notes to purchase
shares of the Company's common stock. The warrant holders will be entitled to
purchase the number of shares of the Company's common stock determined by
dividing 20% of the principal amount of the notes converted by the price per
share at which the notes are converted. The warrants expire in May 2002.

     INITIAL PUBLIC OFFERING

     On May 7, 1999 the Company's Board of Directors authorized the filing of a
registration statement on Form S-1 in connection with the Company's initial
public offering.

                                      F-22
<PAGE>
 
                         Report of Independent Auditors

Board of Directors and Stockholders of
ComputerJobs.com, Inc.

     We have audited the accompanying balance sheets of ComputerJobs.com, Inc.
(formerly ComputerJobs Store, Inc.) as of December 31, 1997 and 1998, and the
related statements of income, changes in stockholders' equity (deficit), and
cash flows for the period from January 16, 1996 (inception) through December 31,
1996 and for the years ended December 31, 1997 and 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ComputerJobs.com, Inc. at
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from January 16, 1996 (inception) through December 31, 1996 and
for the years ended December 31, 1997 and 1998 in conformity with generally
accepted accounting principles.



                                         ERNST & YOUNG LLP


Atlanta, Georgia
March 11, 1999, except Note 1 as to which the date 
  is April 1, 1999

                                      F-23
<PAGE>
 
                            COMPUTERJOBS.COM, INC.

                                Balance Sheets


<TABLE>
<CAPTION>
                                                                          December 31,
                                                            --------------------------------------
                                                                    1997                 1998
                                                            -----------------    -----------------
<S>                                                           <C>                  <C>
Assets
Current assets:
 Cash and cash equivalents..................................         $315,213          $ 9,385,180
 Trade accounts receivable, net of allowance for doubtful
  accounts of $4,000 and $20,000 at December 31, 1997 and
  1998, respectively........................................          136,528              315,081
 Unbilled trade accounts receivable.........................           17,000               62,990
 Prepaid expenses...........................................               --                1,197
 Loan receivable from stockholder...........................            1,086                   --
                                                            -----------------    -----------------
Total current assets........................................          469,827            9,764,448
 
Property and equipment:
 Furniture and fixtures.....................................           15,291               35,728
 Computer and office equipment..............................           73,721              189,288
 Accumulated depreciation...................................          (21,159)             (64,249)
                                                            -----------------    -----------------
Net property and equipment..................................           67,853              160,767
 
Other assets................................................            2,000               99,721
                                                            -----------------    -----------------
Total assets................................................         $539,680          $10,024,936
                                                            =================    =================
 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
 Accounts payable and accrued expenses......................         $ 47,323          $   136,209
 Deferred income taxes payable..............................               --               89,261
 Note payable to stockholders...............................               --            1,000,000
 Distribution payable to stockholders.......................               --              346,817
 Current portion of notes payable...........................            6,279                   --
 Deferred revenue...........................................           16,271               27,996
                                                            -----------------    -----------------
Total current liabilities...................................           69,873            1,600,283
 
Notes payable, less current portion.........................            6,354                   --
 
Series A Preferred Stock, no par value -- ($2 per share
 redemption value; minimum liquidation value of $10,000,000
 plus accrued and unpaid dividends plus a portion of
 remaining assets, as defined), convertible to Class 2
 common stock, 5,000,000 shares authorized, issued and
 outstanding................................................               --            9,986,126
Stockholders' equity:
 Class 1 common stock, no par value-- 5,500,000 shares
  authorized, 5,500,000 shares issued and outstanding.......           10,510               10,510
 Class 2 common stock, no par value-- 14,000,000 shares
  authorized, no shares issued or outstanding...............               --                   --
 Retained earnings (deficit)................................          452,943           (1,571,983)
                                                            -----------------    ----------------- 
Total stockholders' equity (deficit)........................          463,453           (1,561,473)
                                                            -----------------    -----------------
Total liabilities and stockholders' equity (deficit)........         $539,680          $10,024,936
                                                            =================    =================
</TABLE>


                            See accompanying notes.

                                      F-24
<PAGE>
 
                            COMPUTERJOBS.COM, INC.

                             Statements of Income

<TABLE>
<CAPTION>
                                                                   
                                                       Period from 
                                                       January 16, 
                                                       1996 through              YEAR ENDED DECEMBER 31,
                                                       December 31,     --------------------------------------
                                                           1996                 1997                 1998
                                                   -----------------    -----------------    -----------------
<S>                                                  <C>                  <C>                  <C>
Revenue............................................       $  377,163           $1,504,742           $4,431,060
 
Expenses:
 Operations........................................           38,477               65,178              469,519
 Sales and marketing...............................           38,509              198,586            1,893,589
 General and administrative........................          189,126              776,572            1,121,918
 Depreciation......................................            3,617               17,542               45,383
                                                   -----------------    -----------------    ----------------- 
                                                             269,729            1,057,878            3,530,409
 
Operating income...................................          107,434              446,864              900,651
 
Other income (deductions):
 Interest expense..................................             (982)              (1,646)             (12,537)
 Interest income...................................              401                8,258               53,610
                                                   -----------------    -----------------    ----------------- 
                                                                (581)               6,612               41,073
                                                   -----------------    -----------------    ----------------- 
Income before income taxes.........................          106,853              453,476              941,724
Income tax expense.................................               --                   --               89,261
                                                   -----------------    -----------------    ----------------- 
Net income.........................................       $  106,853           $  453,476           $  852,463
                                                   =================    =================    =================
 
Supplemental unaudited pro forma information:
 Income before taxes, as above.....................       $  106,853           $  453,476           $  941,724
 Pro forma provision for income taxes..............          (40,604)            (172,320)            (357,853)
                                                   -----------------    -----------------    ----------------- 
 Pro forma net income..............................       $   66,249           $  281,156           $  583,871
                                                   =================    =================    =================
 
 Basic pro forma earnings per common share.........            $0.01                $0.05                $0.09
 
 Average outstanding common shares.................        5,500,000            5,500,000            5,500,000
</TABLE>


                            See accompanying notes.

                                      F-25
<PAGE>
 
                            COMPUTERJOBS.COM, INC.

            Statements of Changes in Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
                                                                                      RETAINED              TOTAL
                                          CLASS 1 COMMON      CLASS 2 COMMON          EARNINGS          SHAREHOLDERS'
                                               STOCK               STOCK             (DEFICIT)         EQUITY (DEFICIT)
                                        -----------------   -----------------   -----------------    ----------------- 
<S>                                       <C>                 <C>                 <C>                  <C>
BALANCE AT JANUARY 16, 1996 (INCEPTION).
                                                  $10,510                  --          $  --               $    10,510
  Net income............................               --                  --             106,853              106,853
  Distribution to stockholders..........               --                  --             (33,879)             (33,879)
                                        -----------------   -----------------   -----------------    ----------------- 
BALANCE AT DECEMBER 31, 1996............           10,510                  --              72,974               83,484
 Net income.............................               --                  --             453,476              453,476
 Distribution to stockholders...........               --                  --             (73,507)             (73,507)
                                        -----------------   -----------------   -----------------    ----------------- 
BALANCE AT DECEMBER 31, 1997............           10,510                  --             452,943              463,453
 Net income.............................               --                  --             852,463              852,463
 Distribution to stockholders...........               --                  --          (2,796,817)          (2,796,817)
 Accretion and dividends on Series A
  Preferred Stock.......................               --                  --             (80,572)             (80,572)
                                        -----------------   -----------------   -----------------    ----------------- 
BALANCE AT DECEMBER, 31 1998............          $10,510                  --         $(1,571,983)         $(1,561,473)
                                        =================   =================   =================    =================
</TABLE>


                            See accompanying notes.

                                      F-26
<PAGE>
 
                            COMPUTERJOBS.COM, INC.

                           Statements of Cash Flows
                                        
<TABLE>
<CAPTION>
                                                                           
                                                               Period from 
                                                               January 16, 
                                                               1996 through              YEAR ENDED DECEMBER 31,
                                                               December 31,     --------------------------------------
                                                                   1996                 1997                 1998
                                                           -----------------    -----------------    ----------------- 
<S>                                                          <C>                  <C>                  <C>
Operating activities
Net income.................................................         $106,853            $ 453,476          $   852,463
Adjustments to reconcile net income to net cash provided
 by operating activities:
  Depreciation.............................................            3,617               17,542               45,383
  Provision for deferred taxes.............................               --                   --               89,261
  Changes in operating assets and liabilities:
   Trade accounts receivable...............................          (30,880)            (105,648)            (178,553)
   Unbilled trade accounts receivable......................               --              (17,000)             (45,990)
   Loan receivable from stockholder........................               --               (1,086)               1,086
   Prepaid expenses and other assets.......................               --               (2,000)             (98,918)
   Accounts payable and accrued expenses...................           12,394               34,930               88,886
   Deferred revenue........................................           21,903               (5,632)              11,725
                                                           -----------------    -----------------    -----------------
 
Net cash provided by operating activities..................          113,887              374,582              765,343
 
INVESTING ACTIVITIES
Purchase of property and equipment.........................          (23,980)             (65,033)            (138,297)
                                                           -----------------    -----------------    -----------------
Net cash used in investing activities......................          (23,980)             (65,033)            (138,297)
 
FINANCING ACTIVITIES
Sale of Series A Preferred Stock, less expenses............               --                   --            9,905,554
Distributions to stockholders..............................          (33,879)             (73,507)          (1,450,000)
Proceeds from notes payable................................           21,100                   --                   --
Repayment of notes payable.................................           (2,817)              (5,650)             (12,633)
Sales of common stock......................................           10,510                   --                   --
                                                           -----------------    -----------------    ----------------- 
Net cash provided (used) by financing activities...........           (5,086)             (79,157)           8,442,921
                                                           -----------------    -----------------    -----------------
 
Net increase in cash and cash equivalents..................           84,821              230,392            9,069,967
 
Cash and cash equivalents, beginning of period.............               --               84,821              315,213
                                                           -----------------    -----------------    ----------------- 
Cash and cash equivalents, end of year.....................         $ 84,821            $ 315,213          $ 9,385,180
                                                           =================    =================    =================
</TABLE>


                            See accompanying notes.

                                      F-27
<PAGE>
 
                            COMPUTERJOBS.COM, INC.

                         Notes to Financial Statements
                               December 31, 1998

1.  DESCRIPTION OF THE BUSINESS

     The Company is an Internet-based interactive technology company that
provides an employment Web site for information technology (IT) professionals.
The Company's web site enables recruiters and employers to post job
opportunities and search for employment opportunities based on an array of
search criteria. The Company also offers banner advertising and job reposting
services for companies wanting access to IT professionals. The Company operates
primarily on a regional basis and at December 31, 1998, served five regions in
the United States: Atlanta, the Carolinas, Chicago, Florida, and Texas.

     On April 1, 1999 the Company changed its name from ComputerJobs Store, Inc.
to ComputerJobs.com, Inc.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     CASH AND CASH EQUIVALENTS

     The Company considers short-term investments with original maturity dates
of 90 days or less at the date of purchase to be cash equivalents.

     CONCENTRATION OF CREDIT RISK

     Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash equivalents and accounts receivable.
Cash equivalents are held primarily with one financial institution. The Company
performs periodic evaluations of the relative credit standing of this financial
institution. Accounts receivable are unsecured and the Company is at risk to the
extent such amounts become uncollectible.

     ACCOUNTS RECEIVABLE

     The Company performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral. Receivables are
generally due within 30 days. Credit losses have been within management's
expectations.

     PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost. The Company provides for
depreciation computed on a straight-line basis over the estimated useful lives
of the related assets which range from 3 to 5 years.

     If facts and circumstances indicate that the property and equipment or
other assets may be impaired, an evaluation of continuing value would be
performed. If an evaluation is required, the estimated future undiscounted cash
flows associated with these assets would be compared to their carrying amount to
determine if a write down to fair market value or discounted cash flow value is
required.

     REVENUE RECOGNITION

     The Company recognizes advertising and service revenue as earned over the
service period. Advance payments received by the Company are deferred and
credited to operations on the straight-line basis over the life of the
agreement.

     ADVERTISING COSTS

     Advertising costs are expensed in the period in which they are incurred.
The Company incurred $11,583, $178,870 and $1,528,590 in advertising costs for
the period from January 16, 1996 (inception) through December 31, 1996 and for
the years ended December 31, 1997 and 1998, respectively.

                                      F-28
<PAGE>
 
                            COMPUTERJOBS.COM, INC.

                         Notes to Financial Statements
                               December 31, 1998

     INCOME TAXES

     The Company elected to be taxed under the provision of Subchapter S of the
Internal Revenue Code for the period from January 16, 1996 (inception) through
November 25, 1998. Under these provisions, the income of the Company was
reported by the stock or shareholders on their individual income tax returns. As
such, the accompanying financial statements do not include a provision for
income taxes for the period from January 16, 1996 (inception) to November 25,
1998.

     In connection with the Company's amended and restated articles of
incorporation, the Company terminated its tax status as a Subchapter S
corporation. Effective November 25, 1998, the Company is taxed as a subchapter C
corporation. The deferred tax effects of the change in tax status of
approximately $54,000 are included in income at the date the change in tax
status occurred. Supplemental unaudited pro forma information related to net
income and earnings per share is presented as if the Company had been taxed as a
subchapter C corporation for all periods presented.

     Income taxes for the period November 25, 1998 through December 31, 1998
have been provided using the liability method in accordance with FASB Statement
109, Accounting for Income Taxes. Under the liability method, the Company
recognizes deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Using the enacted tax rates in effect for the year in which the
differences are expected to reverse, deferred tax liabilities and assets are
determined based on the differences between the book basis for financial
reporting and the tax basis of an asset or liability.

     USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

     CASH FLOW INFORMATION

     During 1998, the Company recorded a distribution payable to the
stockholders of $346,817, a note payable to stockholders for $1,000,000 and
accrued dividends of $79,000 on the Series A Preferred Stock which are non-cash
financing activities.

     RECLASSIFICATIONS

     Certain prior year balances have been reclassified to conform with the
current presentation.

3.   NOTES PAYABLE

     Notes payable consist of the following:


<TABLE>
<CAPTION>
                                                                                  December 31,
                                                                    --------------------------------------
                                                                           1997                 1998
                                                                    -----------------   ------------------
<S>                                                                   <C>                 <C>
Note payable; interest at prime rate plus 2.0% (10.5% at
December 31, 1997)..................................................          $ 5,052          $  --
 
Note payable; interest at prime rate plus 2.0% (10.25% at
December 31, 1997)..................................................            7,581                   --
                                                                    -----------------   ------------------
                                                                               12,633                   --
 
Less amounts due within one year....................................            6,279                   --
                                                                    -----------------   ------------------
                                                                              $ 6,354          $  --
                                                                    =================   ==================
</TABLE>

                                      F-29
<PAGE>
 
                            COMPUTERJOBS.COM, INC.

                         Notes to Financial Statements
                               December 31, 1998
                                        
     The notes payables were secured by the property and equipment of the
Company and guaranteed by stockholders of the Company.

     Interest paid for the period from January 16, 1996 (inception) through
December 31, 1996 and during the years ended December 31, 1997 and 1998 totaled
$982, $1,646 and $1,030, respectively.

     At December 31, 1996 and 1997, the Company had an unused line of credit of
$50,000, for general working capital purposes. The line of credit expired on
April 5, 1998 and was not renewed.

4.  INCOME TAXES

     Income tax expense (benefit) consists of the following for the period from
November 25, 1998 through December 31, 1998:

<TABLE>
<CAPTION>
                                                         CURRENT             DEFERRED              TOTAL
                                                   -----------------    -----------------   -----------------
<S>                                                  <C>                  <C>                 <C>
Federal............................................          $(7,267)             $86,665             $79,398
State..............................................             (481)              10,344               9,863
                                                   -----------------    -----------------   -----------------
                                                             $(7,748)             $97,009             $89,261
                                                   =================    =================   =================
</TABLE>

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company's deferred
tax assets and liabilities as of December 31, 1998 are as follows:


<TABLE>
<CAPTION>
Deferred income tax assets (liabilities):
<S>                                                    <C>
 Property and equipment..............................        $  17,420
 Net operating loss carryforwards....................            7,748
 Accrual to cash adjustment..........................         (114,429)
                                                     -----------------
Net deferred income taxes............................        $ (89,261)
                                                     =================
</TABLE>

     The Company uses the cash basis for its calculation of income tax expense
in accordance with internal revenue code 448(b)(3). For income tax purposes,
income is generally reported in the period that cash is actually received and
expenses are generally reported in the period the payment is actually made.

     Pro forma income tax expense differed from the amounts computed by applying
the statutory federal rate of 34% as a result of the following:

<TABLE>
<CAPTION>
                                                                  
                                                       PERIOD FROM
                                                       JANUARY 16,
                                                      1996 THROUGH             YEAR ENDED DECEMBER 31,
                                                      DECEMBER 31,     -------------------------------------
                                                          1996                1997                1998
                                                   -----------------   -----------------   ----------------- 
<S>                                                  <C>                 <C>                 <C>
Computed using a 34% tax rate......................          $36,330            $154,182            $320,186
State income taxes, net of federal tax.............            4,274              18,138              37,667
                                                   -----------------   -----------------   ----------------- 
                                                             $40,604            $172,320            $357,853
                                                   =================   =================   =================
</TABLE>

5.   STOCKHOLDERS' EQUITY

     On November 25, 1998, the Company amended and restated its articles of
incorporation. Pursuant to this amendment and restatement, the Company converted
its original 1,000 shares of issued common stock into 5,500,000 shares of Class
1 common stock. The common stock authorized, outstanding and issued, as of
December 

                                      F-30
<PAGE>
 
                            COMPUTERJOBS.COM, INC.

                         Notes to Financial Statements
                               December 31, 1998

31, 1996 and 1997, has been adjusted to reflect this recapitalization. The
Company also authorized 14,000,000 shares of Class 2 common stock and 5,000,000
shares of Series A Preferred Stock. The Company has reserved 2,000,000 shares of
Class 2 common stock for issuance in connection with its stock option plan.

     Each share of Class 1 common stock is convertible to one share of Class 2
common stock at the option of the holder. Class 1 common stock automatically
converts to Class 2 common stock upon a qualifying initial public offering (IPO)
of the Company.

     The rights and privileges of Class 1 and Class 2 stockholders are equal
except that Class 1 stockholders are entitled to receive certain preferences
over Class 2 stockholders in the event of the Company's liquidation, dissolution
or sale or merger.

     PREFERRED STOCK

     In November 1998, the Company sold 5,000,000 shares of Series A Preferred
Stock for an aggregate sales price of $10,000,000. The Series A Preferred Stock
is cumulative and accrues dividends at 8%. Each share of preferred stock is
currently convertible into one share of Class 2 common stock at the option of
the holder. Each holder of Series A Preferred Stock is entitled to certain
protections against sales of common stock at less than the original Series A
purchase price, which may result in the right of such holder to convert each
share of Series A into more than one share of Class 2 common stock. The Series A
preferred stock automatically converts into Class 2 common stock upon a
qualifying IPO of the Company. The Company has reserved 5,000,000 shares of
Class 2 common stock for the conversion of Series A Preferred Stock.

     The voting rights of the Series A Preferred Stock are equal to the voting
rights of the Class 2 common stock. Dividends are payable in cash or stock on
the sale, liquidation, or merger of the Company or redemption of such preferred
stock. To the extent the holders have not converted the Series A Preferred Stock
into Class 2 common stock, the holders of least 75% of the preferred stock may
cause the Company to redeem all such preferred stock at any time after November
25, 2003 at the greater of the purchase price plus accrued dividends or the
appraised value, as defined.

     In the event of the Company's liquidation, dissolution or sale or merger,
the holders of Series A Preferred Stock are entitled to $10,000,000 plus all
accrued dividends on the Series A Preferred Stock before any amounts may be
distributed to the holders of Class 1 or Class 2 common stock.

     No dividends may be paid to the holders of Class 1 and Class 2 common stock
until all outstanding dividends are paid on the Series A Preferred Stock. In the
event that the holders of the Series A Preferred Stock elect to convert their
shares into Class 2 common stock, the Company is not required to distribute the
accrued dividends on the Series A Preferred Stock.

     At December 31, 1998, the Series A Preferred Stock was increased by $79,000
representing dividends not currently declared or paid. The cost of issuance of
the Series A Preferred Stock of $94,446 is being accreted over a five year
period. Such accretion amounted to $1,572 in the year ended December 31, 1998.

     WARRANTS

     In connection with the sale of Series A Preferred Stock, the Company issued
warrants for the purchase of 1,250,000 shares of Class 2 common stock at $5.00
per share. The Company has reserved 1,250,000 shares of Class 2 common stock for
the exercise of these warrants. The warrants expire on the earlier of 1) three
years after an IPO by the Company, 2) the closing date of the sale or merger of
the Company, or 3) December 31, 2003.

                                      F-31
<PAGE>
 
                            COMPUTERJOBS.COM, INC.

                         Notes to Financial Statements
                               December 31, 1998

6.  EARNINGS PER SHARE

     The following table sets forth the computation of the unaudited pro forma
earnings per common share:

<TABLE>
<CAPTION>
                                                           1996                 1997                 1998
                                                   ------------------   ------------------   ------------------
NUMERATOR:
<S>                                                  <C>                  <C>                  <C>
 Pro forma net income..............................        $   66,249           $  281,156           $  583,871
 Accretion and dividends on Series A Preferred
  Stock............................................                --                   --              (80,572)
                                                   ------------------   ------------------   ------------------ 
 Numerator for basic pro forma earnings per common
  share - income available to common stockholders..
                                                           $   66,249           $  281,156           $  503,299
                                                   ==================   ==================   ==================
 
DENOMINATOR:
 Denominator for basic pro forma earning per
  common share - weighted average shares...........         5,500,000            5,500,000            5,500,000
                                                   ==================   ==================   ==================
 
Basic pro forma earnings per common share..........        $     0.01           $     0.05           $     0.09
                                                   ==================   ==================   ==================
</TABLE>

     Series A Preferred Stock, which is convertible into Class 2 common stock
and was outstanding during 1998 (issued on November 25, 1998), and common shares
issuable upon the exercise of warrants were not included in the computation of
pro forma earnings per share because their effect would be anti-dilutive.

7.  EMPLOYEE BENEFITS

     On January 1, 1998, the Company established a 401(k) plan that covers
substantially all employees. The Company contributed $26,965 to the 401(k) plan
in 1998.

     In 1997, the Company sponsored a simplified employee pension plan under
section 408(k) of the Internal Revenue Code. The plan provides discretionary
contributions in each calendar year to the individual retirement accounts of all
eligible employees. Full time employees with more than a year of service are
eligible to participate. Total contributions by the Company totaled $42,119 for
the year ended December 31, 1997. The 408(k) Plan was terminated upon the
establishment of the 401(k) Plan.

8.  LEASE COMMITMENTS 

     During December 1998, the Company entered into a five year operating lease
for office space. This lease agreement provides for rent escalation clauses to
cover increases in certain of the lessors' operating costs. Rental expense
totaled $11,630, $30,646 and $92,217 for the period from January 16, 1996
through December 31, 1996 and for the years ended December 31, 1997 and 1998,
respectively. Future minimum rental payments (excluding any estimate of
operating costs) under noncancelable operating leases with terms of one year or
more at December 31, 1998 are $360,679 in 1999, $327,043 in 2000, $320,254 in
2001, $320,254 in 2002 and $320,254 in 2003.

9.  RELATED PARTY TRANSACTIONS

     On November 2, 1998, the Company declared a $2,000,000 dividend payable to
the stockholders. During 1998, $1,000,000 of the dividends were paid. The
Company issued notes to the stockholders for the remaining $1,000,000. These
notes accrue interest at the federal funds interest rate and are payable in
February 1999.

                                      F-32
<PAGE>
 
                            COMPUTERJOBS.COM, INC.

                         Notes to Financial Statements
                               December 31, 1998

10.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts reported in the accompanying balance sheets for cash
and cash equivalents, accounts receivable, accounts payable and notes payable
approximates their fair value.

11.  YEAR 2000 ISSUE (UNAUDITED)

     Year 2000 issues may arise if computer programs have been written using two
digits rather than four digits to define the applicable year. In such cases,
programs that have time sensitive logic may recognize a date using "00" as the
year 1900 rather than the year 2000, which could result in miscalculations or
system failures.

     The Company has determined that it will not need to modify or replace
significant portions of its software so that its computer systems will function
properly with respect to dates in the year 2000 and beyond. The Company
anticipates that any remaining costs to ensure year 2000 compliance will not be
significant.

     Although no formal assessment of the information and operational systems of
its major clients and vendors has been made, the Company is not aware of any
significant problems as a result of the year 2000. However, if the customers and
clients encounter operational problems related to year 2000 and are unable to
resolve such problems in a timely manner, it could result in a material
financial risk to the Company.

                                      F-33
<PAGE>
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
                                        


To the Board of Directors and Stockholders of
Syncra Software, Inc.

     In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in redeemable preferred stock and stockholders'
deficit and of cash flows present fairly, in all material respects, the
financial position of Syncra Software, Inc. (a development stage enterprise) at
December 31, 1998 and the results of its operations and its cash flows for the
period from inception (February 11, 1998) through December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.



PricewaterhouseCoopers LLP
Boston, Massachusetts
April 29, 1999

                                      F-34
<PAGE>
 
                             SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                                 Balance Sheet

<TABLE>
<CAPTION>
                                                                                              PRO FORMA
                                                                                             DECEMBER 31,
                                                                        DECEMBER 31,             1998
Assets                                                                      1998           (NOTES 2 AND 16)
------                                                                ----------------    -----------------
CURRENT ASSETS:
<S>                                                                   <C>                  <C>
 Cash and cash equivalents..........................................      $ 1,700,370         $ 11,700,370
 Prepaid expenses...................................................          185,506              185,506
 Other current assets...............................................           22,704               22,704
                                                                    -----------------    -----------------
 
 Total current assets...............................................        1,908,580           11,908,580
 
Fixed assets, net...................................................          351,752              351,752
Deposits............................................................          136,998              136,998
                                                                    -----------------    -----------------
 
                                                                          $ 2,397,330         $ 12,397,330
                                                                    =================    =================
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
-----------------------------------------------------------------
CURRENT LIABILITIES:
 Accounts payable...................................................      $   233,281         $    233,281
 Accrued expenses...................................................          316,918              300,271
 Notes payable to stockholders......................................        3,926,370                   --
                                                                    -----------------    -----------------
 
 Total current liabilities..........................................        4,476,569              533,552
                                                                    -----------------    -----------------
 
REDEEMABLE PREFERRED STOCK:
 Series A redeemable convertible preferred stock, $0.001 par value;
  authorized: 2,941,031 shares; issued and outstanding: 2,586,207
  shares plus accrued dividends of $334,652 (liquidation value of
  $6,334,651).......................................................        6,334,651            6,334,651
 Series B redeemable convertible preferred stock, $0.001 par value;
  authorized: 3,737,602 shares; issued and outstanding: 3,537,602
  shares (liquidation value of $14,150,408).........................               --           14,150,408
 Preferred stock warrants...........................................          120,000              120,000
 Redeemable non-voting, non-convertible preferred stock, $0.001 par
  value; authorized: 150,000 shares; issued and outstanding 130,000
  shares plus accrued dividends of $94,135 (liquidation value of
  $1,389,468).......................................................        1,389,468            1,389,468
                                                                    -----------------    -----------------
 Total redeemable preferred stock...................................        7,844,119           21,994,527
                                                                    -----------------    -----------------
 
STOCKHOLDERS' DEFICIT:
 Common stock, $0.001 par value; 10,000,000 shares authorized;
  396,000 shares issued and outstanding at December 31, 1998........              396                  396
 Deficit accumulated during the development stage...................       (9,923,754)         (10,131,145)
                                                                    -----------------    -----------------
 Total stockholders' deficit........................................       (9,923,358)         (10,130,749)
                                                                    -----------------    -----------------
Commitments and contingencies (Note 14).............................
                                                                    -----------------    -----------------
                                                                          $ 2,397,330         $ 12,397,330
                                                                    =================    =================
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                      F-35
<PAGE>
 
                             SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                            Statement of Operations

<TABLE>
<CAPTION>
                                                                 FOR THE PERIOD
                                                                 FROM INCEPTION
                                                                 (FEBRUARY 11,
                                                                 1998) THROUGH
                                                               DECEMBER 31, 1998
                                                             -------------------
COSTS AND EXPENSES:
<S>                                                            <C>
 Research and development....................................        $ 1,670,803
 Selling and marketing.......................................          2,617,460
 General and administrative..................................          1,588,689
 Impairment charge for intangible goods......................          1,312,500
 Settlement charge...........................................          1,795,333
                                                             ------------------- 
 
Loss from operations.........................................         (8,984,785)
 
Interest expense, net........................................             90,430
                                                             -------------------
 
Net loss.....................................................        $(9,075,215)
                                                             ===================
</TABLE>


   The accompanying notes are an integral part of these financial statements

                                      F-36
<PAGE>
 
                             SYNCRA SOFTWARE, INC.
                       (a development stage enterprise)

Statement of Changes in Redeemable Preferred Stock and Stockholders' Deficit
  For the period from inception (February 11, 1998) through December 31, 1998


<TABLE>
<CAPTION>
                                                          SERIES A
                                                         REDEEMABLE        REDEEMABLE NON-VOTING                       
                             SERIES A REDEEMABLE          PREFERRED           NON-CONVERTIBLE                          
                               PREFERRED STOCK         STOCK WARRANTS         PREFERRED STOCK                          
                         ---------------------------------------------------------------------------                   
                                         CARRYING         CARRYING                      CARRYING                       
                            SHARES         VALUE            VALUE          SHARES        VALUE                         
                         ---------------------------------------------------------------------------                   
<S>                        <C>          <C>            <C>                <C>         <C>                              
Issuance of common stock                                                                                               
 to founders.............                                                                                              
                                                                                                                       
Issuance of Series A                                                                                                   
 redeemable convertible                                                                                                
 preferred stock,                                                                                                      
 issuance costs of                                                                                                     
 $170,752................  2,586,207     $5,999,999                                                                    
                                                                                                                       
Issuance of redeemable                                                                                                 
 non-voting,                                                                                                           
 non-convertible                                                                                                       
 preferred stock.........                                                 150,000      $1,500,000                      
                                                                                                                       
Repurchase and                                                                                                         
 retirement of common                                                                                                  
 stock...................                                                                                              
                                                                                                                       
Redemption of redeemable                                                                                               
 non-voting,                                                                                                           
 non-convertible                                                                                                       
 preferred stock.........                                                 (20,000)       (204,667)                     
                                                                                                                       
Series A redeemable                                                                                                    
 convertible preferred                                                                                                 
 stock warrants..........                                     $120,000                                                 
                                                                                                                       
Accrual of cumulative                                                                                                  
 dividends on redeemable                                                                                               
 preferred stock.........                   334,652                                        94,135                      
                                                                                                                       
Net loss.................                                                                                              
                         ---------------------------------------------------------------------------                   
                                                                                                                       
Balance at December 31,                                                                                                
 1998....................  2,586,207     $6,334,651           $120,000    130,000      $1,389,468                      
                         ===========================================================================                   

                                                                                        
                                                                                        
                                                              DEFICIT                   
                                    COMMON STOCK              DURING                    
                            --------------------------      DEVELOPMENT                 
                                SHARES       PAR VALUE         STAGE            TOTAL   
                            ------------------------------------------------------------
<S>                           <C>            <C>           <C>              <C>         
Issuance of common stock                                                                
 to founders.............      1,396,000       $ 1,396                       $     1,396
                                                                                        
Issuance of Series A                                                                    
 redeemable convertible                                                                 
 preferred stock,                                                                       
 issuance costs of                                                                      
 $170,752................                                   $  (170,752)        (170,752)
                                                                                        
Issuance of redeemable                                                                  
 non-voting,                                                                            
 non-convertible                                                                        
 preferred stock.........                                                               
                                                                                        
Repurchase and                                                                          
 retirement of common         (1,000,000)       (1,000)        (249,000)        (250,000)
 stock...................                                                               
                                                                                        
Redemption of redeemable                                                                
 non-voting,                                                                            
 non-convertible                                                                        
 preferred stock.........                                                               
                                                                                        
Series A redeemable                                                                     
 convertible preferred                                                                  
 stock warrants..........                                                               
                                                                                        
Accrual of cumulative                                                                   
 dividends on redeemable                                                                
 preferred stock.........                                      (428,787)        (428,787)
                                                                                        
Net loss.................                                    (9,075,215)      (9,075,215)
                            ------------------------------------------------------------
                                                                                        
Balance at December 31,                                                                 
 1998....................        396,000       $   396      $(9,923,754)     $(9,923,358)
                            ============================================================ 
</TABLE> 

   The accompanying notes are an integral part of these financial statements

                                      F-37
<PAGE>
 
                             SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                            Statement of Cash Flows

<TABLE>
<CAPTION>
                                                                 FOR THE PERIOD
                                                                 FROM INCEPTION
                                                                 (FEBRUARY 11,
                                                                 1998) THROUGH
                                                               DECEMBER 31, 1998
                                                             -------------------
 
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                            <C>
Net loss.....................................................        $(9,075,215)
Adjustments to reconcile net loss to net cash used for
 operating activities:.......................................
 Depreciation................................................             58,537
 Amortization and impairment of intangible assets............          1,500,000
 Amortization of discounts on notes payable..................             46,370
 Changes in assets and liabilities:
   Prepaid expenses..........................................           (185,506)
   Other current assets......................................            (22,704)
   Accounts payable..........................................            233,281
   Accrued expenses..........................................            316,918
                                                             -------------------
 
   Net cash used for operating activities....................         (7,128,319)
                                                             -------------------
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets....................................           (410,289)
Increase in deposits.........................................           (136,998)
                                                             ------------------- 
 
   Net cash used for investing activities....................           (547,287)
                                                             ------------------- 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable to stockholders......          4,000,000
Proceeds from Series A redeemable convertible preferred
 stock, net of issuance costs................................          5,829,247
 
Proceeds from issuance of common stock.......................              1,396
Redemption of non-voting, non convertible redeemable
 preferred stock and related dividends.......................           (204,667)
 
Repurchase of common stock...................................           (250,000)
                                                             -------------------
 
 Net cash provided by financing activities...................          9,375,976
                                                             -------------------
 
Net increase in cash and cash equivalents....................          1,700,370
 
Cash and cash equivalents, beginning of period...............                 --
                                                             -------------------
 
Cash and cash equivalents, end of period.....................        $ 1,700,370
                                                             ===================
 
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Software acquired in exchange for 150,000 shares of
 non-voting, non-convertible redeemable preferred............        $ 1,500,000
                                                             ===================
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                      F-38
<PAGE>
 
                             SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements


1. NATURE OF THE BUSINESS

     Syncra Software, Inc. ("Syncra" or "the Company") was incorporated in
Delaware on February 11, 1998. Syncra was formed to design, develop, produce and
market supply chain collaboration software and solutions. Since its inception,
Syncra has devoted substantially all of its efforts to business planning,
research and development, recruiting management and technical staff, acquiring
operating assets, raising capital, marketing and business development.
Accordingly, Syncra is considered to be in the development stage as defined in
Statement of Financial Accounting Standards ("SFAS") No. 7 "Accounting and
Reporting by Development Stage Enterprise".

     Syncra is subject to risks and uncertainties common to growing technology-
based companies, including rapid technological changes, growth and commercial
acceptances of the Internet, dependence on principal products and third party
technology, new product development and performance, new product introductions
and other activities of competitors, dependence on key personnel, development of
a distribution channel, international expansion, lengthy sales cycles and
limited operating history.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     CASH AND CASH EQUIVALENTS

     Syncra considers all highly liquid instruments with an original maturity of
three months or less at the time of purchase to be cash equivalents. Included in
cash and cash equivalents at December 31, 1998 is approximately $1.6 million in
money market accounts.

     FINANCIAL INSTRUMENTS

     The carrying amount of Syncra's financial instruments, principally cash,
notes payable, and redeemable preferred stock, approximates their fair values at
December 31, 1998.

     FIXED ASSETS

     Fixed assets are recorded at cost and depreciated using the straight-line
method over their estimated useful lives. Repairs and maintenance costs are
expensed as incurred.

     RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS

     Costs incurred in the research and development of Syncra's products are
expensed as incurred, except for certain research and development costs. Costs
associated with the development of computer software are expensed prior to the
establishment of technological feasibility, as defined by SFAS No. 86,
"Accounting for the Cost of Computer Software to be Sold, Leased or Otherwise
Marketed." Costs incurred subsequent to the establishment of technological
feasibility and prior to the general release of the products are capitalized.
During the period ended December 31, 1998, costs eligible for capitalization
were immaterial.

     ACCOUNTING FOR IMPAIRMENT OF LONG LIVED ASSETS

     In accordance with SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"), the
Company records impairment of losses on long lived assets used in operations
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
amount.

     STOCK-BASED COMPENSATION

     Syncra accounts for stock-based awards to employees using the intrinsic
value method as prescribed by Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations.
Accordingly, no compensation expense is recorded for options issued to employees
in fixed amounts and with fixed exercise prices at least equal to the fair
market value of Syncra's Common Stock at the date of grant. Syncra has adopted
the provisions of SFAS No. 123, " Accounting for Stock-Based Compensation",

                                      F-39
<PAGE>
 
                             SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements

through disclosure only (Note 11). All stock-based awards to non-employees are
accounted for at their fair value in accordance with SFAS No. 123.

     PRO FORMA BALANCE SHEET

     The pro forma balance sheet as of December 31, 1998, reflects the issuance
of 3,537,602 shares of convertible Series B Preferred Stock (the "Series B
Preferred Stock") (Note 16) in 1999. Upon issuance of the convertible Series B
Preferred Stock, the Company effected the conversion of the notes payable to
stockholders plus accrued interest of $4,150,408 and received cash proceeds of
$10.0 million from existing and new investors.

     USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.


3.  PREPAID EXPENSES

     Prepaid expenses consist of the following at December 31, 1998:

<TABLE>
<S>                                                            <C>
     Trade shows and other marketing prepayments.............           $135,774
Others.......................................................             49,732
                                                             -------------------
 
                                                                        $185,506
                                                             ===================
</TABLE>

4.  FIXED ASSETS

     Fixed assets consist of the following:

<TABLE>
<CAPTION>
                                                                         ESTIMATED         DECEMBER 31,
                                                                        USEFUL LIFE            1998
                                                                          (YEARS)
                                                                    -----------------   -----------------
<S>                                                                   <C>                 <C>
Computer equipment...............................................            3                $246,631
Office equipment.................................................            5                  71,783
Furniture and fixtures...........................................            7                  91,875
                                                                                        -----------------
                                                                                               410,289
                                                                                         
Less: accumulated depreciation......................................                            58,537
                                                                                        -----------------
 
                                                                                              $351,752
                                                                                        =================
</TABLE>

5.  IMPAIRMENT OF INTANGIBLE ASSETS

     In accordance with SFAS No. 121, Syncra reviews for impairment of long-
lived assets when events or changes in circumstances indicate that an asset's
carrying value may not be recoverable. In connection with the organization of
Syncra in February 1998, Syncra purchased the rights to certain software from
Benchmarking Partners, Inc. ("Benchmarking") in exchange for the issuance of
150,000 shares of Syncra's non-voting, non-convertible Redeemable Preferred
Stock (Note 8) with an aggregate value of $1.5 million. Syncra expected to use
the acquired software as a core technology in its product development. In May
1998, management reassessed the status of Syncra's product development and the
additional features and functionality planned to be included in  Syncra's
products. As a result of this re-evaluation, management concluded that the core
technology acquired from Benchmarking would not be able to support Syncra's
planned products. Accordingly, management decided to 

                                      F-40
<PAGE>
 
                             SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements

restart Syncra's product development activities without the use of the acquired
software. An impairment charge of $1,312,500 was recognized in the 1998
statement of operations.

6.  NOTES PAYABLE TO STOCKHOLDERS

     During 1998, the Company received aggregate cash proceeds totaling
$4,000,000 pursuant to the issuance of convertible promissory notes (the
"Notes") payable to certain of its stockholders. No repayments of principal or
interest (which accrues at a rate of 9% per annum) were made during the year.
The Note holders were also issued warrants to purchase preferred stock (`the
Preferred Stock Warrants"). The aggregate value of the warrants issued to all
Note holders was estimated to be $120,000, which was accounted for as discount
on the Notes and Preferred Stock Warrants. The discount is being amortized over
the term of the Notes. The Preferred Stock Warrants have a term of ten years.
Each Note holder is entitled to a number of the securities to be issued in the
Company's next financing equal to 20% of the face value of the Note held by such
holder divided by the price per share of such securities. As a result of the
Series B financing in 1999 (Note 16), the warrant holders are now entitled to
purchase 200,000 shares of Series B Preferred Stock at $4.00 per share.

7.  REDEEMABLE CONVERTIBLE SERIES A PREFERRED STOCK

     At December 31, 1998, the Company has authorized preferred stock of
5,000,000 shares, $.001 par value per share, of which 2,941,031 shares were
designated as redeemable convertible Series A Preferred Stock  ("Series A
Preferred Stock") and 150,000 shares of which were designated as Redeemable
Preferred Stock (the "Redeemable Preferred Stock").

     The Series A Preferred Stock has the following characteristics:

     VOTING

     Holders of Series A Preferred Stock are entitled to that number of votes
equal to the number of shares of common stock into which the shares of Series A
Preferred Stock are then convertible.

     DIVIDENDS

     Holders of Series A Preferred Stock are entitled to receive out of funds
legally available, cumulative dividends at the rate of 8% per share per annum on
the Base Amount of each share when, as, and if declared by the Board of
Directors. The Base Amount of each share is equal to the price paid for each
share of Series A Preferred Stock ($2.32) plus unpaid dividends which accrue
commencing on the date of original issuance of the Series A Preferred Stock. In
the event that the full amount of dividends is not paid in any twelve-month
period, the Base Amount will be increased by the amount of the unpaid dividend.

     LIQUIDATION

     In the event of any liquidation, dissolution or winding-up of the affairs
of the Company, the holders of Series A Preferred Stock are entitled to receive,
prior to and in preference to holders of both Redeemable Preferred Stock and
common stock, an amount equal to $2.32 per share plus all unpaid cumulative
dividends. After full payment of (i) the foregoing amounts and (ii) amounts to
be paid to the holders of Redeemable Preferred Stock pursuant to the terms
thereof (see Note 8), holders of Series A Preferred Stock were, as of December
31, 1998, entitled to share ratably in the remaining proceeds of the Company, if
any, on an as-converted basis.

     CONVERSION

     Each share of Series A Preferred Stock may be converted at any time, at the
option of the stockholder, into one share of common stock, subject to certain
anti-dilution adjustments, as defined in the terms of the Series A Preferred
Stock.

                                      F-41
<PAGE>
 
                             SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements

     The Series A Preferred Stock will automatically convert into shares of
common stock upon (i) a public offering which results in net proceeds to Syncra
of at least $10,000,000, at a price per share of the Common Stock of at least
$9.28 or  (ii) upon approval of the two-thirds of the outstanding Series A
preferred stockholders to convert all outstanding shares of Series A Preferred
Stock to Common Stock.

     REDEMPTION

     Any time after the fifth anniversary of the original issuance of the Series
A Preferred Stock, at the option of the holder thereof, Syncra shall redeem all,
but not less than all of such holder's shares of Series A Preferred Stock, at a
redemption price equal to the original purchase price of $2.32 per share plus 
all unpaid dividends thereon which have accrued through and including the
redemption date.

     ACCRETION

     The issuance cost incurred by the Company was accreted in full in 1998 as
an adjustment to the carrying value of redeemable convertible Series A Preferred
Stock.

8.  NON-VOTING, NON-CONVERTIBLE REDEEMABLE PREFERRED STOCK

     As described in Note 5, Syncra's Redeemable Preferred Stock was issued in a
non-cash exchange with Benchmarking for certain software. Subsequent to the
issuance of the Redeemable Preferred Stock to Benchmarking, Syncra repurchased
20,000 shares of its Redeemable Preferred Stock from Benchmarking at a price per
share of $10.00 plus accrued dividends of $4,667. In a separate transaction,
Benchmarking transferred the remaining 130,000 shares of the Redeemable
Preferred Stock to Internet Capital Group, Inc. ("ICG"), an existing stockholder
of Syncra in exchange for a $1.3 million note, bearing interest at 8% per annum.
At December 31, 1998, ICG continued to hold the 130,000 shares of Redeemable
Preferred Stock. ICG is also a stockholder of Benchmarking.

     The Redeemable Preferred Stock has the following characteristics:

     VOTING

     Except as required by law, holders of Redeemable Preferred Stock are not
entitled to vote on any matters submitted to a vote of the stockholders of
Syncra, including the election of directors.

     DIVIDENDS

     Holders of Redeemable Preferred Stock are entitled to receive out of funds
legally available, cumulative dividends at the rate of 8% per share per annum on
the Base Amount of each share when, as and if declared by the Board of
Directors. The Base Amount of each share is equal to purchase price paid for
such share of Redeemable Preferred Stock ($10.00) plus unpaid dividends which
accrue commencing on the date of original issuance of the Redeemable Preferred
Stock. In the event that the full amount of dividends is not paid in any twelve-
month period, the Base Amount will be increased by the amount of the unpaid
dividend.

     LIQUIDATION

     In the event of any liquidation, dissolution or winding-up of the affairs
of Syncra, the holders of Redeemable Preferred Stock are entitled to receive,
prior to and in preference to any holders of Common Stock, but after all
distribution or payments required to be made to the holders of Series A
Preferred Stock, an amount equal to $10.00 per share plus accrued but unpaid
dividends. After payment in full of the amounts owed to holders of the
Redeemable Preferred Stock, such holders are not entitled to share in the
distribution of the remaining assets of Syncra.

                                      F-42
<PAGE>
 
                             SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements

     REDEMPTION

     At any time after the fifth anniversary of the original issuance of the
Redeemable Preferred Stock, each holder may require Syncra to redeem all or any
portion of such holder's shares at a redemption price equal to the original
issuance price per share ($10.00) plus all unpaid dividends thereon which have
accrued through and including the redemption date.

     At any time, and from time to time, Syncra may elect to redeem all, or any
portion of the outstanding shares of its Redeemable Preferred Stock, at a
redemption price equal to the original issuance price per share ($10.00) plus
all unpaid dividends thereon which have accrued through and including the
redemption date.

     Redeemable Preferred Stock is also redeemable by Syncra upon the earlier of
(i) a public offering of Syncra's common stock with a per share price of at
least $7.86; or (ii) the consummation of a sale of all or substantially all of
Syncra's assets or capital stock, either through a direct sale, merger,
reorganization or other form of business combination in which control of Syncra
is transferred and as a result holders of Series A Preferred Stock receive at
least $7.86 per share.

9.  COMMON STOCK

     Each share of Common Stock entitles the holder to one vote on all matters
submitted to a vote of Syncra's stockholders. Common stockholders are entitled
to receive dividends, if any, as may be declared by the Board of Directors,
subject to the preferential dividend rights of the holders of the Series A
Preferred Stock and the Redeemable Preferred Stock.

     RESTRICTED STOCK AGREEMENTS

     Syncra has entered into agreements with certain of its stockholders
providing for restrictions on transfers of the shares subject to such agreement.
Each agreement provides Syncra with a right to repurchase the shares held by
such individual, in the event that the Company terminates the employment of the
individual. The number of shares which may be repurchased by the Company and the
price at which such shares may be repurchased differs per individual and is
contingent on whether such individual's termination is for `cause' (as defined
in the agreement) or other than for `cause'. At December 31, 1998, none of the
restricted shares were subject to repurchase due to the restrictions contained
in these agreements.

     At December 31, 1998, all of the outstanding capital stock (including the
Common Stock, Series A Preferred Stock and Redeemable Preferred Stock) of the
Company is subject to certain restrictions as to sale or transfer of such
shares. The Company and its non-founder stockholders also maintain a right of
first refusal, under certain circumstances, on shares offered by a stockholder
for sale to third parties, at the price per share to be paid by such third
party.

     RESERVED SHARES

     At December 31, 1998, 2,833,857 shares were reserved for issuance upon
conversion of the Series A Preferred Stock and exercise of outstanding options.

10.  REPURCHASE OF COMMON STOCK AND REDEMPTION OF PREFERRED STOCK

     On June 5, 1998, the Company repurchased 1,000,000 shares of Common Stock
and redeemed 20,000 shares of its Redeemable Preferred Stock from Benchmarking,
one of the original founders in exchange for $2,250,000. The transaction was
financed through the sale of additional Series A Preferred Stock to certain of
the existing holders of Series A Preferred Stock. Of the 150,000 shares of
Redeemable Preferred Stock originally issued to Benchmarking, the remaining
130,000 shares were transferred by Benchmarking to ICG (see Note 8).

     In addition to the shares acquired, the withdrawal of Benchmarking as a
stockholder eliminated a potential conflict of interest for Syncra and its other
stockholders with Benchmarking and its customers. The 

                                      F-43
<PAGE>
 
                             SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements

transaction also settled potential claims by Benchmarking against Syncra with
respect to the transfer of technical talent from Benchmarking to Syncra and
other potential claims by Benchmarking against the potential future value of
Syncra.

     The difference between the total amount paid to Benchmarking and the
aggregate of the redemption value of the Redeemable Preferred Stock plus accrued
dividends of $204,667 and the fair value of the Common Stock of $250,000 was
treated as settlement charge in the statement of operations.

11.  STOCK OPTION PLAN

     In 1998, the Company adopted the 1998 Stock Option Plan (the "1998 Plan")
which provides for the grant of incentive stock options and non-qualified stock
options, stock awards and stock purchase rights for the purchase of up to
1,000,000 shares of the Company's Common Stock by officers, employees,
consultants, and directors of the Company. The Board of Directors is responsible
for administration of the 1998 Plan. The Board determines the term of each
option, the option exercise price, the number of shares for which each option is
granted, the rate at which each option is exercisable and the vesting period
(generally ratably over four to five years). Incentive stock options may be
granted to any officer or employee at an exercise price of not less than the
fair value per common share on the date of the grant (not less than 110% of the
fair value in the case of holders of more than 10% of the Company's voting
stock) and with a term not to exceed ten years from the date of the grant (five
years for incentive stock options granted to holders of more than 10% of the
Company's voting stock). Non-qualified stock options may be granted to any
officer, employee, consultant, or director at an exercise price per share of not
less than the book value per share.

     No compensation expense has been recognized for employee stock-based
compensation in 1998 because the fair value of the options did not exceed the
exercise price. Further, options vest over several years and additional option
grants are expected to be made in future years. Had compensation expense been
determined based on the fair value of the of the options granted to employees at
the grant date consistent with the provision of SFAS 123, the Company's net loss
would have been the same.

     For purposes of pro forma disclosure of net loss, the fair value of each
option grant was estimated on the date of grant using the Black-Scholes option-
pricing model with the following assumptions for grants in 1998; zero dividend
yield; zero volatility; risk-free interest rate of 4.55%, and expected life of
five years.

     During the period, Syncra granted options aggregating 803,300 shares with a
weighted average exercise price of $0.87 per share. Of the total options
granted, 99,374 shares were exercisable at December 31, 1998 but none of these
vested options were exercised during the period. Options totaling 196,700 were
available for future grant at December 31, 1998. The weighted-average remaining
contractual life of the options is 9.5 years. Further, since the exercise price
of the options is more than the fair market value of the common stock, the
weighted average fair value per share of the options granted during the year
using the Black-Scholes option-pricing model is zero at December 31, 1998.

                                      F-44
<PAGE>
 
                             SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements

12.  INCOME TAXES

     Deferred tax assets consist of the following at December 31, 1998:

<TABLE>
<S>                                                            <C>
         Net operating loss carryforward.....................         $2,386,619
         Fixed and intangible assets.........................            482,690
         Research and development credit carryforwards.......             90,891
         Accrued vacation....................................             35,687
                                                             -------------------
 
Net deferred tax assets......................................          2,995,887
 
Deferred tax asset valuation allowance.......................          2,995,887
                                                             -------------------
 
                                                                     $        --
                                                             ===================
</TABLE>

     The Company has provided a valuation allowance for the full amount of its
net deferred tax assets since realization of any future benefit from deductible
temporary differences and net operating loss and tax credit carryforwards cannot
be sufficiently assured at December 31, 1998.

     At December 31, 1998, the Company has federal and state net operating loss
carryforwards of approximately $5.9 million available to reduce future taxable
income, which will expire in 2019. The Company also has federal and state
research and development tax credit carryforwards of approximately $72,490 and
$27,881, respectively, available to reduce future tax liabilities.

     Under the provisions of the Internal Revenue Code, certain substantial
changes in the Company's ownership may limit the amount of net operating loss
carryforwards and research and development credit carryforwards which could be
utilized annually to offset future taxable income and taxes payable.

13.  401(K) SAVINGS PLAN

     The Company has established a retirement savings plan under Section 401(k)
of the Internal Revenue Code (the "401(k) Plan"). The 401(k) Plan covers
substantially all employees of the Company who meet minimum age and service
requirements, and allows participants to defer a portion of their annual
compensation on a pre-tax basis. Company contributions to the 401(k) Plan may be
made at the discretion of the Board of Directors. The Company has not made any
contributions to the 401(k) Plan through December 31, 1998.

14.  COMMITMENTS AND CONTINGENCIES

     The Company leases its office space and certain office equipment under
noncancelable operating leases. Total rent expense under these operating leases
was approximately $134,000 for the period ended December 31, 1998.

     Future minimum lease commitments at December 31, 1998 are as follows:


YEAR ENDING DECEMBER 31,                                       Operating leases
                                                             -------------------

 1999........................................................         $  272,328
 2000........................................................            254,728
 2001........................................................            254,728
 2002........................................................            254,728
 Thereafter..................................................            127,364
                                                             -------------------
 
                                                                      $1,163,876
                                                             ===================

                                      F-45

<PAGE>
 
                             SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements

15.  RELATED PARTY TRANSACTIONS

     In the normal course of business, Syncra had transactions with Benchmarking
during the period from inception until May 1998 for certain operating expenses
such as organizational costs, payroll, marketing, legal and other expenses. The
total expenses reimbursed by Syncra to Benchmarking amounted to $496,344.
Furthermore, Syncra also paid Benchmarking a management fee totaling $80,000
during the same period.

     In addition to the above transactions, Syncra also reimbursed ICG $500,000
related to professional services provided by Benchmarking to Syncra that
originally were funded by ICG.

16.  SUBSEQUENT EVENTS

     In March and April 1999, 3,737,602 shares of convertible Series B Preferred
Stock were authorized. Syncra issued 3,537,602 shares of Series B Preferred
Stock in exchange for net cash proceeds of $10.0 million plus the conversion of
all principal and accrued interest due on the Notes (Note 6) ("the Series B
Financing"). The terms of the Series B Preferred Stock are substantially similar
to Series A Preferred Stock, except that the Base Amount of the Series B
Preferred Stock and its purchase price are $4.00 per share.

     Further, certain terms of both the Series A Preferred Stock (including
conversion rights associated therewith and participating rights upon
liquidation) and the Redeemable Preferred Stock (including redemption rights
associated therewith) were amended in connection with the Series B Financing.

                                      F-46
<PAGE>
 
================================================================================

     Through and including                 , 1999 (the 25th day after the date
of this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to the unsold allotments
or subscriptions.


                                                     Shares


                  [Internet Capital Group logo appears here]


                                 Common Stock

                                 ------------

                              P R O S P E C T U S
                                        
                                 ------------

                              Merrill Lynch & Co.

                         BancBoston Robertson Stephens

                                BT Alex. Brown

                     NationsBanc Montgomery Securities LLC

                            Wit Capital Corporation


                                             , 1999
                                        
================================================================================
<PAGE>
 
                                    PART II

                    INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

     The expenses to be paid by Internet Capital Group in connection with the
distribution of the securities being registered, other than underwriting
discounts and commissions, are as follows:

<TABLE>
<CAPTION>
                                                                                   Amount (1)
                                                                             --------------------
<S>                                                                            <C>
     Securities and Exchange Commission Registration Fee.....................          $   73,531
     NASD Filing Fee.........................................................              26,950
     Nasdaq National Market Listing Fee......................................              95,000
     Accounting Fees and Expenses............................................             250,000
     Blue Sky Fees and Expenses..............................................               1,000
     Legal Fees and Expenses.................................................             450,000
     Transfer Agent and Registrar Fees and Expenses..........................              10,000
     Printing and Engraving Expenses.........................................             200,000
     Director and Officer Liability Insurance (2)............................             150,000
     Miscellaneous Fees and Expenses.........................................              18,519
                                                                             --------------------
       Total.................................................................          $1,275,000
                                                                             ====================
</TABLE>
---------------------- 
(1) All amounts are estimates except the SEC filing fee, the NASD filing fee and
    the Nasdaq National Market listing fee.

(2) Represents premiums paid by Internet Capital Group on policies that insure
    Internet Capital Group's directors and officers against certain liabilities
    they may incur in connection with the registration, offering and sale of the
    securities described herein.

Item 14. Indemnification of Directors and Officers

     Under Section 145 of the General Corporate Law of the State of Delaware,
Internet Capital Group has broad powers to indemnify its directors and officers
against liabilities they may incur in such capacities, including liabilities
under the Securities Act of 1933, as amended (the "Securities Act"). Internet
Capital Group's bylaws (Exhibit 3.2 hereto) also provide for mandatory
indemnification of its directors and executive officers, and permissive
indemnification of its employees and agents, to the fullest extent permissible
under Delaware law.

     Internet Capital Group's certificate of incorporation (Exhibit 3.1 hereto)
provides that the liability of its directors for monetary damages shall be
eliminated to the fullest extent permissible under Delaware law. Pursuant to
Delaware law, this includes elimination of liability for monetary damages for
breach of the directors' fiduciary duty of care to Internet Capital Group and
its shareholders. These provisions do not eliminate the directors' duty of care
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to Internet Capital Group, for acts or omissions
not in good faith or involving intentional misconduct, for knowing violations of
law, for any transaction from which the director derived an improper personal
benefit, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws.

     Prior to the effective date of the Registration Statement, Internet Capital
Group will have entered into agreements with its directors and certain of its
executive officers that require Internet Capital Group to indemnify such persons
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person may
be made a party by reason of the fact that such person is or was a director or
officer of Internet Capital Group or any of its affiliated enterprises, provided
such person acted in good faith and in a manner 

                                      II-1
<PAGE>
 
such person reasonably believed to be in or not opposed to the best interests of
Internet Capital Group and, with respect to any criminal proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The indemnification
agreements also set forth certain procedures that will apply in the event of a
claim for indemnification thereunder.

     Internet Capital Group intends to obtain in conjunction with the
effectiveness of the Registration Statement a policy of directors' and officers'
liability insurance that insures the Company's directors and officers against
the cost of defense, settlement or payment of a judgment under certain
circumstances.

     The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the underwriters of Internet Capital
Group and its officers and directors for certain liabilities arising under the
Securities Act or otherwise.

Item 15. Recent Sales of Unregistered Securities

     Since its inception in March 1996, Internet Capital Group (or its
predecessor, Internet Capital Group, L.L.C.) has issued and sold unregistered
securities in the transactions described below.

     Shares of Common Stock

     (1)  On May 9, 1996, Internet Capital Group, L.L.C. issued 13,000,000 units
          of Membership Interests to Safeguard Scientifics (Delaware), Inc. for
          an aggregate purchase price of $13,000,000 consisting of $6,860,926 in
          cash and the assignment of 182,500 shares of Common Stock, 127,000
          shares of Series C Preferred Stock, 855,400 shares of Series D
          Preferred Stock and 134,375 shares of Series F Preferred Stock of Sky
          Alland Marketing, Inc. and related rights and obligations in respect
          thereof.

     (2)  In July, 1996, Internet Capital Group, L.L.C. issued an aggregate of
          27,000,000 units of Membership Interests to employees, directors,
          consultants and other purchasers in a subscription offering for an
          aggregate purchase price of $27,000,000.

     (3)  On September 30, 1996, Internet Capital Group, L.L.C. issued an
          aggregate of 4,968,935 units of Membership Profit Interests to
          employees, directors and consultants pursuant to the Membership Profit
          Interest Plan in consideration for services rendered to Internet
          Capital Group, L.L.C.

     (4)  In December, 1996, Internet Capital Group, L.L.C. issued an aggregate
          of 20,000 units if Membership Profit Interests to employees and
          consultants pursuant to the Membership Profit Interest Plan in
          consideration for services rendered to Internet Capital Group, L.L.C.

     (5)  In February, 1997, Internet Capital Group, L.L.C. issued an aggregate
          of 210,070 units of Membership Profit Interests to employees and
          consultants pursuant to the Membership Profit Interest Plan in
          consideration for services rendered to Internet Capital Group, L.L.C.

     (6)  On April 11, 1997, Internet Capital Group, L.L.C. issued 46,783 units
          of Membership Interests to Lou Ryan pursuant to the Membership Profit
          Interest Plan in consideration for services rendered to Internet
          Capital Group, L.L.C.

     (7)  In September, 1997, Internet Capital Group, L.L.C. issued an aggregate
          of 1,209,519 units of Membership Profit Interests to employees and
          consultants to the Membership Profit Interest Plan in consideration
          for services rendered to Internet Capital Group, L.L.C.

     (8)  In November, 1997, Internet Capital Group, L.L.C. issued an aggregate
          of 115,175 units of Membership Profit Interests to employees and
          consultants pursuant to the Membership Profit Interest Plan in
          consideration for services rendered to Internet Capital Group, L.L.C.

                                      II-2
<PAGE>
 
     (9)  In December, 1997, Internet Capital Group, L.L.C. issued 185,000 units
          of Membership Profit Interests to employees and consultants pursuant
          to the Membership Profit Interest Plan in consideration for services
          rendered to Internet Capital Group, L.L.C.

     (10) In March, 1998, Internet Capital Group, L.L.C. issued 250,000 units of
          Membership Interests to Mr. Austin Hearst in a subscription offering
          for an aggregate purchase price of $500,000.

     (11) In April, 1998, Internet Capital Group, L.L.C. issued an aggregate of
          125,000 units of Membership Interests to Mr. Britton Murdock, Mr.
          Robert E. Keith and Mrs. Margot W. Keith in a subscription offering
          for an aggregate purchase price of $250,000.

     (12) In May, 1998, Internet Capital Group, L.L.C. issued an aggregate of
          1,912,500 units of Membership Interests to employees, consultants and
          other purchasers in a subscription offering for an aggregate purchase
          price of $3,825,000.

     (13) In June, 1998, Internet Capital Group, L.L.C. issued an aggregate of
          11,143,750 units of Membership Interests to employees, consultants and
          other purchasers in a subscription offering for an aggregate purchase
          price of $22,287,500.
     
     (14) In July, 1998, Internet Capital Group, L.L.C. issued an aggregate of
          551,250 units of Membership Interests to employees, consultants and
          other purchasers in a subscription offering for an aggregate purchase
          price of $1,102,500.

     (15) In August, 1998, Internet Capital Group, L.L.C. issued an aggregate of
          225,000 units of Membership Interests to employees, consultants and
          other purchasers in a subscription offering for an aggregate purchase
          price of $450,000.

     (16) In September, 1998, Internet Capital Group, L.L.C. issued an aggregate
          of 1,092,500 units of Membership Interests to employees, consultants
          and other purchasers in a subscription offering for an aggregate
          purchase price of $2,185,000.

     (17) In October, 1998, Internet Capital Group, L.L.C. issued an aggregate
          of 3,883,750 units of Membership Interests to employees, consultants
          and other purchasers in a subscription offering for an aggregate
          purchase price of $7,767,500.

     (18) In November, 1998, Internet Capital Group, L.L.C. issued an aggregate
          of 76,250 units of Membership Interests to Mr. Roger S. Penske, Jr.,
          Mr. Ron Trichon and Mr. T. Richard Butera in a subscription offering
          for an aggregate purchase price of $152,500.

     (19) In January, 1999, internet Capital Group, L.L.C. issued an aggregate
          of 158,750 units of Membership Interests to Mr. Samuel A. Plum, Mrs.
          Susan R. Buckley and Dr. Thomas P. Gerrity, a director of Internet
          Capital Group, in a subscription offering for an aggregate purchase
          price of $317,500.

     (20) On February 2, 1999, each unit of the foregoing Membership Interests
          and Membership Profit Interests was converted into one share of Common
          Stock of Internet Capital Group as a result of the merger of Internet
          Capital Group, L.L.C. into Internet Capital Group.

     (21) In February, 1999, Internet Capital Group issued an aggregate of
          14,706,250 shares of Common Stock to employees, directors, consultants
          and other purchasers in a subscription offering for an aggregate
          purchase price of $29,412,500.

     (22) In March, 1999, Internet Capital Group issued an aggregate of
          1,125,000 shares of Common Stock to consultants and other purchasers
          in a subscription offering for an aggregate purchase price of
          $2,250,000.

     Warrants to Purchase Common Stock

     On May 10, 1999, in connection with Internet Capital Group's issuance of
the convertible notes, Internet Capital Group granted warrants, exercisable at
the public offering price, to the holders of the convertible notes to purchase a
number shares of common stock of Internet Capital Group equal to $ 18 million
divided by the initial public offering price.

     On April 30, 1999, in connection with the Secured Revolving Credit Facility
dated April 30, 1999, between Internet Capital Group, Inc. and certain lenders
and guarantors, Internet Capital Group granted to the lenders warrants to
purchase an aggregate of 200,000 shares of common stock of Internet Capital
Group for a purchase price of $10 per share.

     Notes Convertible to Common Stock

     On May 10, 1999, Internet Capital Group issued convertible notes in an
aggregate principal amount of $90 million. Upon consummation of this
offering, the convertible notes automatically convert into shares of common
stock of Internet Capital Group at the initial public offering price.

     Options to Purchase Common Stock

     Internet Capital Group from time to time has granted stock options to
employees, directors, advisory board members and certain employees of our
Partner Companies. The following table sets forth certain information regarding
such grants:

<TABLE>
<CAPTION>

                                                                          Range of
                                                     No. of Shares     Exercise Prices
                                                   -----------------  -----------------
<S>                                                <C>              <C>
1996...............................................       --                N/A
1997...............................................
1998...............................................
</TABLE>

     The sale and issuance of securities in the transactions described above
were exempt from registration under the Securities Act in reliance on Section
4(2) of the Securities Act or Regulation D promulgated thereunder as
transactions by an issuer not involving a public offering, where the purchasers
were sophisticated investors who represented their intention to acquire
securities for investment only and not with a view to distribution and received
or had access to adequate information about the Registrant.

     Appropriate restrictive legends were affixed to the stock certificates
issued in the above transactions. Similar legends were imposed in connection
with any subsequent sales of any such securities. No underwriters were employed
in any of the above transactions.

                                      II-3
<PAGE>
 
Item 16. Exhibits and Financial Statement Schedules

     (a)  Exhibits

Exhibit
Number      Document
-------     --------
1.1*        Form of Underwriting Agreement
2.1         Agreement of Merger, dated February 2, 1999, between Internet
            Capital Group, L.L.C., and Internet Capital Group, Inc.
3.1*        Restated Certificate of Incorporation
3.2*        Amended and Restated Bylaws
4.1         Specimen Certificate for Internet Capital Group's Common Stock
5.1*        Opinion of Dechert Price & Rhoads as to the legality of the shares
            of Common Stock being registered
10.1        Internet Capital Group, L.L.C. 1998 Equity Compensation Plan
10.1.1      Internet Capital Group, Inc. 1999 Equity Compensation Plan
10.1.2      Internet Capital Group, Inc. 1999 Equity Compensation Plan as
            Amended and Restated May 1, 1999
10.2        Internet Capital Group, L.L.C. Option Plan for Non-Employee Managers
10.2.1      Internet Capital Group, Inc. Directors' Option Plan
10.3        Internet Capital Group, L.L.C. Membership Profit Interest Plan
10.4*       Internet Capital Group, Inc. Long-Term Incentive Plan
10.5        Amended and Restated Limited Liability Company Agreement of Internet
            Capital Group, L.L.C. dated September 30, 1998
10.5.1      Amended and Restated Limited Liability Company Agreement of Internet
            Capital Group, L.L.C. dated January 4, 1999
10.6        Securities Holders Agreement dated February 2, 1999 among Internet
            Capital Group, Inc. and certain securities holders named therein
10.7        Amended and Restated 1996 Equity Compensation Plan of VerticalNet,
            Inc. (incorporated by reference to Exhibit 10.1 to Amendment No. 1
            to the Registration Statement on Form S-1 filed by VerticalNet, Inc.
            on January 22, 1999 (Registration No. 333-68053) ("VerticalNet
            Amendment No. 1"))
10.8        Employment Letter with Mark L. Walsh (incorporated by reference to
            Exhibit 10.2 to Amendment No. 2 to the Registration Statement on
            Form S-1 filed by VerticalNet, Inc. on February 8, 1999
            (Registration No. 333-68053) ("VerticalNet Amendment No. 2"))
10.9        Employment Letter with Bary E. Wynkoop (incorporated by reference to
            Exhibit 10.3 to VerticalNet Amendment No. 2)
10.10       Share Purchase Agreement dated September 1, 1998, between Boulder
            Interactive Technology Services Co. and VerticalNet, Inc.
            (incorporated by reference to Exhibit 10.4 to VerticalNet Amendment
            No. 1)
10.11       Agreement and Plan of Merger dated September 30, 1998, among
            VerticalNet, Inc., Informatrix Acquisition Corp., Informatrix
            Worldwide, Inc. and the Stockholders of Informatrix Worldwide, Inc.
            (incorporated by reference to Exhibit 10.5 to VerticalNet Amendment
            No. 2)
10.12       Sponsorship Agreement dated June 30, 1998, between Excite!, Inc. and
            VerticalNet, Inc. (incorporated by reference to Exhibit 10.6 to
            VerticalNet Amendment No. 1)
10.13       Internet Services Agreement dated as of January 19, 1999 by and
            between Compaq Computer Corporation and VerticalNet, Inc.
            (incorporated by reference to Exhibit 10.7 to Amendment No. 3 to the
            Registration Statement on Form S-1 filed by VerticalNet, Inc. on
            February 10, 1999 (Registration No. 333-68053))
10.14       Asset Purchase Agreement dated January 13, 1999 by and among
            VerticalNet, Inc., Coastal Video Communications Corp., Paul V.
            Michels and Phillip P. Price (incorporated by reference to Exhibit
            10.8 to VerticalNet Amendment No. 1)
10.15       Common Stock Purchase Warrant to purchase 40,000 or 60,000 shares of
            VerticalNet, Inc. Common Stock dated November 25, 1998 issued to
            Progress Capital, Inc. (incorporated by reference to Exhibit 10.9 to
            VerticalNet Amendment No. 1)


                                      II-4
<PAGE>
 
10.16       Form of VerticalNet, Inc. Common Stock Purchase Warrant dated
            November 25, 1998 issued in connection with the Convertible Note
            (incorporated by reference to Exhibit 10.10 to VerticalNet Amendment
            No. 1)
10.17       Form of VerticalNet, Inc. Convertible Note dated November 25, 1998
            (incorporated by reference to Exhibit 10.11 to VerticalNet Amendment
            No. 1)
10.18       Series A Preferred Stock Purchase Agreement dated as of September
            12, 1996 between Internet Capital Group, L.L.C. and Water Online,
            Inc. (incorporated by reference to Exhibit 10.12 to VerticalNet
            Amendment No. 2)
10.19       Series D Investor Rights Agreement dated as of May 8, 1998 by and
            among VerticalNet, Inc. and the Investors (incorporated by reference
            to Exhibit 10.13 to VerticalNet Amendment No. 2)
10.20       Registration Rights Agreement dated as of November 25, 1998 between
            VerticalNet, Inc. and the Convertible Note Holders (incorporated by
            reference to Exhibit 10.14 to VerticalNet Amendment No. 2)
10.21       Form of Internet Capital Group, Inc. Common Stock Purchase Warrant
            dated May 10, 1999 issued in connection with the Convertible Note
10.22       Form of Internet Capital Group, Inc. Convertible Note dated May 10,
            1999
10.23*      Stock Purchase Agreement between Internet Capital Group and
            Safeguard Scientifics, Inc.
10.24*      Lease between Internet Capital Group and Safeguard Scientifics, Inc.
            for premises located in Wayne, Pennsylvania.
10.25       Office Lease dated July 22, 1996 between State Street Bank and
            Trust, Internet Capital Group, The Access Fund, Hamilton Lane
            Advisors and Martin S. Gans for office space in San Francisco,
            California.
10.26       Credit Agreement dated as of April 30, 1999 by and among Internet
            Capital Group, Inc., Internet Capital Group Operations, Inc., the
            Banks named therein and PNC Bank, N.A.
10.27       Breakaway Solutions, Inc. Option Agreement dated January 6, 1999 by
            and between Gordon Brooks and Internet Capital Group, L.L.C.
10.28       Benchmarking Partners, Inc. Option Agreement dated January 1, 1997
            by and between Christopher H. Greendale and Internet Capital Group,
            L.L.C.
10.29       Syncra Software, Inc. Option Agreement dated August 1, 1998 by and
            between Michael H. Forster and Internet Capital Group, L.L.C.
21.1        Subsidiaries of Internet Capital Group
23.1        Consent of KPMG LLP
23.2*       Consent of Dechert Price & Rhoads, included in Exhibit 5.1
23.3        Consent of Ernst & Young LLP
23.4        Consent of PricewaterhouseCoopers LLP
24.1        Power of Attorney, included on the signature page hereof
27.1        Financial Data Schedule
99.1        Form of Letter from Internet Capital Group, Inc. to Safeguard
            Scientifics, Inc.'s shareholders describing the Directed Share
            Subscription Program
99.2        Form of Letter from Merrill Lynch & Co. to Safeguard Scientifics,
            Inc.'s shareholders to accompany the Internet Capital Group, Inc.
            letter to Safeguard Scientifics, Inc. shareholders
99.3        Form of Letter from Internet Capital Group, Inc. to Brokers
            describing the Directed Share Subscription Program
99.4        Form of Subscription Form for Directed Share Subscription Program
99.5*       Information placed by Wit Capital on its Web site regarding Internet
            Capital Group, Inc.
--------------------------- 

* To be filed by amendment.

     (b)  Financial Statement Schedules

          None.

                                      II-5
<PAGE>
 
     Schedules other than those listed above have been omitted since they are
not required or are not applicable or the required information is shown in the
financial statements or related notes. Columns omitted from schedules filed have
been omitted since the information is not applicable.

Item 17. Undertakings

     The undersigned Registrant hereby undertakes to provide the underwriters at
the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

     In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

     The undersigned Registrant hereby undertakes that:

     (1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

     (2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

                                      II-6
<PAGE>
 
                                  SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Philadelphia,
Commonwealth of Pennsylvania on the 11th day of May, 1999.

                                    INTERNET CAPITAL GROUP, INC.

                                    By:     Walter W. Buckley, III
                                       ---------------------------
                                         Walter W. Buckley, III
                                         President and Chief Executive Officer
  
                               POWER OF ATTORNEY

     KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Walter W. Buckley, III and David D.
Gathman, and each of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and sign
any registration statement for the same offering covered by the Registration
Statement that is to be effective upon filing pursuant to Rule 462 promulgated
under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>

                Signature                                    Title                                Date
------------------------------------------  ---------------------------------------  ------------------------------
<S>                                         <C>                                      <C>
  Walter W. Buckley, III                    President, Chief Executive Officer and   May 11, 1999
------------------------------------------  Director
Walter W. Buckley, III                      (principal executive officer)

  David D. Gathman                          Chief Financial Officer, Secretary and   May 11, 1999
------------------------------------------  Treasurer
David D. Gathman                            (principal financial and accounting
                                            officer)

  Julian A. Brodsky                         Director                                 May 11, 1999
------------------------------------------
Julian A. Brodsky

  E. Michael Forgash                        Director                                 May 11, 1999
------------------------------------------
E. Michael Forgash

  Kenneth A. Fox                            Director                                 May 11, 1999
------------------------------------------
Kenneth A. Fox
</TABLE> 

                                      II-7
<PAGE>

<TABLE> 
<CAPTION> 

<S>                                         <C>                                      <C>     
 
  Dr. Thomas P. Gerrity                     Director                                 May 11, 1999
------------------------------------------
Dr. Thomas P. Gerrity

  Scott Gould                               Director                                 May 11, 1999
------------------------------------------
Scott Gould

  Robert E. Keith, Jr.                      Director                                 May 11, 1999
------------------------------------------
Robert E. Keith, Jr.
</TABLE>

                                      II-8
<PAGE>
 
                                 EXHIBIT INDEX


Exhibit
Number      Document
-------     --------
1.1*        Form of Underwriting Agreement
2.1         Agreement of Merger, dated February 2, 1999, between Internet
            Capital Group, L.L.C., and Internet Capital Group, Inc.
3.1*        Restated Certificate of Incorporation
3.2*        Amended and Restated Bylaws
4.1         Specimen Certificate for Internet Capital Group's Common Stock
5.1*        Opinion of Dechert Price & Rhoads as to the legality of the shares
            of Common Stock being registered
10.1        Internet Capital Group, L.L.C. 1998 Equity Compensation Plan
10.1.1      Internet Capital Group, Inc. 1999 Equity Compensation Plan
10.1.2      Internet Capital Group, Inc. 1999 Equity Compensation Plan as
            Amended and Restated May 1, 1999
10.2        Internet Capital Group, L.L.C. Option Plan for Non-Employee Managers
10.2.1      Internet Capital Group, Inc. Directors' Option Plan
10.3        Internet Capital Group, L.L.C. Membership Profit Interest Plan
10.4*       Internet Capital Group, Inc. Long-Term Incentive Plan
10.5        Amended and Restated Limited Liability Company Agreement of Internet
            Capital Group, L.L.C. dated September 30, 1998
10.5.1      Amended and Restated Limited Liability Company Agreement of Internet
            Capital Group, L.L.C. dated January 4, 1999
10.6        Securities Holders Agreement dated February 2, 1999 among Internet
            Capital Group, Inc. and certain securities holders named therein
10.7        Amended and Restated 1996 Equity Compensation Plan of VerticalNet,
            Inc. (incorporated by reference to Exhibit 10.1 to Amendment No. 1
            to the Registration Statement on Form S-1 filed by VerticalNet, Inc.
            on January 22, 1999 (Registration No. 333-68053) ("VerticalNet
            Amendment No. 1"))
10.8        Employment Letter with Mark L. Walsh (incorporated by reference to
            Exhibit 10.2 to Amendment No. 2 to the Registration Statement on
            Form S-1 filed by VerticalNet, Inc. on February 8, 1999
            (Registration No. 333-68053) ("VerticalNet Amendment No. 2"))
10.9        Employment Letter with Bary E. Wynkoop (incorporated by reference to
            Exhibit 10.3 to VerticalNet Amendment No. 2)
10.10       Share Purchase Agreement dated September 1, 1998, between Boulder
            Interactive Technology Services Co. and VerticalNet, Inc.
            (incorporated by reference to Exhibit 10.4 to VerticalNet Amendment
            No. 1)
10.11       Agreement and Plan of Merger dated September 30, 1998, among
            VerticalNet, Inc., Informatrix Acquisition Corp., Informatrix
            Worldwide, Inc. and the Stockholders of Informatrix Worldwide, Inc.
            (incorporated by reference to Exhibit 10.5 to VerticalNet Amendment
            No. 2)
10.12       Sponsorship Agreement dated June 30, 1998, between Excite!, Inc. and
            VerticalNet, Inc. (incorporated by reference to Exhibit 10.6 to
            VerticalNet Amendment No. 1)
10.13       Internet Services Agreement dated as of January 19, 1999 by and
            between Compaq Computer Corporation and VerticalNet, Inc.
            (incorporated by reference to Exhibit 10.7 to Amendment No. 3 to the
            Registration Statement on Form S-1 filed by VerticalNet, Inc. on
            February 10, 1999 (Registration No. 333-68053))
10.14       Asset Purchase Agreement dated January 13, 1999 by and among
            VerticalNet, Inc., Coastal Video Communications Corp., Paul V.
            Michels and Phillip P. Price (incorporated by reference to Exhibit
            10.8 to VerticalNet Amendment No. 1)
10.15       Common Stock Purchase Warrant to purchase 40,000 or 60,000 shares of
            VerticalNet, Inc. Common Stock dated November 25, 1998 issued to
            Progress Capital, Inc. (incorporated by reference to Exhibit 10.9 to
            VerticalNet Amendment No. 1)


                                      II-9
<PAGE>
 
10.16       Form of VerticalNet, Inc. Common Stock Purchase Warrant dated
            November 25, 1998 issued in connection with the Convertible Note
            (incorporated by reference to Exhibit 10.10 to VerticalNet Amendment
            No. 1)
10.17       Form of VerticalNet, Inc. Convertible Note dated November 25, 1998
            (incorporated by reference to Exhibit 10.11 to VerticalNet Amendment
            No. 1)
10.18       Series A Preferred Stock Purchase Agreement dated as of September
            12, 1996 between Internet Capital Group, L.L.C. and Water Online,
            Inc. (incorporated by reference to Exhibit 10.12 to VerticalNet
            Amendment No. 2)
10.19       Series D Investor Rights Agreement dated as of May 8, 1998 by and
            among VerticalNet, Inc. and the Investors (incorporated by reference
            to Exhibit 10.13 to VerticalNet Amendment No. 2)
10.20       Registration Rights Agreement dated as of November 25, 1998 between
            VerticalNet, Inc. and the Convertible Note Holders (incorporated by
            reference to Exhibit 10.14 to VerticalNet Amendment No. 2)
10.21       Form of Internet Capital Group, Inc. Common Stock Purchase Warrant
            dated May , 1999 issued in connection with the Convertible Note
10.22       Form of Internet Capital Group, Inc. Convertible Note dated May 10,
            1999
10.23*      Stock Purchase Agreement between Internet Capital Group and
            Safeguard Scientifics, Inc.
10.24*      Lease between Internet Capital Group and Safeguard Scientifics, Inc.
            for premises located in Wayne, Pennsylvania.
10.25       Office Lease dated July 22, 1996 between State Street Bank and
            Trust, Internet Capital Group, The Access Fund, Hamilton Lane
            Advisors and Martin S. Gans for office space in San Francisco,
            California.
10.26       Credit Agreement dated as of April 30, 1999 by and among Internet
            Capital Group, Inc., Internet Capital Group Operations, Inc., the
            Banks named therein and PNC Bank, N.A.
10.27       Breakaway Solutions, Inc. Option Agreement dated January 6, 1999 by
            and between Gordon Brooks and Internet Capital Group, L.L.C.
10.28       Benchmarking Partners, Inc. Option Agreement dated January 1, 1997
            by and between Christopher H. Greendale and Internet Capital Group,
            L.L.C.
10.29       Syncra Software, Inc. Option Agreement dated August 1, 1998 by and
            between Michael H. Forster and Internet Capital Group, L.L.C.
21.1        Subsidiaries of Internet Capital Group
23.1        Consent of KPMG LLP
23.2*       Consent of Dechert Price & Rhoads, included in Exhibit 5.1
23.3        Consent of Ernst & Young LLP
23.4        Consent of PricewaterhouseCoopers LLP
24.1        Power of Attorney, included on the signature page hereof
27.1        Financial Data Schedule
99.1        Form of Letter from Internet Capital Group, Inc. to Safeguard
            Scientifics, Inc.'s shareholders describing the Directed Share
            Subscription Program
99.2        Form of Letter from Merrill Lynch & Co. to Safeguard Scientifics,
            Inc.'s shareholders to accompany the Internet Capital Group, Inc.
            letter to Safeguard Scientifics, Inc. shareholders
99.3        Form of Letter from Internet Capital Group, Inc. to Brokers
            describing the Directed Share Subscription Program
99.4        Form of Subscription Form for Directed Share Subscription Program
99.5*       Information placed by Wit Capital on its Web site regarding Internet
            Capital Group, Inc.
---------------------- 

* To be filed by amendment.

                                     II-10
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{"company-data": {"conformed-name": "INTERNET CAPITAL GROUP INC", "cik": "0001085621", "assigned-sic": "", "irs-number": "232996071", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-78193", "film-number": "99616467"}, "business-address": {"street1": "800 SAFEGUARD BUILDING", "street2": "435 DEVON PARK DRIVE", "city": "WAYNE", "state": "PA", "zip": "19087", "phone": "6109890111"}, "mail-address": {"street1": "800 SAGEGUARD BUILDING", "street2": "435 DEVON PARK DRIVE", "city": "WAYNE", "state": "PA", "zip": "19087"}}
As filed with the Securities and Exchange Commission on May 11, 1999.
                                                           Registration No. 333-
================================================================================
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549
                             --------------------
                                   FORM S-1
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
                             --------------------
                         INTERNET CAPITAL GROUP, INC.
            (Exact name of Registrant as specified in its charter)
Delaware                         7389                  23-2996071
  (State or Other Jurisdiction    (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number)  Identification No.)
--------------------
                             435 Devon Park Drive
                                 Building 800
                           Wayne, Pennsylvania 19087
                                (610) 989-0111
  (Address, Including Zip Code, and Telephone Number, Including Area Code, of
                   Registrant's Principal Executive Offices)
                             --------------------
                            Walter W. Buckley, III
                     President and Chief Executive Officer
                         Internet Capital Group, Inc.
                             435 Devon Park Drive
                                 Building 800
                           Wayne, Pennsylvania 19087
                                (610) 989-0111
(Name, address including zip code, and telephone number, including area code, of
                              agent for service)
                             --------------------
                                With copies to:
Christopher G. Karras, Esq.                           Bruce K. Dallas, Esq.
     Dechert Price & Rhoads                              Davis Polk & Wardwell
    4000 Bell Atlantic Tower                              450 Lexington Avenue
        1717 Arch Street                                New York, New York 10017
Philadelphia, Pennsylvania 19103                             (212) 450-4000
         (215) 994-4000
--------------------
     Approximate date of commencement of proposed sale to the public:  As soon
as practicable after the effective date of this Registration Statement.
     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
     If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
                             --------------------
                        CALCULATION OF REGISTRATION FEE
================================================================================
                                           Proposed Maximum
           Title of Each Class of         Aggregate Offering       Amount of
         Securities to be Registered           Price (1)        Registration Fee
--------------------------------------------------------------------------------
Common Stock, par value $.001 per share    $210,000,000          $58,380
================================================================================
(1) Estimated solely for the purpose of calculating the registration fee
    pursuant to Rule 457(o) under the Securities Act of 1933.
                             -------------------- 
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
Explanatory Note

     This Registration Statement contains two forms of prospectus. One will be
used in connection with an offering of the registrant's common stock to the
general public and the other will be used in the Directed Share Subscription
Program offering of the registrant's common stock to shareholders of Safeguard
Scientifics, Inc. The prospectuses will be identical except that a letter to
shareholders of Safeguard Scientifics, Inc. detailing the procedures for the
Directed Share Subscription Program will be bound to the cover of the prospectus
to be used in that program. The letter to shareholders of Safeguard Scientifics,
Inc. is filed as Exhibit 99.1 to this Registration Statement.
The Information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting offers to buy these securities in
any state where the offer or sale is not permitted.

                             Subject to Completion
                   Preliminary Prospectus dated May 11, 1999
PROSPECTUS
----------
                                                     Shares

                  [Internet Capital Group logo appears here]

                                 Common Stock

                                 ------------

  This is Internet Capital Group, Inc.'s initial public offering of shares of
common stock.

  We expect the public offering price to be between $       and $       per
share. Currently, no public market exists for the shares. After pricing of the
offering, we expect that the common stock will trade on the Nasdaq National
Market under the symbol "ICGE."

  Investing in our common stock involves risks which are described in the "Risk
Factors" section beginning on page 4 of this prospectus.

                                 ------------

                                                          Per Share   Total
                                                          ---------   -----
Public Offering Price.................................        $         $
Underwriting Discount.................................        $         $
Proceeds, before expenses, to Internet                                
 Capital Group, Inc...................................        $         $
 
  The underwriters may also purchase up to an additional         shares at the
public offering price, less the underwriting discount, within 30 days from the
date of this prospectus to cover over-allotments.

  At our request, the underwriters have reserved              shares for sale at
the public offering price to our employees, directors and other persons with
relationships with us. See "Underwriting." As part of this offering, we are
offering           shares at the public offering price to certain shareholders
of Safeguard Scientifics, Inc. See "The Directed Share Subscription Program."

  Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

  The shares of common stock will be ready for delivery in New York, New York on
or about                     , 1999.
                                 ------------
Merrill Lynch & Co.
       BancBoston Robertson Stephens
               BT Alex. Brown
                       NationsBanc Montgomery Securities LLC
                              Wit Capital Corporation

                                 ------------
 
            The date of this prospectus is                  , 1999.
TABLE OF CONTENTS
                                                                            Page
                                                                            ----
Prospectus Summary...........................................................  1
Risk Factors.................................................................  4
Use Of Proceeds.............................................................. 14
Dividend Policy.............................................................. 14
The Reorganization........................................................... 14
The Directed Share Subscription Program...................................... 14
Capitalization............................................................... 15
Dilution..................................................................... 16
Selected Consolidated Financial Data......................................... 17
Management's Discussion And Analysis Of Financial Condition And Results Of
     Operations.............................................................. 18
Our Business................................................................. 26
Management................................................................... 44
Certain Transactions......................................................... 57
Principal Shareholders....................................................... 60
Description Of Capital Stock................................................. 63
Shares Eligible For Future Sale.............................................. 66
Underwriting................................................................. 67
Legal Matters................................................................ 70
Experts...................................................................... 70
Where You Can Find More Information.......................................... 71
Index to Consolidated Financial Statements...................................F-1
FORWARD-LOOKING STATEMENTS

     This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about Internet Capital Group and our Partner
Companies, including, among other things:

     .  Development of an e-commerce market. We define e-commerce as conducting
        or facilitating business transactions over the Internet.

     .  Our ability to identify trends in our markets and the markets of our
        Partner Companies and to offer new solutions that address the changing
        needs of these markets.

     .  Our ability to successfully execute our business model.

     .  Our Partner Companies' ability to compete successfully against direct
        and indirect competitors.

     .  Our ability to acquire interests in additional companies.

     .  Growth in demand for Internet products and services.

     .  Adoption of the Internet as an advertising medium.

     We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.

                                ------------- 

     The terms "Internet Capital Group," "our" and "we," as used in this
prospectus, refer to Internet Capital Group, L.L.C. and its wholly-owned
subsidiary, Internet Capital Group Operations, Inc. (formerly known as Internet
Capital Group, Inc.), for periods before the reorganization of Internet Capital
Group, L.L.C. into Internet Capital Group, Inc. and refer to Internet Capital
Group, Inc. and this subsidiary for periods after the reorganization, except
where it is clear that the term refers only to the parent company.

     Although we refer to the companies in which we have acquired an equity
interest as our "Partner Companies" and that we have a "partnership" with these
companies, we do not act as an agent or legal representative for any of our
Partner Companies, we do not have the power or authority to legally bind any of
our Partner Companies and we do not have the types of liabilities for our
Partner Companies that a general partner of a partnership would have.

     You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.

     We intend to furnish our shareholders with annual reports containing
consolidated financial statements audited by an independent accounting firm.
PROSPECTUS SUMMARY

     This summary is not complete and may not contain all of the information
that may be important to you. You should read the entire prospectus carefully,
including the financial data and related notes, before making an investment
decision. Unless otherwise specifically stated, the information in this
prospectus has been adjusted to reflect the automatic conversion of all
outstanding convertible notes into shares of common stock, but does not take
into account the possible sale of additional shares of common stock to the
underwriters by us pursuant to the underwriters' right to purchase additional
shares to cover over-allotments. In addition, unless otherwise indicated, all
information in this prospectus gives effect to the reorganization described in
"The Reorganization" that was effected before this offering.

                         Internet Capital Group, Inc.

     Internet Capital Group is an Internet holding company primarily engaged in
managing and operating a network of business-to-business, or B2B, e-commerce
companies. Our goal is to become the premier B2B e-commerce company by
establishing an e-commerce presence in major segments of the economy. We believe
that our sole focus on the B2B e-commerce industry allows us to capitalize
rapidly on new opportunities and to attract and develop leading B2B e-commerce
companies. As of April 30, 1999, we owned interests in 29 B2B e-commerce
companies which we refer to as our Partner Companies.

     Our operating strategy is to integrate our Partner Companies into a
collaborative network that leverages our collective knowledge and resources. 
Acting as a long-term partner, we use these collective resources to actively
develop the business strategies, operations and management teams of our Partner
Companies. Our resources include the experience, industry relationships and
specific expertise of our management team, our Partner Companies and our
Advisory Board. Currently, our Advisory Board consists of individuals with
executive-level experience in general management, sales and marketing and
information technology at such leading companies as Cisco Systems, Coca-Cola
Company, Exodus Communications, IBM, MasterCard, Merrill Lynch and Microsoft. We
believe that building successful B2B e-commerce companies enhances the ability
of our collaborative network to facilitate innovation and growth among our
Partner Companies.

     The substantial growth in B2B e-commerce creates tremendous market
opportunities for new emerging companies. International Data Corporation
estimates that the B2B e-commerce market will grow from $35 billion in 1998 to
more than $1.1 trillion by 2003. We focus on two types of B2B e-commerce
companies, which we call market makers and infrastructure service providers.

     .  Market makers bring buyers and sellers together by creating Internet-
        based markets for the exchange of goods, services and information.
        Market makers enable more effective and lower cost commerce for
        traditional businesses by providing access through the Internet to a
        broader range of buyers and sellers. Market makers typically operate in
        a specific industry and tailor their business models to match a target
        market's distinct characteristics. Our Partner Company network currently
        includes significant interests in 13 market makers: Arbinet, BidCom,
        Collabria, CommerX, ComputerJobs.com, Deja.com, e-Chemicals, Internet
        Commerce Systems, ONVIA.com, PlanSponsor Exchange, RapidAutoNet,
        Universal Access and VerticalNet.

     .  Infrastructure service providers sell software and services to 
        businesses engaged in e-commerce. Many businesses need assistance in
        designing business practices to take advantage of the Internet and in
        building and managing the technological infrastructure needed to support
        B2B e-commerce. Our Partner Company network currently includes
        significant interests in 16 infrastructure service providers:
        Benchmarking Partners, Blackboard, Breakaway Solutions, ClearCommerce,
        Context Integration, Entegrity Solutions, LinkShare, MessageQuest,
        PrivaSeek, SageMaker, ServiceSoft, Sky Alland Marketing, SMART
        Technologies, Syncra Software, US Interactive and Vivant!.

     We have grown rapidly since our inception in 1996. In 1998, we added twelve
B2B e-commerce companies to our network and from the beginning of 1999 to April
30, 1999, we added eight B2B e-commerce companies to our network.
Our principal executive office is located at 435 Devon Park Drive, Building
800, Wayne, Pennsylvania 19087 and our telephone number is (610) 989-0111. We
also maintain offices in San Francisco, California, and Boston, Massachusetts.
We maintain a site on the World Wide Web at www.ICGE.com. The information on our
Web site is not part of this prospectus.

                                 This Offering

     The offering information provided below assumes that the underwriters'
over-allotment option is not exercised and excludes:

     .  shares of common stock reserved for issuance under our 1999 Equity
        Compensation Plan, under which options to purchase 9,631,500 shares were
        outstanding as of April 30, 1999 at a weighted average exercise price of
        $2.30 per share, and

     .  warrants outstanding to purchase             shares at an exercise price
        of $            per share.

Common stock offered................................            shares

Common stock to be outstanding after this offering..            shares

Use of proceeds.....................................  We intend to use the
                                                      offering proceeds for
                                                      repayment of outstanding
                                                      debt, acquisitions and
                                                      working capital.

Risk factors........................................  See "Risk Factors" and the
                                                      other information included
                                                      in this prospectus for a
                                                      discussion of factors you
                                                      should carefully consider
                                                      before deciding to invest
                                                      in shares of our common
                                                      stock.

Nasdaq National Market symbol.......................  ICGE

                    The Directed Share Subscription Program

     As part of this offering, we are offering shares of our common stock to
certain shareholders of Safeguard Scientifics, Inc. in a directed share
subscription program. The program is described in greater detail below under the
heading "The Directed Share Subscription Program."

                                       2
Summary Consolidated Financial Data

     The following summary historical and pro forma consolidated financial
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our audited 
Consolidated Financial Statements and related Notes thereto included elsewhere
in this prospectus. The summary pro forma information does not purport to 
represent what our results would have been if these events had occurred at the
dates indicated. The pro forma consolidated statement of operations data
reflects our being taxed as a C-corporation since January 1, 1998, although we
have been taxed as a C-corporation since February 2, 1999. The pro forma
consolidated balance sheet data reflects the issuance of    shares of our common
stock at $    per share from January through March, 1999 and the issuance of $90
million of our convertible notes in May, 1999. The pro forma as adjusted
consolidated balance sheet data reflects the automatic converion of our
convertible notes into      shares of our common stock upon completion of this
offering and the sale of shares of our common stock in this offering at an
assumed initial public offering price of $ per share and after deduction of
estimated underwriting discounts and commissions and estimated offering
expenses.
March 4, 1996
                                                              (inception) to
                                                               December 31,             Year Ended December 31,
                                                                                 --------------------------------------
                                                                  1996                 1997                 1998
                                                            -----------------    -----------------    -----------------
Consolidated Statement of Operations Data:
 
Revenue
 Partner Company Operations.................................      $   285,140         $    791,822         $  3,134,769
 General ICG Operations.....................................               --                   --                   --
                                                            -----------------    -----------------    -----------------
                                                                  $   285,140         $    791,822         $  3,134,769
                                                            =================    =================    =================
 
Operating Loss
 Partner Company Operations.................................      $  (789,762)        $ (4,663,796)        $(16,065,225)
 General ICG Operations.....................................       (1,360,821)          (2,054,118)          (3,512,586)
                                                            -----------------    -----------------    -----------------
                                                                  $(2,150,583)        $ (6,717,914)        $(19,577,811)
                                                            =================    =================    =================
 
Net Income (Loss)
 Partner Company Operations.................................      $  (796,202)        $ (4,778,902)        $(16,150,496)
 General ICG Operations.....................................       (1,266,283)          (1,800,726)          30,049,424
                                                            -----------------    -----------------    -----------------
                                                                  $(2,062,485)        $ (6,579,628)        $ 13,898,928
                                                            =================    =================    =================
 
Pro forma income tax provision..............................                                               $  5,142,603
Pro forma net income........................................                                                  8,756,325
Pro forma net income per share -- basic and diluted.........
Pro forma shares used in computing net income per share.....
 Basic......................................................
 Diluted....................................................
 
                                                                                  December 31, 1998
                                                            -----------------------------------------------------------
                                                                                                          Pro Forma
                                                                  Actual              Pro Forma          As Adjusted
                                                            -----------------    -----------------    -----------------
 
Consolidated Balance Sheet Data:
 
Cash and cash equivalents...................................      $26,840,904         $116,840,904
Working capital.............................................       20,452,438          110,452,438
Total assets................................................       96,785,975          186,785,975
Long-term debt..............................................          351,924              351,924
Convertible subordinated notes..............................               --           90,000,000
Total shareholders' equity..................................       80,724,378           80,724,378
3
RISK FACTORS

     Investing in our common stock will provide you with an equity ownership
interest in Internet Capital Group. As one of our shareholders, your investment
will be subject to risks inherent to our business. The price of our common stock
may decline. You should carefully consider the following factors as well as
other information contained in this prospectus before deciding to invest in
shares of our common stock.

RISKS PARTICULAR TO INTERNET CAPITAL GROUP

We have a limited operating history upon which you may evaluate us

     We were formed in March 1996. Although we have grown significantly since
then, we have a limited operating history upon which you may evaluate our
business and prospects. We and our Partner Companies are among the many
companies that have entered into the relatively new B2B e-commerce market. Many
of our Partner Companies are in the early stages of their development. Our
business and prospects must be considered in light of the risk, expense and
difficulties frequently encountered by companies in an early stage of
development, particularly companies in new and rapidly evolving markets such as
B2B e-commerce. If we are unable to effectively allocate our resources and help
grow existing Partner Companies, our stock price may be adversely affected and
we may be unable to execute our strategy of developing a collaborative network
of Partner Companies.

Our business depends upon the performance of our Partner Companies, which is
uncertain

     Economic, governmental, industry and internal company factors outside our
control affect each of our Partner Companies. A significant portion of our
assets is comprised of ownership interests in our Partner Companies. In
particular, the value of our holdings in VerticalNet could represent a
significant portion of our market capitalization. If our Partner Companies do
not succeed, the value of our assets will decline. Some of the risks relating to
our Partner Companies are described below under "Risks Particular to Our Partner
Companies."

Our business model is unproven

     Our strategy is based on an unproven business model. Our business model
depends on the willingness of companies to join our collaborative network and
the ability of the collaborative network to assist our Partner Companies. Our
business model depends on our ability to share information within our network of
Partner Companies. If competition develops among our Partner Companies, we may
be unable to fully benefit from the sharing of information within our network of
Partner Companies. If we cannot convince companies of the value of our business
model, our ability to attract new companies will be adversely affected and our
strategy of building a collaborative network may not succeed.

We may have to take certain actions to avoid registration under the Investment
Company Act of 1940

     We believe that we are primarily and actively engaged in the business of e-
commerce through our Partner Companies and have applied to the Securities and
Exchange Commission for an exemptive order from the Investment Company Act of
1940. If we receive the exemptive order, we would not be regulated by this Act
as long as we continue to be primarily engaged in e-commerce through majority-
owned subsidiaries or controlled companies. However, we cannot be certain that
the Securities and Exchange Commission will grant this exemption. If it does
not, we may need to make significant changes to our business activities.

     Generally, a company must register under the Investment Company Act and
comply with significant restrictions on operations and transactions with
affiliates if its investment securities exceed 40% of the company's total
assets, or if it holds itself out as being primarily engaged in the business of
investing, owning or holding securities. Under an alternative test, a company is
not required to register under the Investment Company Act if not more than 45%
of its total assets consist of, and not more than 45% of its net income is
derived from, securities other than government securities and securities of
majority-owned subsidiaries and companies primarily controlled by it. We are
currently unable to rely on this alternative test as a result of net income
generated from the sale of two minority interests and instead are relying on a
one-year temporary exemption from the registration requirements of the
Investment Company Act.

                                       4
By May 2000 if the exemptive order has not been obtained, or earlier if we
believe the current temporary exemption is no longer available, we may need to
take certain actions to avoid the requirement to register as an investment
company. For example, we may be compelled to acquire additional income or loss
generating assets that we might not otherwise have acquired, be forced to forego
opportunities to acquire interests in companies that would be important to our
strategy or be forced to forego the sale of minority interests we would
otherwise want to sell. In addition, we may need to sell some assets which are
considered to be investment securities, including interests in Partner
Companies. It is not feasible for us to register as an investment company
because the Investment Company Act regulations are inconsistent with our
strategy of actively managing, operating and promoting collaboration among our
network of Partner Companies.

Fluctuations in our quarterly results may adversely affect our stock price

     We expect that our quarterly results will fluctuate significantly due to
many factors, including:

     .  the operating results of our Partner Companies;

     .  completed acquisitions;

     .  changes in our methods of accounting for our Partner Company interests,
        which may result from changes in our ownership percentages of our
        Partner Companies;

     .  sales of equity securities by our Partner Companies, which could cause
        us to recognize gains or losses under applicable accounting rules;

     .  the development of the B2B e-commerce market;

     .  intense competition;

     .  management of our growth and the growth of our Partner Companies; and

     .  divestitures of interests in our Partner Companies.

We believe that period-to-period comparisons of our operating results are not
meaningful. Additionally, if our operating results in one or more quarters do
not meet securities analysts' or your expectations, the price of our common
stock could decrease.

Our success is dependent on our key personnel and the key personnel of our
Partner Companies

     We believe that our success will depend on continued employment by us and
our Partner Companies of senior management and key technical personnel. Our
success also depends on the continued assistance of our Advisory Board members,
who will from time to time leave our Advisory Board. If one or more members of
our senior management, our Partner Companies' senior management or our Advisory
Board were unable or unwilling to continue in their present positions, our
business and operations could be disrupted.

     Many of our management personnel have worked for us for less than one year.
Our efficiency may be limited while these employees and future employees are
being integrated into our operations. In addition, we may be unable to find and
hire additional qualified management and professional personnel to help lead us
and our Partner Companies.

     The success of some of our Partner Companies also depends on their having
highly trained technical and marketing personnel. Our Partner Companies will
need to continue to hire additional personnel as their businesses grow. A
shortage in the number of trained technical and marketing personnel could limit
the ability of our Partner Companies to increase sales of their existing
products and services and launch new product offerings.

We have had a history of operating losses and expect continued operating losses
in the foreseeable future

     For the year ended December 31, 1998, we realized net income of $13.9
million primarily due to $34.4 million of non-operating income from the sale of
certain minority interests. During that same year, net operating losses totaled
$19.6 million. In addition, we incurred operating losses of $6.7 million in 1997

                                       5
and $2.2 million in 1996. We expect to continue to incur operating losses for
the foreseeable future and, if we ever have operating profits, we may not be
able to sustain them.

     Our expenses will increase as we build an infrastructure to implement our
business model. For example, we expect to hire additional employees, expand
information technology systems and lease more space for our corporate offices.
In addition, we plan to significantly increase our operating expenses to:

     .  broaden our Partner Company support capabilities;

     .  explore acquisition opportunities and alliances with other companies;
        and

     .  facilitate business arrangements among our Partner Companies.

Expenses may also increase due to the potential effect of goodwill amortization
and other charges resulting from completed and future acquisitions. If any of
these and other expenses are not accompanied by increased revenue, our
operating losses will be greater than we anticipate.

Our Partner Companies are growing rapidly and we may have difficulty assisting
them in managing their growth

     Our Partner Companies have grown, and we expect them to continue to grow,
rapidly by adding new products and services and hiring new employees. This
growth is likely to place significant strain on their resources and on the
resources we allocate to assist our Partner Companies. In addition, our
management may be unable to convince our Partner Companies to adopt our ideas
for effectively and successfully managing their growth.

We may compete with some of our shareholders and Partner Companies, and our
Partner Companies may compete with each other

     We may compete with some of our shareholders and Partner Companies for 
Internet-related opportunities. After this offering, Comcast Corporation, 
Compaq Computer Corporation, General Electric Capital Corporation and Safeguard
Scientifics, Inc. will beneficially own      %,         %,            % and    
     % of our common stock, respectively. These shareholders may compete with 
us to acquire interests in B2B e-commerce companies. Comcast Corporation,
General Electric Capital Corporation and Safeguard Scientifics, Inc. currently
each have a designee as a member of our board of directors, which may give these
companies access to our business plan and knowledge about potential
acquisitions. In addition, we may compete with our Partner Companies to acquire
interests in B2B e-commerce companies, and our Partner Companies may compete
with each other for acquisitions or other B2B e-commerce opportunities. In
particular, VerticalNet seeks to expand, in part through acquisition, its number
of B2B communities. VerticalNet, therefore, may seek to acquire companies that
we would find attractive. While we may partner with VerticalNet on future
acquisitions, we have no current contractual obligations to do so. We do not
have any contracts or other understandings with our shareholders or Partner
Companies that would govern the resolution of these potential conflicts. Such
competition, and the complications posed by the designated directors, may deter
companies from partnering with us and may limit our business opportunities.

We face competition from potential acquirors of Internet-related companies

     We face competition from other capital providers including publicly-traded
Internet companies, venture capital companies and large corporations. Many of
these competitors have greater financial resources and brand name recognition
than we do. These competitors may limit our opportunity to acquire interests in
new Partner Companies. If we cannot acquire interests in attractive companies,
our strategy to build a collaborative network of Partner Companies may not
succeed.

Our success could be impaired by future market conditions

     Our strategy involves creating value for our shareholders and the employees
of our Partner Companies by helping our Partner Companies grow and access the
capital markets. We are therefore dependent on the market for Internet-related
companies in general and for initial public offerings of those companies in
particular. To date, there have been a substantial number of Internet-related
initial public offerings and additional offerings are expected to be made in the
future. If the market for Internet-related companies and initial public
offerings were to 

                                       6
weaken for an extended period of time, the ability of our Partner Companies to
grow and access the capital markets will be impaired, and we may need to provide
additional capital to our Partner Companies.

We may be unable to obtain maximum value for our Partner Company interests

     We have significant positions in our Partner Companies. While we generally
do not anticipate selling our interests in our Partner Companies, if we were to
divest all or part of them, we may not receive maximum value for these
positions. For Partner Companies with publicly-traded stock, we may be unable to
sell our interest at then-quoted market prices. Furthermore, for those Partner
Companies that do not have publicly traded stock, the realizable value of our
interests may ultimately prove to be lower than the carrying value currently 
reflected in our consolidated financial statements.

We may not have opportunities to acquire interests in additional companies

     We may be unable to identify companies that complement our strategy, and
even if we identify a company that complements our strategy, we may be unable to
acquire an interest in the company for many reasons, including:

     .  a failure to agree on the terms of the acquisition, such as the amount
        or price of our acquired interest;

     .  incompatibility between us and management of the company;

     .  competition from other acquirors of B2B e-commerce companies;

     .  a lack of capital to acquire an interest in the company; and

     .  the unwillingness of the company to partner with us.

If we cannot acquire interests in attractive companies, our strategy to build a
collaborative network of Partner Companies may not succeed.

Our business may be disrupted or adversely affected by future acquisitions

     We have acquired, and plan to continue to acquire, significant interests in
Internet-related companies that complement our business strategy. In the future,
we may acquire larger percentages or larger interests in companies than we have
in the past, or we may seek to acquire 100% ownership of companies. These larger
acquisitions may place significantly greater strain on our resources, ability to
manage such companies and ability to integrate them into our collaborative
network. Future acquisitions are subject to the following risks:

     .  Our acquisitions may cause a disruption in our ongoing support of our
        Partner Companies, distract our management and other resources and make
        it difficult to maintain our standards, controls and procedures.

     .  We may acquire interests in companies in Internet-related markets in
        which we have little experience.

     .  We may not be able to facilitate collaboration between our Partner
        Companies and new companies that we acquire.

     .  To fund future acquisitions we may be required to incur debt or issue
        equity securities, which may be dilutive to existing shareholders.

Our systems and those of our Partner Companies and third parties may not be Year
2000 compliant which could disrupt our operations and the operations of our
Partner Companies

     Many computer programs have been written using two digits rather than four
digits to define the applicable year. This poses a problem at the end of the
century because these computer programs may recognize a date using "00" as the
year 1900, rather than the year 2000. This in turn could result in major system
failures or miscalculations and is generally referred to as the Year 2000 issue.
We may realize exposure and risk if our 

                                       7
systems and the systems on which our Partner Companies are dependent to conduct
their operations are not Year 2000 compliant. Our potential areas of exposure
include products purchased from third parties, computers, software, telephone
systems and other equipment used internally. If our present efforts and the
efforts of our Partner Companies to address the Year 2000 compliance issues are
not successful, or if distributors, suppliers and other third parties with which
we and our Partner Companies conduct business do not successfully address such
issues, our business and the businesses of our Partner Companies may not be
operational for a period of time. If the Web-hosting facilities of our Partner
Companies are not Year 2000 compliant, their production Web sites would be
unavailable and they would not be able to deliver services to their users.

RISKS PARTICULAR TO OUR PARTNER COMPANIES

Fluctuation in the market price of VerticalNet common stock may affect the
market price of our common stock

     VerticalNet is one of our Partner Companies. As of April 30, 1999, our
holdings in VerticalNet were valued at approximately $700 million. This could
represent a significant portion of our market capitalization. The market price
of VerticalNet's common stock has been highly volatile. Fluctuations in the
market price of VerticalNet's common stock are likely to impact the market price
of our common stock.

     VerticalNet's results of operations, and accordingly the price of its
common stock, may be adversely affected by the following factors:

     .  lack of acceptance of the Internet as an advertising medium;

     .  inability to develop a large base of users of its Web sites who possess
        demographic characteristics attractive to advertisers;

     .  lower advertising rates;

     .  slow development of the e-commerce market;

     .  lack of acceptance of its Internet content;

     .  loss of key content providers;

     .  intense competition;

     .  loss of key personnel; and

     .  inability to manage growth.

The success of our Partner Companies depends on the development of the B2B e-
commerce market, which is uncertain

     All of our Partner Companies rely on the Internet for the success of their
businesses. The development of the e-commerce market is in its early stages. If
widespread commercial use of the Internet does not develop, or if the Internet
does not develop as an effective medium for the provision of products and
services, our Partner Companies may not succeed.

     Our long-term success depends on widespread market-acceptance of B2B e-
commerce. A number of factors could prevent such acceptance, including the
following:

     .  the unwillingness of businesses to shift from traditional processes to
        B2B e-commerce processes;

     .  the necessary network infrastructure for substantial growth in usage of
        B2B e-commerce may not be adequately developed;

     .  increased government regulation or taxation may adversely affect the
        viability of B2B e-commerce;

                                       8
.  insufficient availability of telecommunication services or changes in
        telecommunication services could result in slower response times for the
        users of B2B e-commerce; and

     .  concern and adverse publicity about the security of B2B e-commerce
        transactions.

There is intense competition for the internet products and services our Partner
Companies offer

     Competition for Internet products and services is intense. As the market
for B2B e-commerce grows, we expect that competition will intensify. Barriers to
entry are minimal, and competitors can offer products and services at a
relatively low cost. Our Partner Companies compete for a share of a customer's:

     .  purchasing budget for services, materials and supplies with other online
        providers and traditional distribution channels;

     .  dollars spent on consulting services with many established information
        systems and management consulting firms; and

     .  advertising budget with online services and traditional off-line media,
        such as print and trade associations.

In addition, some of our Partner Companies compete to attract and retain a
critical mass of buyers and sellers. Several companies offer competitive
solutions that compete with one or more of our Partner Companies. We expect that
additional companies will offer competing solutions on a stand-alone or combined
basis in the future. Furthermore, our Partner Companies' competitors may develop
Internet products or services that are superior to, or have greater market
acceptance than, the solutions offered by our Partner Companies. If our Partner
Companies are unable to compete successfully against their competitors, our
Partner Companies may fail.

     Many of our Partner Companies' competitors have greater brand recognition
and greater financial, marketing and other resources than our Partner Companies.
This may place our Partner Companies at a disadvantage in responding to their
competitors' pricing strategies, technological advances, advertising campaigns,
strategic partnerships and other initiatives.

Some of our Partner Companies may be unable to protect their proprietary rights
and may infringe on the proprietary rights of others

     Proprietary rights are important to the success and competitive position of
many of our Partner Companies. Although our Partner Companies seek to protect
their proprietary rights, their actions may be inadequate to protect any
trademarks and other proprietary rights. In addition, effective copyright and
trademark protection may be unenforceable or limited in certain countries, and
the global nature of the Internet makes it impossible for some of our Partner
Companies to control the dissemination of their work and use of their services.
Some of our Partner Companies also license content from third parties and it is
possible that they could become subject to infringement actions based upon the
content licensed from those third parties. Our Partner Companies generally
obtain representations as to the origin and ownership of such licensed content;
however, this may not adequately protect them. Any of these claims, with or
without merit, could subject our Partner Companies to costly litigation and the
diversion of their technical and management personnel. If our Partner Companies
incur costly litigation and their personnel are not effectively deployed, the
expenses incurred by our Partner Companies will increase and their profits, if
any, will decrease.

Our Partner Companies that publish or distribute content over the Internet may
be subject to legal liability

     Some of our Partner Companies may be subject to legal claims relating to
the content on their Web sites, or the downloading and distribution of this
content. Claims could involve matters such as defamation, invasion of privacy
and copyright infringement. Providers of Internet products and services have
been sued in the past, sometimes successfully, based on the content of material.
In addition, some of the content provided by our Partner Companies on their Web
sites is drawn from data compiled by other parties, including governmental and
commercial sources, and our Partner Companies re-enter the data. This data may
have errors. If any of our Partner Companies' Web site content is improperly
used or if any of our Partner Companies supply incorrect information, it could
result in unexpected liability. Any of our Partner Companies that incur this
type of unexpected liability

                                       9
may not have insurance to cover the claim or its insurance may not provide
sufficient coverage. If our Partner Companies incur substantial cost because of
this type of unexpected liability, the expenses incurred by our Partner
Companies will increase and their profits, if any, will decrease.

Our Partner Companies' computer and communications systems may fail

     Some of our Partner Companies' businesses depend on the efficient and
uninterrupted operation of their computer and communications hardware systems.
Any system interruptions that cause our Partner Companies' Web sites to be
unavailable to Web browsers may reduce the attractiveness of our Partner
Companies' Web sites to third party content providers. If third party content
providers are unwilling to use our Partner Companies' Web sites, our business,
financial condition and operating results could be adversely affected.
Interruptions could result from natural disasters as well as power loss,
telecommunications failure and similar events.

     Capacity limits on some of our Partner Companies' technology, transaction
processing systems and network hardware and software may be difficult to project
and they may not be able to expand and upgrade their systems to meet increased
use.

     As traffic on our Partner Companies' Web sites continues to increase, they
must expand and upgrade their technology, transaction processing systems and
network hardware and software. Our Partner Companies may be unable to accurately
project the rate of increase in use of their Web sites. In addition, our Partner
Companies may not be able to expand and upgrade their systems and network
hardware and software capabilities to accommodate increased use of their Web
sites. If our Partner Companies are unable to appropriately upgrade their
systems and network hardware and software, the operations and processes of our
Partner Companies may be disrupted.

Our Partner Companies may not be able to attract a loyal base of users to their
Web sites

     Some of our Partner Companies rely on the content of their Web sites to
attract business. Our success depends upon the ability of these Partner
Companies to deliver compelling Internet content to their targeted users. If our
Partner Companies are unable to develop Internet content that attracts a loyal
user base, the revenues and profitability of our Partner Companies could be
impaired. Internet users can freely navigate and instantly switch among a large
number of Web sites. Many of these Web sites offer original content. Thus, our
Partner Companies may have difficulty distinguishing the content on their Web
sites to attract a loyal base of users.

Our Partner Companies may be unable to acquire or maintain easily identifiable
Web site addresses or prevent third parties from acquiring Web site addresses
similar to theirs

     Some of our Partner Companies hold various Web site addresses relating to
their brands. These Partner Companies may not be able to prevent third parties
from acquiring Web site addresses that are similar to their addresses, which
could adversely affect the use by businesses of our Partner Companies' Web
sites. In these instances, our Partner Companies may not grow as we expect. The
acquisition and maintenance of Web site addresses generally is regulated by
governmental agencies and their designees. The regulation of Web site addresses
in the United States and in foreign countries is subject to change. As a result,
our Partner Companies may not be able to acquire or maintain relevant Web site
addresses in all countries where they conduct business. Furthermore, the
relationship between regulations governing such addresses and laws protecting
trademarks is unclear.

Some of our Partner Companies are dependent on barter transactions that do not
generate cash revenue

     During 1998, revenue from barter transactions constituted a significant
portion of some of our Partner Companies' revenue. Barter revenue may continue
to represent a significant portion of their revenue in future periods. Barter
transactions do not generate any cash revenue and are entered into by our
Partner Companies to promote their brands without any expenditure of cash
resources.

                                       10
RISKS RELATING TO THE INTERNET INDUSTRY

Concerns regarding security of transactions and transmitting confidential
information over the Internet may have an adverse impact on our business

     We believe that concern regarding the security of confidential information
transmitted over the Internet prevents many potential customers from engaging in
online transactions. If our Partner Companies that depend on such transactions
do not add sufficient security features to their future product releases, our
Partner Companies' products may not gain market acceptance or there may be
additional legal exposure to them.

     Despite the measures some of our Partner Companies have taken, the
infrastructure of each of them is potentially vulnerable to physical or
electronic break-ins, viruses or similar problems. If a person circumvents the
security measures imposed by any one of our Partner Companies, he or she could
misappropriate proprietary information or cause interruption in operations of
the Partner Company. Security breaches that result in access to confidential
information could damage the reputation of any one of our Partner Companies and
expose the Partner Company affected to a risk of loss or liability. Some of our
Partner Companies may be required to make significant investments and efforts to
protect against or remedy security breaches. Additionally, as e-commerce becomes
more widespread, our Partner Companies' customers will become more concerned
about security. If our Partner Companies are unable to adequately address these
concerns, they may be unable to sell their goods and services.

Our Partner Companies operate in markets characterized by rapid technology
change

     The markets in which our Partner Companies operate are characterized by
rapid technological change, frequent new product and service introductions and
evolving industry standards. Significant technological changes could render
their existing Web site technology or other products and services obsolete. The
e-commerce market's growth and intense competition exacerbate these conditions.
If our Partner Companies are unable to successfully respond to these
developments or do not respond in a cost-effective way, our business, financial
condition and operating results will be adversely affected. To be successful,
our Partner Companies must adapt to their rapidly changing markets by
continually improving the responsiveness, services and features of their
products and services and by developing new features to meet the needs of their
customers. Our success will depend, in part, on our Partner Companies' ability
to license leading technologies useful in their businesses, enhance their
existing products and services and develop new offerings and technology that
address the needs of their customers. Our Partner Companies will also need to
respond to technological advances and emerging industry standards in a cost-
effective and timely manner.

Government regulations and legal uncertainties may place financial burdens on 
our business and the businesses of our Partner Companies

     As as April 30, 1999, there were few laws or regulations directed 
specifically at e-commerce. However, because of the Internet's popularity and 
increasing use, new laws and regulations may be adopted. These laws and 
regulations may cover issues such as the collection of and use of data from Web 
site visitors and related privacy issues, pricing, content, copyrights, online 
gambling, distribution and the quality of goods and services. The enactment of 
any additional laws or regulations may impede the growth of the Internet and B2B
e-commerce, which could decrease the revenue of our Partner Companies and place
additional financial burdens on our business and the businesses of our Partner 
Companies.

     Laws and regulations directly applicable to e-commerce or Internet 
communications are becoming more prevalent. For example, Congress recently 
enacted laws regarding online copyright infringement and the protection of 
information collected online from children. Although these laws may not have a 
direct adverse effect on our business or those of our Partner Companies, they 
add to the legal and regulatory burden faced by B2B e-commerce companies.

RISKS RELATING TO THE OFFERING

Shares eligible for future sale by our current shareholders may decrease the
price of our common stock

     If our shareholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options, in the public market
following the offering, then the market price of our common stock could fall.
Restrictions under the securities laws and certain lock-up agreements limit the
number of shares of common stock available for sale in the public market. The
holders of               shares of common stock, options exercisable into an
aggregate of                  shares of common stock, and warrants exercisable
into an aggregate of            shares of common stock have agreed not to sell
any of these securities for 180 days after the offering without the prior
written consent of Merrill Lynch. In addition, the holders of the convertible
notes that will automatically convert into                shares of common stock
upon the closing of this offering have also agreed to such restrictions.
However, Merrill Lynch may, in its sole discretion, release all or any portion
of the securities subject to the lock-up agreements.

     The holders of 72,479,549 shares of common stock, the holders of warrants
to purchase shares of common stock and the holders of convertible notes that
will automatically convert into                   shares of common stock upon
the closing of this offering have demand or piggy-back registration rights.
However, the holders of these securities that have demand registration rights
have agreed not to demand that their securities be registered for 180 days after
the offering without the prior written consent of Merrill Lynch. We also may
shortly file a registration statement to register all shares of common stock
under our stock option plans. After such registration statement is 

                                       11
effective, common stock issued upon exercise of stock options under our benefit
plans will be eligible for resale in the public market without restriction.

The interests of certain of our significant shareholders may conflict with our
interests and the interests of our other shareholders

     As a result of their combined stock ownership, Safeguard Scientifics
(Delaware), Inc. and Safeguard 98 Capital L.P., together, will be in a position
to affect significantly our corporate actions such as mergers or takeover
attempts in a manner that could conflict with the interests of our public
shareholders. After the offering, Safeguard Scientifics (Delaware), Inc. and
Safeguard 98 Capital L.P., together, will beneficially own             % of our
common stock.

Anti-takeover provisions and our right to issue preferred stock could make a
third-party acquisition of us difficult

     Our certificate of incorporation provides that our board of directors may
issue preferred stock without shareholder approval. In addition, our bylaws
provide for a classified board, with each board member serving a three-year
term. The issuance of preferred stock and the existence of a classified board
could make it more difficult for a third-party to acquire us without the
approval of our board.

Our common stock has never been publicly traded so we cannot predict the extent
to which a trading market will develop for our common stock

     There has not been a public market for our common stock. We cannot predict
the extent to which a trading market will develop or how liquid that market
might become. The initial public offering price will be determined by
negotiations between representatives of the underwriters and us, and may not be
indicative of prices that will prevail in the trading market.

Our common stock price is likely to be highly volatile

     The market price for our common stock is likely to be highly volatile as
the stock market in general and the market for Internet-related stocks and the
stock of VerticalNet in particular, has been highly volatile. The trading prices
of many technology and Internet-related company stocks have reached historical
highs within the last year and have reflected relative valuations substantially
above historical levels. During the same period, the stocks of these companies
have also been highly volatile and have recorded lows well below such historical
highs. We cannot assure you that our common stock will trade at the same levels
of other Internet stocks or that Internet stocks in general will sustain their
current market prices.

     The following factors will add to our common stock price's volatility:

     .  actual or anticipated variations in our quarterly operating results and
        those of our Partner Companies;

     .  new sales formats or new products or services offered by us, our Partner
        Companies and their competitors;

     .  changes in our financial estimates and those of our Partner Companies by
        securities analysts;

     .  conditions or trends in the Internet industry in general and the B2B e-
        commerce industry in particular;

     .  announcements by our Partner Companies and their competitors of
        technological innovations;

     .  announcements by us or our Partner Companies or our competitors of
        significant acquisitions, strategic partnerships or joint ventures;

     .  changes in the market valuations of our Partner Companies and other
        Internet companies;

     .  our capital commitments;

                                       12
.  additions or departures of our key personnel and key personnel of our
        Partner Companies; and

     .  sales of our common stock.

Many of these factors are beyond our control. These factors may decrease the
market price of our common stock, regardless of our operating performance.

                                       13
USE OF PROCEEDS

     Based on an assumed initial public offering price of $         per share,
our net proceeds from the sale of the           shares of our common stock will
be approximately $               ($             if the underwriters' over-
allotment option is exercised in full), after deduction of underwriting
discounts and commissions and estimated offering expenses payable by us.

     The principal purposes of this offering are to increase our working
capital, to create a public market for our common stock, to facilitate our
future access to public equity markets and to provide us with increased
visibility and credibility. We intend to use the net proceeds from the offering
to repay any balance outstanding on our revolving bank credit facility, acquire
interests in Internet-related companies and for general corporate purposes,
including working capital. Our bank credit facility matures in April 2000 and
bears interest, at our option, at prime and/or LIBOR plus 2.5%. At April 30,
1999, there was no outstanding balance under the bank credit facility. We use
monies borrowed under the bank credit facility primarily to acquire interests in
new or existing Partner Companies. Pending use of the net proceeds for the above
purposes, we intend to invest the funds in interest-bearing, investment-grade
securities, certificates of deposit, or direct or guaranteed obligations of the
United States.

                                DIVIDEND POLICY

     We have never declared or paid dividends on our capital stock, and we do
not intend to pay dividends in the foreseeable future. We plan to retain any
earnings for use in the operation of our business and to fund future growth.

                              THE REORGANIZATION

     Internet Capital Group, Inc. is a successor to a business originally
founded in March 1996 as a Delaware limited liability company under the name
Internet Capital Group, L.L.C. As a limited liability company, Internet Capital
Group, L.L.C. was treated for income tax purposes as a partnership with taxes on
the income generated by Internet Capital Group L.L.C. paid by its members.
Internet Capital Group, L.L.C. merged into Internet Capital Group, Inc., with
Internet Capital Group, Inc. surviving (the "Reorganization"). In connection
with the Reorganization and as required by its limited liability company
agreement to satify the members' tax liabilities, Internet Capital Group, L.L.C.
declared a $10.7 million distribution to its members. Internet Capital Group,
Inc. has assumed all liabilities of Internet Capital Group, L.L.C., including
the distribution to members of Internet Capital Group, L.L.C. Also as part of
the Reorganization, Internet Capital Group, Inc. issued            shares of
common stock to the members of Internet Capital Group, L.L.C. The separate
existence of Internet Capital Group, L.L.C. ceased on February 2, 1999.

                    THE DIRECTED SHARE SUBSCRIPTION PROGRAM

     As part of this offering, we are offering             shares of our common
stock in a directed share subscription program to shareholders of Safeguard
Scientifics, Inc., one of our principal and founding shareholders. Only persons
who owned at least             shares of Safeguard Scientifics, Inc. common
stock as of                  , 1999 are eligible to participate in the program.
Such shareholders may subscribe for one share of our common stock for every ten
shares of Safeguard Scientifics, Inc. common stock held by them, and may not
transfer the opportunity to subscribe to another person except involuntarily by
operation of law. Sales under the program will close on the same day as other
sales under this offering. If any of the shares offered under the program are
not purchased by the shareholders of Safeguard Scientifics, Inc., then Safeguard
Scientifics, Inc. or one or more of its designees will purchase these shares.
The purchase price under the program, whether paid by Safeguard Scientifics,
Inc. or its shareholders, will be the same price per share as set forth on the
cover page of this prospectus.

                                       14
CAPITALIZATION

     The following table sets forth our capitalization as of December 31, 1998
(i) on an actual basis, (ii) on a pro forma basis to reflect the issuance of
           shares of our common stock at       per share from January through 
March, 1999 and the issuance of $90 million of our convertible notes in May,
1999, and (iii) on a pro forma basis, as adjusted to reflect the automatic
conversion of our convertible notes into        shares of our common stock upon
completion of this offering and the sale of      shares of our common stock in 
this offering at an assumed initial public offering price of $    per share and
after deduction of estimated underwriting discounts and commissions and
estimated offering expenses.

     The calculation of shareholders' equity reflects our Reorganization on
February 2, 1999. Common stock data also assumes that the underwriters' over-
allotment option is not exercised and excludes shares of common stock reserved
for issuance under our (i) 1999 Equity Compensation Plan, under which options to
purchase 9,631,500 shares were outstanding as of April 30, 1999 at a weighted
average exercise price of $2.30 per share, and (ii) warrants outstanding to
purchase           shares at an exercise price of $            per share.
December 31, 1998
                                                             -----------------------------------------------------------
                                                                                                           Pro Forma
                                                                                                               As    
                                                                   Actual             Pro Forma             Adjusted  
                                                             -----------------    -----------------    -----------------
Long-term debt...............................................      $   351,924         $    351,924         $
 
Convertible subordinated notes...............................               --           90,000,000
 
Shareholders' equity:                                                    
 
Preferred stock, $.001 par value; no shares authorized
 --actual, pro forma and pro forma as adjusted...............               --                   --
 
Common stock, $.001 par value; 130,000,000 shares
 authorized, 66,043,625 shares issued and outstanding -
 actual;                shares issued and outstanding--pro
 forma; shares issued and outstanding--pro forma as                    
 adjusted ...................................................           66,044               66,044 
 
 
 
 
Additional paid-in capital...................................       74,935,262           74,935,262
 
Retained earnings............................................        5,256,815            5,256,815
 
Unamortized deferred compensation............................       (1,266,814)          (1,266,814)
 
Accumulated other comprehensive income.......................        1,733,071            1,733,071
                                                             -----------------    -----------------    -----------------
 
Total shareholders' equity...................................       80,724,378           80,724,378
                                                             -----------------    -----------------    -----------------
 
  Total capitalization.......................................      $81,076,302         $171,076,302         $
                                                             =================    =================    =================
15
DILUTION

     Our pro forma net tangible book value at December 31, 1998, after giving 
effect to the conversion of all outstanding convertible notes into shares 
of common stock upon completion of this offering, was approximately $          
      , or $               per share. Pro forma net tangible book value per 
share is equal to our total tangible assets less our total liabilities, 
divided by the total number of shares of our common stock outstanding. After 
giving effect to the sale of                      shares of our common stock 
offered hereby at an assumed initial public offering price of $             per
share and after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us, our as adjusted pro forma net 
tangible book value at December 31, 1998 would have been approximately $       
     , or $            per share. This represents an immediate increase in net
tangible book value of $            per share to existing shareholders and an 
immediate dilution of $                per share to new investors purchasing 
shares of our common stock in this offering. The following table illustrates 
the per share dilution to the new investors.
Assumed initial public offering price per share .............................................               $
 Pro forma net tangible book value per share at December 31, 1998............................    $
 Increase per share attributable to this offering............................................
As adjusted pro forma net tangible book value per share after the offering...................
                                                                                                          ----------
Dilution per share to new investors in this offering.........................................               $
                                                                                                          ==========
The following table summarizes on a pro forma basis, as of December 31,
1998, the total number of shares of our common stock purchased from us, 
the total cash consideration paid and the average price per share paid by the
existing shareholders and by the new investors in this offering at an assumed
initial public offering price of $      per share and before deducting estimated
underwriting discounts and commissions and our estimated offering expenses:
Average
                                                                            Total               Price Per
                                     Shares Purchased                   Consideration             Share
                          ------------------------------------   ---------------------------   ------------
                                 Number             Percent          Amount        Percent
                          ------------------   ---------------   ------------   ------------
Existing shareholders.....
New investors (1).........
                          ------------------   ---------------   ------------   ------------
     Total................
                          ==================   ===============   ============   ============
(1) This number of shares assumes that the underwriters' over-allotment option
    is not exercised. If the over-allotment option is exercised in full, we will
    issue and sell an additional                   shares.

     The foregoing discussion and tables assume no exercise of any stock options
outstanding as of December 31, 1998. As of December 31, 1998, there were options
outstanding to purchase a total of 6,697,000 shares of our common stock at a
weighted average exercise price of $1.99 per share and 3,773,000 shares reserved
for future grant under our 1999 Equity Compensation Plan. To the extent that any
of these shares are issued, there will be further dilution to new investors. See
"Capitalization," "Management--Employee Benefit Plans" and Note 8 to 
Consolidated Financial Statements.

                                       16
SELECTED CONSOLIDATED FINANCIAL DATA

     You should read the following selected consolidated financial data in
conjunction with our Consolidated Financial Statements, including the Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this prospectus. The consolidated
statement of operations data from March 4, 1996, the date of our inception,
through December 31, 1996 and for the years ended December 31, 1997 and 1998,
and consolidated balance sheet data at December 31, 1997 and 1998 have been
derived from the consolidated financial statements, that have been audited by
KPMG LLP, independent auditors, included elsewhere in this prospectus. The
consolidated balance sheet data at December 31, 1996 has been derived from the
consolidated financial statements that have been audited by KPMG LLP,
independent auditors, which are not included in this prospectus.
March 4, 1996
                                                               (inception) to
                                                                December 31,             Year Ended December 31,
                                                                                 --------------------------------------
                                                                   1996                1997                 1998
                                                            -----------------    -----------------    -----------------
Revenue.....................................................      $   285,140          $   791,822         $  3,134,769
                                                            -----------------    -----------------    -----------------
 
Operating expenses
  Cost of revenue...........................................          427,470            1,767,017            4,642,528
  Sales and marketing.......................................          268,417            2,300,365            7,894,662
  General and administrative................................        1,652,481            3,442,241            7,619,169
  Minority interest.........................................         (427,185)             106,411           (5,381,640)
  Equity (income) loss......................................          514,540             (106,298)           7,937,861
                                                            -----------------    -----------------    -----------------
  Total operating expenses..................................        2,435,723            7,509,736           22,712,580
                                                            -----------------    -----------------    -----------------
Operating loss..............................................       (2,150,583)          (6,717,914)         (19,577,811)
Other income, net...........................................               --                   --           32,552,151
Interest income, net........................................           88,098              138,286              924,588
                                                            -----------------    -----------------    -----------------
Net income (loss)...........................................      $(2,062,485)         $(6,579,628)        $ 13,898,928
                                                            =================    =================    =================
 
Pro forma information (unaudited):
 
Pro forma net income
  Net income as reported....................................                                               $ 13,898,928
  Pro forma income tax provision............................                                                 (5,142,603)
                                                                                                      -----------------
  Pro forma net income......................................                                               $  8,756,325
                                                                                                      =================
 
Pro forma net income per share
  Basic.....................................................      
  Diluted................................................... 
 
Pro forma shares used in computing net income per share
  Basic.....................................................
  Diluted...................................................
                                                                                    December 31,
                                                            -----------------------------------------------------------
                                                                  1996                 1997                 1998
                                                            -----------------    -----------------    -----------------
 Consolidated Balance Sheet Data:
 
 Cash and cash equivalents..................................      $ 3,215,256          $ 5,967,461         $ 26,840,904
 Working capital............................................        4,883,129            2,390,762           20,452,438
 Total assets...............................................       13,629,407           31,481,016           96,785,975
 Long-term debt.............................................          167,067              399,948              351,924
 Total shareholders' equity.................................       12,858,856           26,634,675           80,724,378
17
MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this prospectus.
The following discussion should be read in conjunction with our audited 
Consolidated Financial Statements and related Notes thereto included elsewhere 
in this prospectus.

General

     Internet Capital Group is an Internet holding company primarily engaged in
managing and operating a network of business-to-business, or B2B, e-commerce
companies. Our goal is to become the premier B2B e-commerce company by
establishing an e-commerce presence in major segments of the economy. We believe
that our sole focus on the B2B e-commerce industry allows us to capitalize
rapidly on new opportunities and to attract and develop leading B2B e-commerce
companies. As of April 30, 1999, we owned interests in 29 B2B e-commerce
companies which we refer to as our Partner Companies.

     Because we acquire significant interests in Internet-related companies,
many of which generate operating losses, we have experienced, and expect to
continue to experience, significant volatility in our quarterly results. We do
not know if we will report net income in any period, and we expect that we
will report operating losses in many quarters for the foreseeable future.

Effect of Various Accounting Methods on our Results of Operations

     The various interests that we acquire in our Partner Companies are
accounted for under three broad methods: consolidation, equity method and cost
method. The applicable accounting method is generally determined based on our
voting interest in a Partner Company.

     Consolidation. Partner Companies in which we directly or indirectly own
more than 50% of the outstanding voting securities are generally accounted for
under the consolidation method of accounting. Under this method, a Partner
Company's results of operations are reflected within our Consolidated Statements
of Operations. Participation of other Partner Company shareholders in the
earnings or losses of a consolidated Partner Company is reflected in the caption
"Minority interest" in our Consolidated Statements of Operations. Minority
interest adjusts our consolidated results of operations to reflect only our
share of the earnings or losses of the consolidated Partner Company. VerticalNet
was our only consolidated Partner Company through December 31, 1998.

     Equity Method. Partner Companies whose results we do not consolidate, but
over whom we exercise significant influence, are accounted for under the equity
method of accounting. Whether or not we exercise significant influence with
respect to a Partner Company depends on an evaluation of several factors
including, among others, representation on the Partner Company's Board of
Directors and ownership level, which is generally a 20% to 50% interest in the
voting securities of the Partner Company, including voting rights associated
with our holdings in common, preferred and other convertible instruments in the
Partner Company. Under the equity method of accounting, a Partner Company's
results of operations are not reflected within our Consolidated Statements of
Operations; however, our share of the earnings or losses of the Partner Company
is reflected in the caption "Equity (income) loss" in the Consolidated
Statements of Operations. As of December 31, 1998, we accounted for nine of our
Partner Companies under the equity method of accounting.

     The net effect of a Partner Company's results of operations on our net
results of operations is generally the same under either the consolidation
method of accounting or the equity method of accounting, as under these methods
only our share of the earnings or losses of a Partner Company is reflected in
our net results of operations in the Consolidated Statements of Operations.

     Cost Method. Partner Companies not accounted for under the consolidation or
the equity method of accounting are accounted for under the cost method of
accounting. Under this method, our share of the earnings or losses of these
companies is not included in our Consolidated Statements of Operations.

                                       18
Effect of Various Accounting Methods on the Presentation of our Financial
Statements

     The presentation of our financial statements may differ from period to
period primarily due to whether or not we apply the consolidation method of
accounting or the equity method of accounting. For example, since our inception
we consolidated VerticalNet's financial statements with our own. However, due to
their initial public offering in February 1999, our ownership interest in
VerticalNet decreased to 37%. Therefore, we will be applying the equity method
of accounting beginning in the three months ended March 31, 1999. The
presentation of our financial statements will look substantially different as a
result of our no longer consolidating VerticalNet.

     To understand our results of operations and financial position without the
effect of consolidating VerticalNet, Note 11 to our Consolidated Financial
Statements summarizes our Parent Company Statements of Operations and Balance
Sheets for the same periods presented in the Consolidated Financial Statements.
These statements differ from the Consolidated Financial Statements by treating
VerticalNet as if it were accounted for under the equity method of accounting.
Our share of VerticalNet's losses is included in "Equity (income) loss" in the
Parent Company Statements of Operations and the losses recorded in excess of
carrying value of VerticalNet are included in "Non-current liabilities" in the
Parent Company Balance Sheets.

Operations Overview

     VerticalNet was our only consolidated Partner Company through December 31,
1998. All of our consolidated revenue and a significant portion of our
consolidated operating expenses since our inception on March 4, 1996 through
December 31, 1998 were attributable to VerticalNet.

     As of April 30, 1999, VerticalNet owned and operated 37 industry-specific 
trade communities. Advertising revenue and Web site development fees
represented all of VerticalNet's revenue in 1996 and 1997. In 1998, most of
VerticalNet's revenue was generated from selling advertisements to industry
suppliers in its trade communities.

     VerticalNet sells storefront and banner advertising and event sponsorships
in its trade communities. The duration of a storefront advertisement is
typically for a period of one year, while banner advertisements are typically
for a period of three months. All advertising revenue is recognized ratably in
the period in which the advertisement is displayed, provided that the collection
is reasonably assured. VerticalNet also generates revenue from career services,
education, and e-commerce, specifically the sale of books and third party
software for which they receive a transaction fee, and from barter transactions.

     A significant portion of our operations are conducted through corporations
in which we hold a significant minority ownership interest accounted for under
the equity method of accounting. As of December 31, 1998, we accounted for nine
of our Partner Companies under the equity method of accounting. Under this
method, the results of operations of these entities are not reflected within our
Consolidated Statements of Operations; however, our share of such companies'
earnings or losses is reflected in the caption "Equity (income) loss" in the
Consolidated Statements of Operations.

                                       19
Results of Operations

     Our consolidated results of operations are composed of Partner Company
Operations and General ICG Operations. Partner Company Operations includes the
effect of consolidating VerticalNet and recording our share of earnings or
losses of Partner Companies accounted for under the equity method of accounting.
General ICG Operations represents the expenses of providing strategic and
operational support to our Partner Companies, as well as the related
administrative costs related to these expenses. General ICG Operations also
includes the effect of transactions and other events incidental to our ownership
interests in our Partner Companies and our operations in general.
March 4, 1996
                                                          (inception) through                
                                                              December 31,              Year Ended December 31,
                                                                                -------------------------------------- 
                                                                 1996                  1997                 1998
                                                           -----------------    -----------------    -----------------
Summary of Consolidated Net Income (Loss)
Partner Company Operations.................................      $  (796,202)         $(4,778,902)        $(16,150,496)
General ICG Operations.....................................       (1,266,283)          (1,800,726)          30,049,424
                                                           -----------------    -----------------    -----------------
Net income (loss) - Consolidated Total.....................      $(2,062,485)         $(6,579,628)        $ 13,898,928
                                                           =================    =================    =================
 
Partner Company Operations
 Revenue...................................................      $   285,140          $   791,822         $  3,134,769
                                                           -----------------    -----------------    -----------------
 Operating expenses
   Cost of revenue.........................................          427,470            1,767,017            4,642,528
   Sales and marketing.....................................          268,417            2,300,365            7,894,662
   General and administrative..............................          291,660            1,388,123            4,106,583
                                                           -----------------    -----------------    -----------------
 Operating loss -- Partner Company Operations before
   minority interest and equity income (loss)..............         (702,407)          (4,663,683)         (13,509,004)
 Minority interest.........................................          427,185             (106,411)           5,381,640
 Equity income (loss)......................................         (514,540)             106,298           (7,937,861)
                                                           -----------------    -----------------    -----------------
 Operating loss -- Partner Company Operations..............         (789,762)          (4,663,796)         (16,065,225)
 Other income, net.........................................               --                   --                   --
 Interest expense, net.....................................           (6,440)            (115,106)             (85,271)
                                                           -----------------    -----------------    -----------------
 Net loss -- Partner Company Operations....................      $  (796,202)         $(4,778,902)        $(16,150,496)
                                                           =================    =================    =================
General ICG Operations
 General and administrative................................      $ 1,360,821          $ 2,054,118         $  3,512,586
                                                           -----------------    -----------------    -----------------
 Operating loss - General ICG Operations...................       (1,360,821)          (2,054,118)          (3,512,586)
 Other income, net.........................................               --                   --           32,552,151
 Interest income, net......................................           94,538              253,392            1,009,859
                                                           -----------------    -----------------    -----------------
 Net income (loss) - General ICG Operations................      $(1,266,283)         $(1,800,726)        $ 30,049,424
                                                           =================    =================    =================
Consolidated Total
 Revenue...................................................      $   285,140          $   791,822         $  3,134,769
                                                           -----------------    -----------------    -----------------
 Operating expenses
   Cost of revenue.........................................          427,470            1,767,017            4,642,528
   Sales and marketing.....................................          268,417            2,300,365            7,894,662
   General and administrative..............................        1,652,481            3,442,241            7,619,169
   Minority interest.......................................         (427,185)             106,411           (5,381,640)
   Equity (income) loss....................................          514,540             (106,298)           7,937,861
                                                           -----------------    -----------------    -----------------
 Operating loss............................................       (2,150,583)          (6,717,914)         (19,577,811)
 Other income, net.........................................               --                   --           32,552,151
 Interest income, net......................................           88,098              138,286              924,588
                                                           -----------------    -----------------    -----------------
 Net income (loss) - Consolidated Total....................      $(2,062,485)         $(6,579,628)          13,898,928
                                                           =================    =================   
 Pro forma income tax provision............................                                                 (5,142,603)
                                                                                                     -----------------
 Pro forma net income......................................                                               $  8,756,325
                                                                                                     =================
20
Results of Operations-Partner Company Operations

     VerticalNet-Analysis of Three Year Period Ended December 31, 1998

     For the periods ended December 31, 1996, December 31, 1997 and December 31,
1998, VerticalNet was our only consolidated Partner Company. The following is a
discussion of VerticalNet's results of operations for the three year period
ended December 31, 1998:

     Revenue. Revenue was $.3 million for the year ended December 31, 1996,
$.8 million for the year ended December 31, 1997 and $3.1 million for the year
ended December 31, 1998. The increase in  revenue was due primarily to an
increase in the number of advertisers as a result of VerticalNet's marketing
efforts and the increase in the number of industry-specific trade communities
from 16 as of December 31, 1997 to 33 as of December 31, 1998.

     Cost of Revenue. Cost of revenue was $.4 million in 1996, $1.8 million in
1997 and $4.6 million in 1998. Cost of revenue consists of editorial,
operational, and product development expenses. The increase in cost of revenue
was due to increased staffing and the costs of enhancing the features, content
and services of VerticalNet's industry-specific trade communities, as well as
increasing the overall number of trade communities.

     Sales and Marketing Expenses. Sales and marketing expenses were $.3 million
for the year ended December 31, 1996, $2.3 million for the year ended December
31, 1997 and $7.9 million for the year ended December 31, 1998. The increase in
sales and marketing expenses was primarily due to increasing the number of sales
and marketing personnel, increasing sales commissions and increased expenses
related to promoting VerticalNet's industry-specific trade communities.

     General and Administrative Expenses. General and administrative expenses
were $.3 million for the year ended December 31, 1996, $1.4 million for the year
ended December 31, 1997 and $4.1 million for the year ended December 31, 1998.
The increase in general and administrative expenses was due primarily to
increased staffing levels, higher facility costs, professional fees to support
the growth of VerticalNet's infrastructure and goodwill amortization related to
VerticalNet's 1998 acquisitions.

     Equity (Income) Loss

     A significant portion of our operations are conducted through companies in
which we hold a significant minority ownership interest. These companies are
accounted for under the equity method of accounting. Equity (income) loss
fluctuates with the number of companies accounted for under the equity method,
our ownership percentage in these companies, and the results of operations of
these companies. In the periods ended December 31, 1996 and 1997, only Sky
Alland was accounted for under the equity method. Sky Alland's results of
operations in 1997 improved compared to 1996.

     The significant change in equity (income) loss from 1997 to 1998 reflects a
decrease in the results of operations at Sky Alland and the effect of Partner
Companies in which we acquired an interest during 1998. One of these companies,
Syncra Software, Inc., represented approximately $4.3 million of our $7.9
million equity loss in 1998. As of December 31, 1998, we accounted for nine of
our Partner Companies under the equity method of accounting. Most of these
companies are in a very early stage of development and incurred substantial
losses in 1998, and our share of these losses was substantial.

     As mentioned previously, our ownership interest in VerticalNet will no
longer be consolidated in our financial statements but will be accounted for
under the equity method of accounting in 1999 as a result of our lower ownership
interest in VerticalNet following the completion of their initial public
offering in February 1999. VerticalNet incurred losses in each of the years in
the three year period ended December 31, 1998, and may incur losses in the
future. In addition, due to the early stage of development of the companies in
which we acquire interests, existing and new Partner Companies accounted for
under the equity method are expected to incur substantial losses. Our share of
these losses is expected to be substantial in 1999.

     While VerticalNet and most of the companies accounted for under the equity
method of accounting have generated losses in each of the years in the three-
year period ended December 31, 1998, and therefore in most cases 

                                       21
did not incur tax liabilities, these companies may generate taxable income in
the future. Our share of these companies' net income would be reduced to the
extent of our share of these companies' tax expense.

Results of Operations - General Operations

     General and Administrative

     Our general and administrative costs consist primarily of employee
compensation, outside services such as legal, accounting and consulting, and
travel-related costs. We commenced operations in March 1996 with offices in
Wayne, Pennsylvania and San Francisco, California. As the number of our
employees grew to support our operations and those of our Partner Companies, our
general and administrative costs increased. In late 1998, we opened an office in
Boston, Massachusetts, and in early 1999, we significantly increased the number
of our employees. We plan to continue to hire new employees, open new offices,
and build our overall infrastructure. While general and administrative costs
increased 71% from 1997 to 1998, we expect these costs will more than double
from 1998 to 1999.

     Other Income

     Other income consists of the effect of transactions and other events
incidental to our ownership interests in our Partner Companies and our
operations in general. Other income is expected to include, among other items,
gains or losses on the sales of all or a portion of minority interests, gains or
losses on the sales of stock by our public Partner Companies to reflect the
change in our share of the net equity of these companies, and impairment charges
related to our ownership interests in Partner Companies. We continually evaluate
the carrying value of our ownership interests in each of our Partner Companies
for possible impairment based on achievement of business plan objectives and
milestones, the value of each ownership interest in the Partner Company relative
to carrying value, the financial condition and prospects of the Partner Company,
and other relevant factors.

     Other income consisted of the following:
Year Ended
                                                             December 31,1998
                                                            -------------------
Sale of Matchlogic to Excite...............................         $12,822,162
Sales of Excite holdings...................................          16,813,844
Sale of WiseWire to Lycos..................................           3,324,238
Sales of Lycos holdings....................................           1,471,907
Partner Company impairment charge..........................          (1,880,000)
                                                            -------------------
                                                                    $32,552,151
                                                            ===================
In February 1998, we exchanged all of our holdings of Matchlogic, Inc. for
763,820 shares of Excite, Inc. which resulted in a gain at the date of exchange
of $12.8 million. Throughout the remainder of 1998, we sold 716,082 shares of
Excite which resulted in $30.2 million of proceeds and $16.8 million of gains.

     In April 1998, we exchanged all of our holdings of WiseWire for 196,130
shares of Lycos, Inc. which resulted in a gain at the date of the transaction of
$3.3 million. Throughout the remainder of 1998, we sold 173,756 shares of Lycos
which resulted in $6.2 million of proceeds and $1.5 million of gains.

     The remaining holdings of Excite and Lycos are marked to market at December
31, 1998 with the difference between carrying value and market value recorded in
"Accumulated other comprehensive income" in the shareholders' equity section of
our Consolidated Balance Sheet in accordance with Statement of Financial
Accounting Standards No. 115.

     In December 1998, we recorded an impairment charge of $1.9 million for the
decrease in value of one of our Partner Companies.

     As a result of the initial public offering of VerticalNet completed in
February 1999, we expect to record a gain in 1999 of approximately $28 million
relating to the increase in our share of VerticalNet's net equity.

                                       22
Interest Income

     Our cash and cash equivalents are invested primarily in money market
accounts. During 1998, we received $38.2 million of proceeds from the sale of
our common stock and $36.4 million of proceeds from the sales of a portion of
our holdings in Excite and Lycos. The increase in interest income in 1998 was
primarily due to the significant increase in our cash and cash equivalents
throughout 1998 as a result of these transactions.

     Income Taxes

     From our inception on March 4, 1996 to February 2, 1999, we were organized
as a limited liability company and were treated as a partnership for income tax
purposes. As a result of our reorganization as a corporation, we will be subject
to corporate federal and state income taxes. For informational purposes, the
Consolidated Statement of Operations for the year ended December 31, 1998
reflects pro forma income on an after-tax basis assuming we had been taxed as a
C corporation since January 1, 1998. We did not have any net operating loss
carry forwards at December 31, 1998.

Liquidity and Capital Resources

     We have funded our operations with a combination of equity proceeds,
proceeds from the sales of a portion of our Excite and Lycos holdings,
borrowings under bank credit facilities, and proceeds from the issuance of
convertible notes.

     We received equity commitments of $40 million in 1996, of which $13.7 
million and $20.1 million was received in 1996 and 1997, respectively, and $6.2
million of which was funded with an in-kind contribution of holdings of a
Partner Company in 1996. We received additional commitments of $70 million in
1998, of which $38 million and $32 million was received in 1998 and 1999,
respectively.

     Sales of Excite and Lycos stock in 1998 generated proceeds of $36.4
million.

     In April, 1999 we entered into a $50 million revolving bank credit
facility. In connection with the facility, we issued 200,000 warrants
exercisable for seven years at $10 per share. The facility matures in April
2000, is subject to a .25% unused commitment fee, bears interest, at our option,
at prime and/or LIBOR plus 2.5%, and is secured by substantially all of our
assets (including all of our holdings in VerticalNet). Borrowing availability
under the facility is based on the fair market value of our holdings of publicly
traded Partner Companies (currently only VerticalNet) and the value, as defined
in the facility, of our private Partner Companies. If the market price of
VerticalNet experiences a significant decline, availability under the credit
facility could be reduced significantly and could have an adverse effect on our
ability to borrow under the facility and could require an immediate repayment of
a portion of our outstanding borrowings, if any. Based on the provisions of the
borrowing base, borrowing availability at April 30, 1999 was $32.6 million, of
which none was outstanding.

     In May, 1999 we issued $90 million of three-year convertible notes. The
notes bear interest at an annual rate of 4.99% during the first year and at the
prime rate for the remaining two years. Prior to May 2000, the notes will
automatically convert into shares of our common stock at our initial public
offering price upon consummation of an initial public offering. If the notes are
converted, all accrued interest is waived. We issued warrants to the holders of
these notes to purchase shares of our common stock. The warrant holders will be
entitled to purchase, at the initial public offering price, the number of shares
of our common stock determined by dividing $18 million by the initial public
offering price. The warrants expire in May, 2002.

     Proceeds from our initial public offering, proceeds from the issuance of
our convertible notes, availability under our revolving bank credit facility,
proceeds from the sales from time to time of all or a portion of our minority 
interests and other internal sources of cash flow are expected to be sufficient
to fund our cash requirements through June 2000, including commitments to new or
existing Partner Companies and general operations requirements. We are
contingently obligated for approximately $3.2 million of guarantee commitments,
and have committed capital of $2 million to an existing Partner Company to be
funded in 1999.

                                       23
From its inception through its initial public offering, VerticalNet funded
its operations through a combination of equity, investor and bank borrowings,
and leases. These sources included amounts both advanced and guaranteed by us.
VerticalNet raised $58.3 million in its initial public offering. VerticalNet
believes that these initial public offering funds, together with its existing
cash and cash equivalents, should be sufficient to fund its operations through
March, 2000. We have no obligation to provide additional funding to VerticalNet,
and we have no obligations with respect to its outstanding debt arrangements.

     Consolidated working capital increased to $20.5 million at December 31,
1998, compared to $2.4 million at December 31, 1997. The increase was primarily
due to the net effect of the proceeds from the equity we raised in 1998 and the
proceeds from the sales of a portion of our Excite and Lycos holdings, offset by
the ownership interests we acquired in 1998.

     Cash used in operating activities increased in 1997 and 1998 compared to
each of the prior years primarily due to VerticalNet's increased losses in each
of those years.

     Cash used in investing activities primarily reflects the acquisition of
ownership interests in and advances to new or existing Partner Companies, offset
in 1998 by the proceeds of $36.4 million from the sales of a portion of our
available-for-sale securities, Excite and Lycos. We utilized $56.6 million,
including $9 million contributed to VerticalNet, to acquire interests in new or
existing Partner Companies in 1998 and we expect this amount to more than double
in 1999. In 1998, we acquired interests in the following Partner Companies:
Blackboard, CommerX, ComputerJobs.com, Context Integration, Deja.com, e-
Chemicals, Entegrity Solutions, LinkShare, MessageQuest, PrivaSeek,
RapidAutoNet, SageMaker, ServiceSoft, Syncra Software, US Interactive,
VerticalNet and Vivant!. Our operations are not capital intensive, and capital
expenditures in any year normally will not be significant in relation to our
overall financial position. We expect to commit funds in 1999 to the buildout of
our larger new corporate headquarters in Wayne, Pennsylvania and the development
of our information technology infrastructure. There were no material capital
asset purchase commitments as of April 30, 1999.

Recent Accounting Pronouncements

     We do not expect the adoption of recently issued accounting pronouncements
to have a significant impact on our results of operations, financial position or
cash flows.

Year 2000 Readiness Disclosure

     Many computer programs have been written using two digits rather than four
digits to define the applicable year. This poses a problem at the end of the
century because these computer programs may recognize a date using "00" as the
year 1900, rather than the year 2000. This in turn could result in major system
failures or miscalculations and is generally referred to as the Year 2000 issue.

     We currently use the information technology systems and many non-
information technology systems of Safeguard Scientifics, Inc., one of our
principal shareholders. Safeguard has completed its assessment of its computer
information systems. Safeguard has replaced all computer systems and software
which were determined to be Year 2000 non-compliant. Safeguard is in the process
of surveying its vendors of non-information systems including telecommunications
and security systems, and expects to complete remediation, if necessary, during
1999. If Safeguard determines that its non-information systems are non-compliant
and are at risk to not be remedied in time, it intends to develop a contingency
plan. We will not incur any material expenses in connection with Safeguard's
Year 2000 efforts. We plan to survey our vendors of the non-information
technology systems that we use independently of Safeguard and we expect to
complete remediation, if necessary, during 1999. If we determine that these
systems are non-compliant and are at risk to not be remedied in time, we will
develop a contingency plan.

     The Year 2000 readiness of our only consolidated subsidiary, VerticalNet,
is described below. Our Partner Companies are in varying stages of assessing,
remediating and testing their internal systems and assessing Year 2000 readiness
of their vendors, business partners, and customers. Our Partner Companies are
also in varying stages of developing contingency plans to operate in the event
of a Year 2000 problem. The total cost and time which will be incurred by our
Partner Companies on the Year 2000 readiness effort has not been determined.
There can be no assurance that all necessary work will be completed in time, or
that such costs will not materially 

                                       24
adversely impact one or more of such Partner Companies. In addition, required
spending on the Year 2000 effort will cause customers of most of our Partner
Companies to reallocate at least part of their information systems budgets.
Although some of our Partner Companies have offerings which may be useful in
such efforts, such reallocations could materially adversely affect the results
of operations of our Partner Companies.

     VerticalNet

     VerticalNet may realize exposure and risk if the systems on which it is
dependent to conduct its operations are not Year 2000 compliant. VerticalNet's
potential areas of exposure include products purchased from third parties,
information technology including computers and software, and non-information
technology including telephone systems and other equipment used internally.
Additionally, all of the internally-developed production and operation systems
for VerticalNet's Web sites are undergoing a complete re-engineering. All new
programs are being tested and validated for Year 2000 compliance.

     VerticalNet has taken steps to ensure that telephone systems and other non-
information technology are Year 2000 compliant. VerticalNet has replaced its
telephone and voicemail systems with new systems which are Year 2000 compliant.
VerticalNet believes all non-information technology upon which it is materially
dependent is Year 2000 compliant. Additionally, with respect to information
technology, VerticalNet expects to resolve any Year 2000 compliance issues
primarily through normal upgrades of its software or, when necessary, through
replacement of existing software with Year 2000 compliant applications. The cost
of these upgrades or replacements is included in VerticalNet's capital
expenditure budget and is not expected to be material to VerticalNet's financial
position or results of operations. VerticalNet estimates that its total cost to
become Year 2000 compliant will not exceed $250,000, which it expects will be
funded from working capital or borrowings under its bank line of credit.
However, such upgrades and replacements may not be completed on schedule or
within estimated costs or may not successfully address VerticalNet's Year 2000
compliance issues.

     VerticalNet has completed its Year 2000 compliance assessment plan. This
plan includes assessing both its information and non-information technology as
well as its internally-developed production and operation systems. Based on this
assessment, VerticalNet believes that all non-information technology, all
internally-developed production and operations systems and 80% of its technology
are Year 2000 compliant. VerticalNet believes that the remaining 20% of its
information technology that is not Year 2000 compliant is not critical to its
business. VerticalNet intends to complete the replacement or remediation of
these non-compliant technologies, as well as the testing of any replacement or
corrected technologies, by the end of the second quarter of 1999.

     In addition, VerticalNet is in the process of seeking verification from its
key distributors, vendors and suppliers that they are Year 2000 compliant or, if
they are not presently compliant, to provide a description of their plans to
become so. VerticalNet has received certification from 80% of its distributors,
vendors and suppliers that they are either Year 2000 compliant or are taking the
necessary steps to become Year 2000 compliant. To the extent that vendors fail
to provide certification that they are Year 2000 compliant by July, 1999,
VerticalNet will seek to terminate and replace those relationships.

     In the event that VerticalNet's production and operational facilities that
support its Web sites are not Year 2000 compliant, small portions of its Web
site may become unavailable. VerticalNet's review of its systems has shown that
there is no single application that would make its Web sites totally unavailable
and VerticalNet believes that it can quickly address any difficulties that may
arise.

     In the event that VerticalNet's Web-hosting facilities are not Year 2000
compliant, its Web sites would be unavailable and it would not be able to
deliver services to its users.

     VerticalNet does not currently have a contingency plan to deal with the
worst-case scenario that might occur if technologies it is dependent upon are
not Year 2000 compliant and fail to operate effectively after the Year 2000.
VerticalNet intends to develop a plan for this scenario by the end of the second
quarter of 1999.

     If VerticalNet's present efforts to address the Year 2000 compliance issues
are not successful, or if distributors,  suppliers and other third parties with
which it conducts business do not successfully address such issues, its
business, operating results and financial position could be materially and
adversely affected.

                                       25
OUR BUSINESS

Internet Capital Group

     Internet Capital Group is an Internet holding company primarily engaged in
managing and operating a network of business-to-business, or B2B, e-commerce
companies. Our goal is to become the premier B2B e-commerce company by
establishing an e-commerce presence in major segments of the economy. We believe
that our sole focus on the B2B e-commerce industry allows us to capitalize
rapidly on new opportunities and to attract and develop leading B2B e-commerce
companies. As of April 30, 1999, we owned interests in 29 B2B e-commerce
companies which we refer to as our Partner Companies.

     Our operating strategy is to integrate our Partner Companies into a
collaborative network that leverages our collective knowledge and resources.
Acting as a long-term partner, we use these collective resources to actively
develop the business strategies, operations and management teams of our Partner
Companies. Our resources include the experience, industry relationships and
specific expertise of our management team, our Partner Companies and our
Advisory Board. Currently, our Advisory Board consists of individuals with
executive-level experience in general management, sales and marketing and
information technology at such leading companies as Cisco Systems, Coca-Cola
Company, Exodus Communications, IBM, Mastercard, Merrill Lynch and Microsoft. We
believe that building successful B2B e-commerce companies enhances the ability
of our collaborative network to facilitate innovation and growth among our
Partner Companies.

Industry Overview

     Growth of the Internet

     People and businesses are increasingly relying on the Internet to access
and share information as well as to purchase and sell products and services.
International Data Corporation estimates that at the end of 1998 more than 142
million people were using the Internet to communicate, participate in discussion
forums and obtain information about goods and services. IDC projects that this
user base will grow to 502 million people by the end of 2003. A rapidly growing
number of businesses use the Internet to market and sell their products and
streamline business operations. According to Forrester Research, 50% of all
United States businesses will be online by 2002.

     Growth of B2B E-Commerce

     The Internet's substantial growth creates tremendous market opportunities
for companies that connect buyers and sellers, and companies that create
applications and systems for traditional businesses wishing to engage in e-
commerce. Historically, B2B e-commerce has occurred through electronic data
interchange over proprietary networks, which are costly and available only to a
limited number of participants. The Internet provides an open platform with
common communication protocols to build efficient, cost-effective networks that
facilitate e-commerce. As Internet-based network reliability, speed and security
have improved in recent years and as more businesses have connected to the
Internet, traditional businesses are beginning to use the Internet to conduct e-
commerce and exchange information with customers, suppliers and distributors.
While the business-to-consumer e-commerce market currently is significant in
size, estimated by IDC to have been $15 billion in goods and services in 1998,
the B2B e-commerce market is larger and is predicted to grow dramatically. IDC
projects that the B2B e-commerce market will grow from $35 billion in goods and
services in 1998 to over $1.1 trillion by 2003.

     We believe that the B2B e-commerce market is beginning a period of rapid
development and growth for the following reasons:

     .  Expanded Access to New and Existing Customers and Suppliers. Traditional
        businesses have relied on their sales forces and purchasing departments
        to develop and maintain customer and supplier relationships. This model
        is constrained by the time and cost required to exchange current
        information regarding requirements, prices and product availability, and
        the difficulty of cost-effectively locating new customers and suppliers
        and managing existing relationships. Traditional businesses can leverage
        the Internet to obtain real-time, accurate information regarding
        requirements, prices and products to a global audience, including
        suppliers, customers and business 

                                       26
partners. This makes it easier for businesses to attract new customers
        and suppliers, improve service and increase revenue.

     .  Increased Efficiency and Reduced Cost. Traditional businesses can
        utilize the Internet to automate their internal operations, including
        manufacturing, finance, sales and purchasing functions. The Internet can
        also be used to increase information flow and access throughout an
        organization. This increases operational efficiency by reducing the
        time, costs and resources required to transact business, lowering
        inventory levels and procurement costs, and improving responsiveness to
        customers and suppliers.

     Market Opportunities for Emerging B2B E-Commerce Companies

     We believe that there are significant opportunities for companies that can
assist traditional businesses in using the Internet to create more efficient
markets and enable e-commerce. We call these companies B2B e-commerce companies.
We focus on two types of B2B e-commerce companies: market makers and
infrastructure service providers.

     .  Market Makers. Market makers bring buyers and sellers together by
        creating Internet-based markets for the exchange of goods, services and
        information. Market makers enable more effective and lower cost commerce
        for traditional businesses by providing access through the Internet to a
        broader range of buyers and sellers. Market makers typically operate in
        a specific industry and tailor their business models to match a target
        market's distinct characteristics. To understand the different types of
        markets, we divide market makers into three categories: distributor,
        network and community.

        .  Distributor. Distributor markets are characterized by comparatively
           inefficient distribution channels. To service these markets,
           distributor market makers act as principals in transactions,
           distributing goods and services between buyers and sellers who
           connect with each other over the Internet. Distributor market makers
           may charge a fee based on the value of the transactions facilitated.

        .  Network. Network markets are characterized by comparatively efficient
           distribution channels. Although network market makers do not act as
           principals in transactions, they automate existing business processes
           so as to make them more efficient. Network market makers may generate
           revenue by charging fees for transactions conducted on their Web
           sites, and may charge a fee for access to their Web-based services.

        .  Community. Community market makers bring together buyers and sellers
           that are typically businesses and professionals with common
           interests. Existing relationships among these businesses and
           professionals are unstructured, but community market makers
           facilitate interaction and transactions among them by providing an
           electronic community. Community market makers may charge a fee for
           facilitated transactions and receive advertising revenue.

     .  Infrastructure Service Providers. Infrastructure service providers sell
        software and services to businesses engaged in e-commerce. Many
        businesses need assistance in designing business practices to take
        advantage of the Internet, and in building and managing the
        technological infrastructure needed to support B2B e-commerce.
        Infrastructure service providers help businesses in the following ways:

        .  Strategic Consulting and Systems Integration. Consultants assist
           traditional businesses in developing their e-commerce strategies.
           Systems integrators develop and implement a technological
           infrastructure that enables e-commerce. Systems integrators also
           integrate e-commerce applications with existing enterprise
           applications. Strategic consultants and systems integrators typically
           charge their clients on a project-by-project basis.

        .  Software Providers. Software providers design and sell software
           applications, tools and related services that support e-commerce and
           integrate business functions. Software providers may sell or license
           their products.

                                       27
.  Outsourced Service Providers. Outsourced service providers offer
           software applications, infrastructure and related services designed
           to help traditional businesses reduce cost, improve operational
           efficiency and decrease time to market. Outsourced service providers
           may charge fees on a per-use or periodic basis.

     Challenges Facing Emerging B2B E-Commerce Companies

     We believe that emerging B2B e-commerce companies face certain challenges,
including:

     .  Developing a Successful Business Model. B2B e-commerce companies must
        develop business models that capitalize on the Internet's capabilities
        to provide solutions to traditional companies in target industries. B2B
        e-commerce companies require industry expertise because each industry
        has distinct characteristics including existing distribution channels,
        levels of concentration and fragmentation among buyers and sellers,
        procurement policies, product information and customer support
        requirements. B2B e-commerce companies also require Internet expertise
        in order to apply its capabilities to their target industries.

     .  Building Corporate Infrastructure. Many B2B e-commerce companies have
        been recently formed and require sales and marketing, executive
        recruiting and human resources, information technology, and finance and
        business development assistance. These companies also require capital as
        significant resources may be required to build technological
        capabilities and internal operations.

     .  Finding the Best People. Entrants into the B2B e-commerce market require
        management with expertise in the applicable market, an understanding of
        the Internet's capabilities, the ability to manage rapid growth and the
        flexibility to adapt to the changing Internet marketplace. We believe
        that very few people have these skills, and those that do are highly
        sought after. To be successful, companies must attract and retain highly
        qualified personnel.

We believe that the most successful B2B e-commerce companies will rapidly
identify market demands and move quickly to satisfy those demands. B2B e-
commerce companies that accomplish this goal may establish new standards, gain
market share, secure critical partnerships and create a brand name, making
competition more difficult for new entrants. In addition, B2B e-commerce
companies must keep abreast of Internet and industry-specific developments and
adapt to a rapidly changing environment.

Our Solution and Strategy

     Our goal is to become the premier B2B e-commerce company by establishing an
e-commerce presence in major segments of the economy. We believe that our sole
focus on the B2B e-commerce industry allows us to capitalize rapidly on new
opportunities and to attract and develop leading B2B e-commerce companies. As of
April 30, 1999, we owned interests in 29 B2B e-commerce companies which we refer
to as our Partner Companies.

     Our operating strategy is to integrate our Partner Companies into a
collaborative network that leverages our collective knowledge and resources.
Acting as a long-term partner, we use these collective resources to actively
develop the business strategies, operations and management teams of our Partner
Companies. Our resources include the experience, industry relationships and
specific expertise of our management team, our Partner Companies and our
Advisory Board.

     Our strategy is to:

     .  create or identify companies with the potential to become industry
        leaders;

     .  acquire significant interests in Partner Companies and incorporate them
        into our collaborative network;

     .  provide strategic guidance and operational support to our Partner
        Companies; and

     .  promote collaboration among our Partner Companies.

                                       28
In implementing our strategy, we leverage the collective knowledge and
experience of our Partner Companies, strategic investors and Advisory Board
members. Our Advisory Board consists of over 15 experienced executives from
various backgrounds who provide our network with strategic guidance, sales,
marketing and information technology expertise and industry contacts. Ideally, 
we would like to own 40% or more of our Partner Companies, with management and 
public shareholders owning the remaining interests, but we believe that we can 
have significant influence with lower ownership levels.

     Create or Identify Companies With the Potential to Become Market Leaders

     Our expertise in the B2B e-commerce market allows us to build or identify
companies that are positioned to succeed. We apply a disciplined analysis that
capitalizes on this competitive advantage. When we evaluate whether to enter a
market by building a company or acquiring an interest in an existing company, we
weigh the following industry and partnership company factors:

     .  Industry Criteria

        .  Inefficiency. We consider whether the industry suffers from
           inefficiencies that may be alleviated through e-commerce. We also
           consider the relative amount of inefficiency, as more inefficient
           industries present greater profit potential.

        .  Competition. We evaluate the amount of competition that a potential
           Partner Company faces from e-commerce and traditional businesses.

        .  Market Maker Profit Potential. When evaluating market makers, we
           consider the number and dollar value of transactions in the industry.
           In the multi-billion dollar industries that we target, offering even
           incremental efficiency improvements presents significant profit
           potential.

        .  Centralized Information Sources. When evaluating market makers, we
           consider whether the industry has product catalogs, trade journals
           and other centralized sources of information regarding products,
           prices, customers and other factors. The availability of this
           information makes it easier for a market maker to facilitate
           communication and transactions. We generally avoid industries where
           this information is not available.

        .  Infrastructure Service Provider Profit Potential. When evaluating
           infrastructure service providers, we examine the size of the market
           opportunity, the profit potential in serving the target market and
           whether the infrastructure service provider can provide assistance to
           our market maker Partner Companies.

     .  Partnership Company Criteria

        .  Industry Leader. We partner with a company only if we believe that it
           has the products and skills to become a leader in its industry.

        .  Management Quality. We assess the overall quality and industry
           expertise of a potential Partner Company's management.

        .  Significant Ownership. We consider whether we will be able to obtain
           a significant position in the company and exert influence over the
           company.

        .  Network Synergy. We consider the degree to which a potential Partner
           Company may contribute to our network, and benefit from our network
           and operational resources.

     Acquire Interests in Partner Companies

     After we identify an attractive potential Partner Company, we negotiate the
acquisition of a significant interest in the company. As a condition to an
acquisition, we require representation on the company's Board of Directors, to
ensure our ability to provide active guidance to the Partner Company. We
structure acquisitions to permit the Partner Company's management and key
personnel to retain an equity stake in the company. As a result of our
experience, we believe that we have the ability to complete acquisitions quickly
and efficiently.

                                       29
During our negotiations with potential Partner Companies we emphasize the
value of our collaborative network, which we believe gives us a competitive
advantage over other acquirors in successfully consummating transactions. Our
Partner Companies, strategic investors and Advisory Board members assist in
these discussions and assist in other stages of the acquisition process,
including the initial evaluation of potential Partner Companies and due
diligence.

     Provide Strategic Guidance and Operational Support to Our Partner Companies

     After we make an acquisition or form a Partner Company, we take an active
role in its affairs by providing both strategic guidance and operational
support:

     .  Strategic Guidance. We provide strategic guidance to our Partner
        Companies regarding market positioning, business model development and
        market trends. In addition, we advise Partner Company management and
        directors on day-to-day management and operational issues. Our exclusive
        focus on the B2B e-commerce market and the knowledge base of our Partner
        Companies, strategic investors, management and Advisory Board give us
        valuable experience that we share with our Partner Company network.
        Advisory Board members who provide strategic guidance to our Partner
        Companies include Jeff Ballowe, a former President of Ziff-Davis Inc.
        and the current Chairman of Deja.com, Inc., Alex W. Hart, a former Chief
        Executive Officer of MasterCard International, Ron Hovsepian, Vice
        President of Business Development at IBM Corporation and Yossi Sheffi,
        Ph.D., a co-founder of Syncra Software, Inc. and e-Chemicals, Inc. and
        currently a Professor at Massachusetts Institute of Technology.

     .  Operational Support. B2B e-commerce companies often have difficulty
        obtaining senior executive level guidance in the many areas of expertise
        successful companies need. We assist our Partner Companies by providing
        access to skilled managers who guide our Partner Companies in the
        following functional areas:

        .  Sales and Marketing. Several members of our Advisory Board and
           management team provide guidance to our Partner Companies' sales,
           marketing, product positioning and advertising efforts. These
           individuals include Michael H. Forster, a former Senior Vice
           President of Worldwide Field Operations at Sybase, Inc. and currently
           one of our Senior Partners, Christopher H. Greendale, a former
           Executive Vice President at Cambridge Technology Partners and
           currently one of our Senior Partners, Rowland Hanson, a former Vice
           President of Corporate Communications at Microsoft Corporation and
           currently founder of C. Rowland Hanson & Associates, Charles W.
           Stryker, Ph.D., President, Marketing Information Solutions, at
           IntelliQuest, Inc., and Sergio Zyman, a former Vice President and
           Chief Marketing Officer of the Coca-Cola Company.

        .  Executive Recruiting and Human Resources. Members of our management
           team assist our Partner Companies in recruiting key executive talent.
           In providing this assistance, we leverage the contacts developed by
           our network of Partner Companies, management and Advisory Board. In
           addition, we plan to hire several executives to provide dedicated
           recruiting and other human resource support to our Partner Companies.
           We believe that this is one of the most important functions that we
           perform on behalf of our Partner Companies. B2B e-commerce companies
           must locate executives with both industry and Internet expertise. The
           market for these professionals is highly competitive since few
           persons possess the necessary mix of skills and experience.

        .  Information Technology. Our Chief Technology Officer, Richard G. 
           Bunker, is dedicated to helping our Partner Companies with their
           information systems strategies and solving problems relating to their
           current information technology. Members of our Advisory Board who
           provide guidance in this area include K.B. Chandrasekhar, Chairman of
           the Board of Directors of Exodus Communications, and Peter Solvik,
           the Chief Information Officer of Cisco Systems, Inc.

                                       30
.  Finance. One of our Managing Directors, John N. Nickolas, an
           experienced finance executive, is dedicated to providing financial
           guidance to our Partner Companies in areas such as corporate finance,
           financial reporting, accounting and treasury operations. In providing
           these services, Mr. Nickolas leverages the skills and experience of
           our internal finance and accounting group, our Partner Company
           network and outside consultants.

        .  Business Development. B2B e-commerce companies may be involved in
           evaluating, structuring and negotiating joint ventures, strategic
           alliances, joint marketing agreements, acquisitions or other
           transactions. We provide assistance to our Partner Companies in all
           these areas. Our management team, Advisory Board, strategic investors
           and Partner Companies all assist in this function.

     Promote Collaboration Among Our Partner Companies

     One of the principal goals of our network is to promote innovation and
collaboration among our Partner Companies, which has resulted in shared
knowledge and business contacts among our Partner Companies and the formation of
numerous strategic alliances. We promote collaboration formally by hosting
regularly scheduled seminars relating to Partner Company operational and
business issues. At these seminars, the executives of Partner Companies share
their experiences with each other, our management team and the Advisory Board.
For example, at a recent seminar, thirteen chief executive officers of our
market maker and infrastructure service provider Partner Companies gathered to
discuss e-commerce strategies and business models. On an informal basis, we
promote collaboration by making introductions and recommending Partner Companies
to each other.

     Recent examples of collaboration among our Partner Companies include:

     .  VerticalNet and e-Chemicals are collaborating to provide customer leads
        for e-Chemicals. This relationship enables VerticalNet to provide a
        greater breadth of services to its customers in the chemicals business
        and provides more buyers for the products distributed by e-Chemicals.

     .  Deja.com, which provides a Web-based community for potential purchasers
        to access user comments on a variety of products and services, has
        formed a strategic alliance with VerticalNet to provide VerticalNet's
        Web sites with discussion content. In addition, Deja.com and
        ComputerJobs.com have created a discussion forum that accesses
        ComputerJobs.com's database of technology employment opportunities,
        increasing ComputerJobs.com's exposure to Deja.com's broad user base.

     The collaboration of our Partner Companies is the result of our role as the
hub of our network. Through the network we identify prospective alliances, make
introductions, assist in strategic planning and monitor the ongoing
relationships among our Partner Companies. We encourage and regulate the
information flow among our Partner Companies. We also control the information
flow by determining the composition of the network. If we believe that a Partner
Company is not contributing to our network or has lost its strategic importance,
we may sell our interest in that Partner Company.

Overview of Current Partner Companies

     We focus our efforts on building and operating companies in two areas of
the B2B e-commerce market--market makers and infrastructure service providers.

     Market Maker Categories

     Market makers operate in particular industries, such as chemicals, food or
auto parts. Each industry comprises a distinct market with its own
characteristics. Market makers must tailor their business models to match their
markets. To understand the different types of markets and help our market maker
Partner Companies position themselves, we place market makers into one of three
categories--distributor, network or community.

     .  Distributor. Distributor markets are characterized by comparatively
        inefficient distribution channels. To service these markets, our
        distributor Partner Companies act as principals in transactions,
        distributing goods and services between buyers and sellers who connect
        with each other over the Internet. Our Partner Companies in this
        category generate revenue by charging fees for transactions 

                                       31
conducted on their Web sites. An example of one of our distributor
        Partner Companies is e-Chemicals. e-Chemicals believes that traditional
        distribution channels for chemicals burden customers with excessive
        transaction costs, high administrative costs and inefficient logistics.
        To solve these problems, e-Chemicals has developed a Web site through
        which it will sell a wide range of industrial chemicals to business
        customers. e-Chemicals provides products based on streamlined Web-based
        ordering processes, out-sourced logistics systems and online support.

     .  Network. Network markets are characterized by comparatively efficient
        distribution channels. Our network Partner Companies automate existing
        business processes so as to make them more efficient. Our Partner
        Companies in this category may charge a fee based on the value of the
        transactions facilitated and an ongoing fee for access to their Web
        sites. An example of one of our network Partner Companies is Internet
        Commerce Systems, Inc. Internet Commerce Systems is in the process of
        establishing an Internet-based product introduction and promotion
        service for the food industry. Internet Commerce Systems' FoodOne system
        seeks to replace the traditional practice of weekly distribution of
        physical product catalogs and follow-up calls by telemarketers, food
        brokers or field salespeople. Internet Commerce Systems believes that it
        will increase retail store sales coverage and provide market feedback to
        grocery manufacturers while decreasing order entry, sales and marketing
        costs.

     .  Community. Community market makers bring together buyers and sellers
        that are typically businesses and professionals with common interests.
        Existing relationships among these businesses and professionals are
        unstructured, but our Partner Companies stimulate interaction and
        facilitate transactions among them by providing an electronic community.
        Our Partner Companies may charge a fee for each facilitated transaction
        and receive advertising revenue. One example of our community Partner
        Companies is VerticalNet. As of April 30, 1999, VerticalNet owned and
        operated 37 industry-specific Web sites designed to act as online B2B
        communities. These vertical trade communities act as comprehensive
        sources of information, interaction and electronic commerce.

     Market Maker Profiles

     Table of Market Makers. The Partner Companies listed below are integral to
our strategy of owning numerous interests in distributor, network and community
market makers. We believe that establishing an e-commerce presence in major
industrial segments of the economy will enable us to become the premier B2B e-
commerce company. The table shows certain information regarding our market maker
Partner Companies by category as of April 30, 1999. Our ownership positions have
been calculated based on the issued and outstanding common stock of each Partner
Company, assuming the issuance of common stock on the conversion or exercise of
preferred stock and convertible notes, but excluding the effect of options and
warrants.
Our             Partner
                                                                                                      Ownership         Company
     Category and Name                Industry                   Description of Business             Percentage          Since
---------------------------   ----------------------   -----------------------------------------   --------------    --------------
Distributor:

CommerX Inc.                    Plastics                Provides Internet-based procurement              34%             1998
 www.commerx.com                                        and sales of raw materials, tools and
                                                        maintenance and repair products for
                                                        the plastics industry.
                                                     
e-Chemicals, Inc.               Chemicals               Provides Internet-based sales and                26%             1998
 www.e-Chemicals.com                                    distribution of industrial chemicals.
32
Our             Partner
                                                                                                      Ownership         Company
     Category and Name                Industry                   Description of Business             Percentage          Since
---------------------------   ----------------------   -----------------------------------------   --------------    --------------
ONVIA.com, Inc.                 Small Business          Provides small businesses with a wide            19%             1999
 www.megadepot.com               Services               breadth of tailored products and
                                                        services over the Internet.
 
Universal Access, Inc.          Telecommunications      Provides Internet-based ordering for             11%             1999
 www.universal accessinc.com                            provisioning and access and
                                                        transportation exchange services for
                                                        network service providers focused on
                                                        business customers.
 
Network:
Arbinet                         Telecommunications      Provides an Internet-based trading               16%             1999
 www.arbinet.com                                        floor and clearinghouse for
                                                        telecommunications carriers to
                                                        purchase bandwidth.
 
BidCom                          Construction            Provides Internet-based project                  25%             1999
 www.bidcom.com                                         planning and management services for
                                                        the construction industry.
 
Collabria Inc.                  Printing                Provides Internet-based procurement              10%             1999
 www.collabria.com                                      and production services for the
                                                        commercial printing industry.
 
ComputerJobs.com, Inc.          Technology              Provides Internet-based job screening            33%             1998
 www.computerjobs.com            Employment             and resume posting for information
                                                        technology professionals, corporations
                                                        and staffing firms.
 
Internet Commerce Systems,      Food                    Provides Internet-based product                  43%             1999
 Inc.                                                   introduction and promotion services to
 www.icsfoodone.com                                     wholesale and retail food distributors.
 
RapidAutoNet Corporation        Auto Parts              Provides Internet-based auto parts               15%             1998
 www.rapidautonet.com                                   procurement for professional
                                                        automotive and truck repair shops.
Community:
Deja.com, Inc.                  Media                   Provides a Web-based community for               32%             1997
 www.deja.com                                           potential purchasers to access user
                                                        comments on a variety of products and
                                                        services.

PlanSponsor Exchange            Asset Management        Provides a Web-based community for               24%             1999
 www.plansponsor                                        asset managers to reach fund sponsors.
 exchange.com

VerticalNet, Inc.               Industrial Services     Provides industry-specific Web-based             37%             1996
 www.verticalnet.com                                    trade communities for businesses and
                                                        professionals.
33
Set forth below is a more detailed summary of some of our market maker
Partner Companies.

     ComputerJobs.com, Inc. ComputerJobs.com is a network market maker that
provides Internet-based job advertising and resume posting services for
information technology professionals, corporations and staffing firms.
Identifying and attracting information technology professionals is an expensive
and critical success factor for many businesses. ComputerJobs.com is focused on
improving the online recruitment process for both information technology job
seekers and employers, including staffing firms and corporations. Job seekers
visit ComputerJobs.com's regional-specific Web sites to submit their resume and
pursue job opportunities free of charge. ComputerJobs.com allows jobs seekers to
scan job opportunities by information technology-specific skill requirements,
geographic preferences and other job criteria. Job seekers also have access to
extensive career resources and industry news on the site. By attracting a
significant number of job seekers and their resumes, ComputerJobs.com offers
staffing firms and corporations seeking information technology professionals the
ability to post job openings as well as search and receive daily resumes of
information technology candidates for a monthly fee. ComputerJobs.com pre-
screens job ads and resumes prior to placing them into its database and before
dissemination to its Web sites and clients.

     ComputerJobs.com has Web sites for the information technology markets in
Atlanta, the Carolinas, Chicago, Florida, Texas, New York and Washington, D.C.
Based on more than 2,620 responses from recruiters, ComputerJobs.com was ranked
number one by Internet Business Network as the top site in customer satisfaction
in a 1998 study of the top 100 job sites. ComputerJobs.com plans to expand into
additional information technology markets by year end. We identified
ComputerJobs.com through a director of one of our Partner Companies. We are
assisting ComputerJobs.com with overall strategy, operational management,
recruiting, finance and marketing. Douglas A. Alexander, one of our Managing
Directors, is a member of ComputerJobs.com's Board of Directors.
ComputerJobs.com has formed a strategic alliance with Deja.com that has enabled
Deja.com to create a channel for accessing ComputerJobs.com's database of
technology employment opportunities. For 1998, ComputerJobs.com had revenue of
$4.4 million.

     Deja.com, Inc. Deja.com, formerly Deja News, is a community market maker
that is the Web's leading source of shared knowledge in the form of user-
generated ratings and discussions. With over 160 million page views per month,
it is the leading purveyor of online discussion, offering access to more than
45,000 discussion forums. These forums are populated by knowledgeable
participants who are interested in sharing their knowledge and experience on a
wide variety of subjects.

     Deja.com recently extended its franchise in shared knowledge with the
consumer-driven feature Deja Ratings, a tool that extends the site's ability to
support daily decision-making. Deja Ratings captures consumer opinions on a wide
range of products and services through a scaled voting system that includes
product comparisons. The analytical tools that support decision-making are
supplemented by contextual links to e-commerce retailers and vendors.

     Deja.com derives revenue from sponsors and e-commerce partners, and
provides the marketing community with the compelling proposition of reaching a
highly targeted, self-segmenting audience consisting of highly active Internet
consumers intent on investigating considered purchases. Deja.com also delivers
to those marketers a unique means of programming to the specific interests of
their target consumers, all in the context of a commerce-friendly platform.

     We have been very active in recruiting Deja.com's management team and
developing its business strategy. In addition, Kenneth A. Fox and Douglas A.
Alexander, two of our Managing Directors, are members of Deja.com's Board of
Directors. Deja.com is in discussions with several Partner Companies to provide
services to its user community. For 1998, Deja.com had revenue of $5.1 million.

     Universal Access, Inc. Universal Access is a distributor market maker that
provides Internet-based ordering for provisioning and access and transportation
exchange services for network service providers focused on business customers.
For any network service provider, such as Internet service providers or other
telecommunications carriers, to establish a dedicated connection for its
corporate customers, it must provide provisioning and access. Provisioning is
the initial establishment of a dedicated connection, and access is the
availability of a dedicated connection after provisioning. Prior to significant
deregulation in the 

                                       34
telecommunications industry, network service providers typically selected one
telecommunications carrier to service their corporate customers. After
deregulation, network service providers faced increasing challenges in dealing
with a growing number of local and long-distance carriers to establish dedicated
connections. These challenges faced by network service providers have been
exacerbated by rapid growth in demand from their business customers for
dedicated Internet access.

     Universal Access enables network service providers to deal with a single
provider, rather than multiple local and long distance telecommunications
carriers, for seamless provisioning and access among multiple carriers.
Universal Access' proprietary database contains more than 27 telecommunication
carriers' routing availability, pricing and service capabilities which allows it
to determine the most economical and efficient path for bandwidth connectivity.
By providing single party accountability for all of their provisioning, access,
billing and ongoing network reliability needs, Universal Access enables network
service providers to offer their business customers with faster provisioning and
superior customer service.

     Network service providers typically establish high-cost facilities on the
premises of a telecommunications carrier, which makes changing to another
carrier prohibitively expensive. As network service providers expand nationwide,
Universal Access' transport exchange services will allow these network service
providers to locate their equipment with Universal Access, which provides them
the flexibility to change telecommunications carriers. We are actively providing
Universal Access with overall strategy, marketing and finance guidance. Robert
Pollan, one of our Managing Directors, is a member of Universal Access' Board of
Directors. For 1998, Universal Access had revenue of $1.6 million.

     VerticalNet, Inc. VerticalNet is a community market maker that provides
industry-specific Web-based trade communities for businesses and professionals.
VerticalNet owns and operates 37 industry-specific Web sites as of April 30,
1999 designed as online B2B communities, known as vertical trade communities.
These vertical trade communities act as comprehensive sources of information,
interaction and e-commerce. VerticalNet's objective is to continue to be a
leading owner and operator of industry-specific vertical trade communities on
the Internet.

     VerticalNet's 37 vertical trade communities are:
Process Group                                           Communication Group
 .  Adhesives and Sealants Online                        .  Fiber Optics Online (fiberopticsonline.com)
   (adhesivesandsealants.com)                                Design and Production of Fiber Optic 
     Manufacturing and Production of Adhesive,               Networks and Network Components
     Sealant, and Grout Materials                       
                                                        .  Photonics Online (photonicsonline.com)           
 .  Chemical Online (chemicalonline.com)                      Design and Manufacturing of Lasers, Optics,    
     Manufacturing and Processing Chemicals                  Optoelectronics, Fiber Optics and Imaging      
                                                             Devices 
 .  Hydrocarbon Online (hydrocarbononline.com)                                                        
     Hydrocarbons and Petrochemicals Processing         .  Premises Networks.com (premisesnetworks.com)      
                                                             Facilities and Network Infrastructure Design    
 .  Oil and Gas Online (oilandgasonline.com)                  and Administration                              
     Production and Exploration of Oil and Gas                                                              
                                                        .  RF Globalnet (rfglobalnet.com)                    
 .  Paint and Coatings Online                                 Information, Bookstore and Educational         
   (paintandcoatingsonline.com)                              Center for Radio Frequency, Wireless and       
     Manufacturing and Production of Paint Coatings,         Microwave Engineers                             
     Inks and Thick Film Printable Conductors                                                               
                                                        .  Wireless Design Online (wirelessdesignonline.com) 
 .  Pharmaceutical Online (pharmaceuticalonline.com)          Design and Development of Wireless              
     Development, Design and Manufacturing of                Communications Systems and Equipment            
     Pharmaceuticals
35
Environmental Group                                      Advanced Technologies Group
 .  Pollution Online (pollutiononline.com)                .  Aerospace Online (aerospaceonline.com)
     Industrial Pollution Control                             Design and Manufacturing of Products and Services
                                                              Relating to the Aerospace Industry 
 .  Power Online (poweronline.com)                             
     Power Generation, Electric Utility Deregulation,    .  Computer OEM Online (computeroemonline.com)
     Emissions Control, Alternative Fuels, Power              Design and Manufacturing of Computers and 
     Industry                                                 Comperitzed Electronics Devices 

 .  Public Works Online (publicworks.com)                 .  Medical Design Online (medicaldesignonline.com)                    
     Public Works and Municipal Maintenance                   Design, Manufacturing and Procurement of     
                                                              Medical Devices 
 .  Solid Waste Online (solidwaste.com)                       
     Solid Waste Disposal                                .  Plant Automation.com (plantautomation.com)
                                                              Hardware and Software Used in Industrial 
 .  Water Online (wateronline.com)                             Manufacturing Including Robotics and     
     Municipal Water Supply and Municipal                     Automated Control Systems  
     Wastewater Treatment                                                
                                                         .  Test and Measurement (testandmeasurement.com)    
Food & Packaging Group                                        Design, Manufacturing and Procurement of  
 .  Bakery Online (bakeryonline.com)                           Test, Measurement, Data Acquisition, Data  
     Production and Procurement of Baking                     Analysis and Instrumentation Equipment 
     Ingredients         
                                                         Sciences Group                               
 .  Beverage Online (beverageonline.com)                  .  Bioresearch Online (bioresearchonline.com)                  
     Production and Procurement of Equipment used             Covers all Aspects of Experimental and   
     in the Production of Beverages                           Applied Biology Including Biotechnology,                 
                                                              Genomics and Genetics 
 .  Dairy Network.com (dairynetwork.com)                   
     Production, Procurement and Distribution of         .  Drug Discovery Online (drugdiscoveryonline.com) 
     Dairy Products                                           Early-Stage Pharmaceutical Discovery and 
                                                              Development 
 .  Food Ingredients Online (foodingredientsonline.com)     
     Manufacturing and Processing of Food                .  Laboratory Network.com (laboratorynetwork.com)
     Ingredients                                              Covers all Aspects of the Research Industry 
                                                              Focusing on Analytical Instrumentation and 
 .  Food Online (foodonline.com)                               Materials Science 
     Manufacturing and Processing of Food Products              
                                                         Services Group 
 .  Meat and Poultry Online                               .  Property and Casualty.com 
   (meatandpoultryonline.com)                               (propertyandcasualty.com)                
     Production, Procurement and Distribution of              Property and Casualty Insurance     
     Meat and Poultry Products                                               
                                                         .  Safety Online (safetyonline.com)
 .  Packaging Network.com (packagingnetwork.com)               Industrial and Environmental Safety            
     Production, Purchase, Design and Marketing of             
     Packaging for all Consumer and Industrial 
     Products

Healthcare Group
 .  Hospital Network.com (hospitalnetwork.com)
     Information for Hospital Purchasing Decision-
     Makers

 .  Nurses.com (nurses.com)
     Clinical, Professional and Other Information for 
     Nurses
Each VerticalNet community is individually branded, focuses on one business
sector and caters to individuals with similar professional interests.
VerticalNet designs each of its vertical trade communities to attract
professionals responsible for selecting and purchasing highly specialized
industry related products and services. 

                                       36
VerticalNet's communities combine product information, requests for proposals,
discussion forums, electronic commerce opportunities, industry news,
directories, classifieds, job listings, and online professional education
courses.

     VerticalNet satisfies a developing market not currently being adequately
served through traditional channels, including trade publishers, trade shows and
trade associations. VerticalNet believes that this market is not currently being
served by Internet companies, which tend to focus on the consumer and not on the
B2B market.

     VerticalNet's vertical trade communities take advantage of the Internet's
ability to allow users around the world to contact each other online, allowing
buyers to research, source, contact and purchase from suppliers. Although other
companies offer B2B services on the Internet, VerticalNet believes that it is
currently the only company operating a portfolio of specialized B2B communities.
A portfolio strategy permits VerticalNet to:

     .  offer consistent content and services in its current vertical trade
        communities and replicate these offerings as it launches new
        communities;

     .  realize cost savings and operating efficiencies in its technology,
        marketing, infrastructure and management resources; and

     .  increase its overall audience, making its individual sites more
        appealing to a broad array of advertisers and suppliers who sell their
        goods and services over the Internet.

     VerticalNet currently generates the majority of its revenue from Internet
advertising, including the development of "storefronts." A storefront is a Web
page posted on one of its vertical trade communities that provides information
on an advertiser's products, links a visitor to the advertiser's Web site and
generates sales inquiries from interested visitors. VerticalNet believes that
industry professionals using its vertical trade communities possess the
demographic characteristics that are attractive to its advertisers.

     We were first introduced to VerticalNet through one of our major
shareholders. We helped to recruit several of VerticalNet's executive officers,
and worked with them to develop VerticalNet's business strategy. Douglas A.
Alexander, one of our Managing Directors, currently serves as VerticalNet's
Chairman of the Board of Directors and Walter W. Buckley, our President and
Chief Executive Officer, is a member of VerticalNet's Board of Directors. This
year VerticalNet became a public company, trading on the Nasdaq National Market
under the symbol "VERT." VerticalNet has formed a strategic alliance with e-
Chemicals to provide customer leads for e-Chemicals and to expand VerticalNet's
services to its chemical business customers. For 1998, VerticalNet had revenue
of $3.1 million.

     Infrastructure Service Provider Categories

     Infrastructure service providers assist traditional businesses in the
following ways:

     .  Strategic Consulting and Systems Integration. Strategic consultants
        assist traditional businesses in developing their e-commerce strategies.
        Systems integrators develop and implement technological infrastructure
        that enables e-commerce. Systems integrators also integrate e-commerce
        applications with existing enterprise applications. Strategic
        consultants and systems integrators typically bill their clients on a
        project-by-project basis.

     .  Software Providers. Software providers design and sell software
        applications that support e-commerce and integrate business functions.
        Software providers may sell or license their products.

     .  Outsourced Service Providers. Outsourced service providers offer
        software applications, infrastructure and related services designed to
        help traditional businesses reduce cost, improve operational efficiency
        and decrease time to market. Outsourced service providers may charge
        fees on a per-use or periodic basis.

                                       37
Infrastructure Service Provider Profiles

     Table of Infrastructure Service Providers. The Partner Companies listed
below are important to our strategy because the growth of our Partner Companies
increases the value of our collaborative network. We believe that infrastructure
service providers will facilitate innovation and growth of our market maker
companies by providing them with critical services. The table shows certain
information regarding our infrastructure service provider Partner Companies by
category as of April 30, 1999. Our ownership positions have been calculated
based on the issued and outstanding common stock of each Partner Company,
assuming the issuance of common stock on the conversion or exercise of preferred
stock and convertible notes, but excluding the effect of options and warrants.
Our             Partner
                                                                                           Ownership          Company
     Category and Name                        Description of Business                      Percentage          Since
----------------------------   -------------------------------------------------------   --------------    --------------

Strategic Consulting and Systems Integration:
Benchmarking Partners, Inc.      Provides e-commerce best practices research and                13%             1996
 www.benchmarking.com            consulting services to optimize supply and distribution 
                                 network management.
 
Context Integration, Inc.        Provides systems integration services focused on               18%             1997
 www.context.com                 customer support, data access and e-commerce.

US Interactive, Inc.             Provides a range of consulting and technical                    4%             1996
 www.usinteractive.com           services relating to Internet marketing solutions.
 
Software Providers:

Blackboard, Inc.                 Provides universities and corporations with                    31%             1998
 www.blackboard.com              applications that enable them to host classes and
                                 training on the Internet.
 
ClearCommerce Corp.              Provides comprehensive e-commerce solutions                    17%             1997
 www.clearcommerce.com           including transaction and payment processing, credit
                                 card authorization, fraud tracking and reporting
                                 functions.

Entegrity Solutions              Provides encryption software to secure transactions            12%             1996
 www.entegrity.com               and communications between business applications.

SageMaker, Inc.                  Provides software that combines an enterprise's                22%             1998
 www.sagemaker.com               external and internal information assets into a
                                 single, Web-based knowledge management platform.
 
ServiceSoft Technologies,        Provides tools and services used by its customers to           12%             1998
 Inc.                            create Internet customer service applications consisting 
 www.servicesoft.com             of self-service, e-mail response and live interaction
                                 products.

SMART Technologies, Inc.         Provides enterprise relationship management software            6%             1997
 www.smartdna.com                that enables customers to interact directly with a
                                 company's back-office systems.
38
Our             Partner
                                                                                           Ownership          Company
     Category and Name                        Description of Business                      Percentage          Since
----------------------------   -------------------------------------------------------   --------------    --------------
Syncra Software, Inc.            Provides software that improves supply chain                   35%             1998
 www.syncra.com                  efficiency through collaboration of trading partners
                                 over the Internet.

Vivant! Corporation              Provides process automation, decision support                  23%             1998
 Management                      software and services that enable companies to 
 www.vivantcorp.com              strategically manage contractors, consultants and
                                 temporary employees.
 
Outsourced Service Providers:

Breakaway Solutions, Inc.        Provides application service hosting, e-commerce               57%             1999
 www.breakaway.com               consulting and systems integration services to
                                 middle-market companies.

The LinkShare Corporation        Establishes affiliate relationships for online                 34%             1998
 www.linkshare.com               merchants with other Web sites to facilitate
                                 e-commerce.

MessageQuest, Inc.               Provides a messaging service for data sharing across            5%             1998
 www.messagequest.com            separate enterprises. Also provides software,
                                 systems integration services and managed network
                                 services for application integration within
                                 enterprises or with external trading partners and
                                 customers.

PrivaSeek, Inc.                  Provides consumers with control of their Web-based             16%             1998
 www.privaseek.com               personal profiles, allowing merchants to offer
                                 consumers incentives for selective disclosure.
 
Sky Alland Marketing, Inc.       Provides services to improve customer communications           35%             1996
 www.skyalland.com               and relationships.
Set forth below is a more detailed summary of some of our infrastructure
service provider Partner Companies.

     Benchmarking Partners, Inc. Benchmarking Partners is a strategic consulting
and systems integration infrastructure service company that provides e-commerce
best practices research and consulting services to optimize supply and
distribution network management. The use of best business practices enabled by
information technology established by Benchmarking Partners allows companies to
efficiently manage their supply and distribution networks. Benchmarking Partners
improves supply and distribution networks in the following ways:

     .  Integration: Coordinating diverse business functions such as
        manufacturing, logistics, sales and marketing to maximize efficiency.

     .  Optimization: Developing strategies that increase the efficiency of
        supply networks.

     .  Collaboration: Creating collaborative solutions that incorporate key
        trading partners.

     Benchmarking Partners' clients include: companies undergoing business
process and information technology transformation; technology solution providers
hoping to gain a better understanding of the market requirements for their
products; and management consultants and systems integrators seeking to refine
their ability to effectively support their clients.

     We were introduced to Benchmarking Partners through a member of our board
of directors. We have helped Benchmarking Partners recruit key managers and are
currently helping it build and position 

                                       39
its best practice e-commerce Web site. Benchmarking Partners assisted us in
assessing enterprise software markets and provides information technology advice
to other Partner Companies. Benchmarking Partners is also working with Sky
Alland Marketing and US Interactive to develop Internet business application
opportunities. For 1998, Benchmarking Partners had revenue of $15.9 million.

     Breakaway Solutions, Inc. Breakaway Solutions is an outsourced service
provider infrastructure service company that is an application service provider
and e-commerce consulting and systems integration services provider to middle-
market companies. Through its application service hosting solutions, Breakaway
Solutions implements, operates and supports software applications that can be
accessed and used over the Internet. Breakaway Solutions also offers custom
developed, e-commerce related B2B interactive marketing and other solutions.
By focusing on Internet-based solutions, Breakaway has created a library of
components that can be redeployed by multiple clients. This allows Breakaway
Solutions to provide rapid, cost-effective service to clients.

     We first met Breakaway Solutions through one of our shareholders and 
Advisory Board members. We helped Breakaway Solutions to complete its management
team and merge with one of our other Partner Companies. In addition, Breakaway 
Solutions is a strategic partner for installing ClearCommerce's Web-based 
transaction and order processing solutions. Breakaway Solutions is also in 
discussions to provide its services to ONVIA.com.

     MessageQuest, Inc. MessageQuest is an outsourced service provider
infrastructure service company that delivers systems integration services,
software, and managed networked services to enterprises seeking to enable
mission-critical business processes within their enterprise or with their
external trading partners and customers. The range of computing environments and
software applications utilized across a typical Fortune 500 enterprise is vast
and growing, often involving multiple legacy and client/server environments,
characterized by heterogeneous computer platforms and various proprietary
information formats. Additionally, the recent growth of the Internet and the use
of intranets has increased the complexity of data sharing among heterogeneous
business applications. MessageQuest currently employs 200 professionals
dedicated to providing software and system integration services around IBM's MQ
series, a messaging-based middleware software solution that facilitates data
sharing among an enterprise's disparate applications, databases and operating
systems.

     MessageQuest's recently launched managed network service leverages its
extensive domain expertise in providing middleware solutions that facilitate
data sharing to provide a highly secure, assured information delivery system
between corporations for use over any network, including the Internet. This
managed network service provides an open platform that seamlessly bridges legacy
e-commerce services, such as electronic data interchange and proprietary value-
added networks, with today's best-of-breed Internet technologies. By offering
multi-platform and multi-network interoperability and extensive customer
support, MessageQuest provides its customers with low cost, rapidly-implemented
messaging services. We believe that the services and software provided by
MessageQuest can be used throughout our Partner Company network, including our
market makers interested in tighter integration with their suppliers and
customers. We have assisted MessageQuest in recruiting senior management and
repositioning it to offer managed network services. To support the introduction
of managed network services, we provided the company with strategic planning,
sales and marketing support and introductions to potential business partners.

Government Regulations and Legal Uncertainties

     As of April 30, 1999, there were few laws or regulations directed
specifically at e-commerce. However, because of the Internet's popularity and
increasing use, new laws and regulations may be adopted. These laws and
regulations may cover issues such as the collection of and use of data from Web
site visitors and related privacy issues, pricing, content, copyrights, online
gambling, distribution and the quality of goods and services. The enactment of
any additional laws or regulations may impede the growth of the Internet and B2B
e-commerce, which could decrease the revenue of our Partner Companies and place
additional financial burdens on them.

     Laws and regulations directly applicable to e-commerce or Internet
communications are becoming more prevalent. For example, Congress recently
enacted laws regarding online copyright infringement and the protection of
information collected online from children. Although these laws may not have a
direct adverse effect on our 

                                       40
business or those of our Partner Companies, they add to the legal and regulatory
burden faced by B2B e-commerce companies. Other specific areas of legislative
activity are:

     .  Taxes. Congress recently enacted a three-year moratorium, ending on
        October 21, 2001, on the application of "discriminatory" or "special"
        taxes by the states on Internet access or on products and services
        delivered over the Internet. Congress further declared that there will
        be no federal taxes on e-commerce until the end of the moratorium.
        However, this moratorium does not prevent states from taxing activities
        or goods and services that the states would otherwise have the power to
        tax. Furthermore, the moratorium does not apply to certain state taxes
        that were in place before the moratorium was enacted.

     .  Online Privacy. Both Congress and the Federal Trade Commission are
        considering regulating the extent to which companies should be able to
        use and disclose information they obtain online from consumers. If any
        regulations are enacted, B2B e-commerce companies may find certain
        marketing activities restricted. Also, the European Union has directed
        its member nations to enact much more stringent privacy protection laws
        than are generally found in the United States, and has threatened to
        prohibit the export of certain personal data to United States companies
        if similar measures are not adopted. Such a prohibition could limit the
        growth of foreign markets for United States B2B e-commerce companies.
        The Department of Commerce is negotiating with the Federal Trade
        Commission to provide exemptions from the European Union regulations,
        but the outcome of these negotiations is uncertain.

     .  Regulation of Communications Facilities. To some extent, the rapid
        growth of the Internet in the United States has been due to the relative
        lack of government intervention in the marketplace for Internet access.
        Lack of intervention may not continue in the future. For example,
        several telecommunications carriers are seeking to have
        telecommunications over the Internet regulated by the Federal
        Communications Commission in the same manner as other telecommunications
        services. Additionally, local telephone carriers have petitioned the
        Federal Communications Commission to regulate Internet service providers
        in a manner similar to long distance telephone carriers and to impose
        access fees on such providers. Some Internet service providers are
        seeking to have broadband Internet access over cable systems regulated
        in much the same manner as telephone services, which could slow the
        deployment of broadband Internet access services. Because of these
        proceedings or others, new laws or regulations could be enacted which
        could burden the companies that provide the infrastructure on which the
        Internet is based, thereby slowing the rapid expansion of the medium and
        its availability to new users.

     .  Other Regulations. The growth of the Internet and e-commerce may lead to
        the enactment of more stringent consumer protection laws. The Federal
        Trade Commission may use its existing jurisdiction to police e-commerce
        activities, and it is possible that the Federal Trade Commission will
        seek authority from Congress to regulate certain online activities. The
        Federal Trade Commission has already issued for public comment proposed
        regulations governing the collection of information online from
        children.

     Generally applicable laws may affect us and our Partner Companies. The
exact applicability of many of these laws to B2B e-commerce, however, is
uncertain.

Employees

     As of April 30, 1999, excluding our Partner Companies, we had 21 employees,
all of whom work with us on a full-time basis. We consider our relationships
with our employees to be good. None of our employees are covered by collective
bargaining agreements.

Legal Proceedings

     We are not a party to any material legal proceedings.

                                       41
Competition

     Competition From our Shareholders and Within our Network

     We may compete with our shareholders and Partner Companies for Internet-
related opportunities. After this offering, Comcast Corporation, Compaq Computer
Corporation, General Electric Capital Corporation and Safeguard Scientifics,
Inc. will beneficially own      %,         %,            % and        % of our
common stock, respectively. These shareholders may compete with us to acquire
interests in B2B e-commerce companies. Comcast Corporation, General Electric
Capital Corporation and Safeguard Scientifics, Inc. currently each have a
designee as a member of our board of directors, which may give such companies
access to our business plan and potential acquisitions. In addition, we may
compete with our Partner Companies to acquire interests in B2B e-commerce
companies, and our Partner Companies may compete with each other for
acquisitions or other B2B e-commerce opportunities. In particular, VerticalNet
seeks to expand, in part through acquisition, its number of B2B communities.
VerticalNet, therefore, may seek to acquire companies that we would find
attractive. While we may partner with VerticalNet on future acquisitions, we
have no current contractual obligations to do so. We do not have any contracts
or other understandings with our shareholders or Partner Companies that would
govern the resolution of these potential conflicts. Such competition, and the
complications posed by the designated directors, may deter companies from
partnering with us and may limit our business opportunities.

     Competition Facing our Partner Companies

     Competition for Internet products and services is intense. As the market
for B2B e-commerce grows, we expect that competition will intensify. Barriers to
entry are minimal, and competitors can offer products and services at a
relatively low cost. Our Partner Companies compete for a share of a customer's:

     .  purchasing budget for services, materials and supplies with other online
        providers and traditional distribution channels;

     .  dollars spent on consulting services with many established information
        systems and management consulting firms; and

     .  advertising budget with online services and traditional off-line media,
        such as print and trade associations.

In addition, some of our Partner Companies compete to attract and retain a
critical mass of buyers and sellers. Several companies offer competitive
solutions that compete with one or more of our Partner Companies. We expect that
additional companies will offer competing solutions on a stand-alone or combined
basis in the future. Furthermore, our Partner Companies' competitors may develop
Internet products or services that are superior to, or have greater market
acceptance than, the solutions offered by our Partner Companies. If our Partner
Companies are unable to compete successfully against their competitors, our
Partner Companies may fail.

     Many of our Partner Companies' competitors have greater brand recognition
and greater financial, marketing and other resources than our Partner Companies.
This may place our Partner Companies at a disadvantage in responding to their
competitors' pricing strategies, technological advances, advertising campaigns,
strategic partnerships and other initiatives.

     Competition for Partner Companies

     We face competition from other capital providers including publicly-traded
Internet companies, venture capital companies and large corporations. Many of
these competitors have greater financial resources and brand name recognition
than we do. These competitors may limit our opportunity to acquire interests in
new Partner Companies. If we cannot acquire interests in attractive companies,
our strategy to build a collaborative network of Partner Companies may not
succeed.

Facilities

     Our corporate headquarters are located at 435 Devon Park Drive, Building 
800 in an office facility located in Wayne, Pennsylvania, where we lease
approximately 3,650 square feet. We plan to move into a larger corporate

                                      42
headquarters in Wayne, Pennsylvania during the second half of 1999. We also
maintain offices in Boston, Massachusetts and San Francisco, California.

                                       43
MANAGEMENT

Executive Officers and Directors

     Our executive officers, key employees and directors, their ages and their
positions as of April 30, 1999, are as follows:
Name                     Age                             Position
       ----                     ---                             --------
Walter W. Buckley, III (2)       39             President, Chief Executive Officer and Director
Douglas A. Alexander             37             Managing Director
Richard G. Bunker                37             Managing Director and Chief Technology Officer
Kenneth A. Fox                   28             Managing Director and Director
David D. Gathman                 51             Chief Financial Officer, Secretary and Treasurer
Victor Hwang                     30             Managing Director
Henry N. Nassau (3)              44             Managing Director and General Counsel
John N. Nickolas                 32             Managing Director and Assistant Treasurer
Robert A. Pollan                 38             Managing Director
Michael H. Forster               56             Senior Partner   
Christopher H. Greendale         47             Senior Partner   
Robert E. Keith, Jr. (2)         58             Chairman and Director
Julian A. Brodsky (2)            65             Director
E. Michael Forgash (1)           41             Director
Thomas P. Gerrity (1)            57             Director
Scott E. Gould                   34             Director
-------------------------- 

(1)  Member of the audit committee

(2)  Member of the compensation committee

(3)  Mr. Nassau has agreed to join us as soon as reasonably possible. He is
     currently counsel to the law firm of Dechert Price & Rhoads.

     Walter W. Buckley, III, is a co-founder and has served as our President and
Chief Executive Officer and as one of our directors since March, 1996. Prior to
co-founding us, Mr. Buckley worked for Safeguard Scientifics, Inc. as Vice
President of Acquisitions from 1991 to February, 1996. Mr. Buckley directed many
of Safeguard Scientifics' investments and was responsible for developing and
executing Safeguard Scientifics' multimedia and Internet investment strategies.
Mr. Buckley serves as a director of VerticalNet, Inc., Sky Alland Marketing,
Who? Vision Systems, Inc., Syncra Software, Inc., PrivaSeek, Inc., Breakaway
Solutions, Inc. and e-Chemicals, Inc.

     Douglas A. Alexander has served as one of our Managing Directors since
September, 1997. Prior to joining us, Mr. Alexander co-founded Reality Online,
Inc. in 1986 and sold it to Reuters Group in 1994. Mr. Alexander continued to
serve as President and Chief Executive Officer of Reality Online after its
acquisition by Reuters Group until September, 1997 while concurrently acting as
a key contributor to Reuter's global Internet initiatives. Mr. Alexander is
Chairman of the board of VerticalNet, Inc. and serves as a director of
Blackboard, Inc., ComputerJobs.com, Inc., Deja.com, Inc., The LinkShare 
Corporation and SageMaker, Inc.

                                       44
Richard G. Bunker has served as one of our Managing Directors and has been
our Chief Technology Officer since April, 1999. Prior to joining us, Mr. Bunker
was President and Chief Executive Officer of Reality Online, a Reuters company,
from September, 1997 to April, 1999. Before becoming President and Chief
Executive Officer, Mr. Bunker served in various senior management positions at
Reality Online. While President and Chief Executive Officer of Reality Online,
Mr. Bunker built the company into a leading builder and host online securities
trading company. He also served as Senior Vice President and Chief Information
Officer of SEI Investments from January, 1994 to March, 1996, and Vice President
of the investment management and trading technology group at State Street Global
Advisors from October, 1992 to January, 1994.

     Kenneth A. Fox is a co-founder and has served as one of our Managing
Directors since our inception in March, 1996. Mr. Fox has also served as one of
our directors since February, 1999. Prior to co-founding us, Mr. Fox served as
Director of West Coast Operations for Safeguard Scientifics, Inc. and Technology
Leaders II, L.P., a venture capital partnership, from 1994 to 1996. In this
capacity, Mr. Fox led the development of and managed the West coast operations
for these companies. Mr. Fox serves as a director of BidCom, ClearCommerce 
Corporation, CommerX, Inc., Context Integration, Inc., Deja.com,
Inc., Entegrity Solutions Corporation, ONVIA.com, Inc., RapidAutoNet, SMART 
Technologies, Inc. and Vivant! Corporation.

     David D. Gathman has served as our Chief Financial Officer, Secretary and
Treasurer  since January, 1999. Prior to joining us, Mr. Gathman was Chief
Financial Officer and Executive Vice President, Finance and Administration of
Integrated Systems Consulting Group, Inc. from January, 1997 through its merger
with First Consulting Group, Inc. in December, 1998. He also served as Chief
Operating Officer, Vice President, Secretary and Assistant Treasurer of
Integrated Systems Consulting Group, Inc. from April, 1994 to December, 1998 and
as a director of the company. Mr. Gathman brings to us over 30 years of finance-
related experience, the last 16 of which were focused in the information
technology industry.

     Victor Hwang has served as one of our Managing Directors since March, 1999.
Prior to joining us, Mr. Hwang served from January, 1999 to March, 1999 as a
General Partner of Softbank Holdings, responsible for developing an investment
fund targeting late-stage private Internet companies. From August, 1995 to
January, 1999, Mr. Hwang also served as an investment banker at Goldman, Sachs &
Co., where he was involved in numerous financing and merger transactions for a
broad range of Internet, software, semiconductor, communications and hardware
companies. While at Goldman Sachs & Co., Mr. Hwang's clients included e-Bay,
GeoCities and Yahoo!. Mr. Hwang obtained a Masters of Business Administration
from the Graduate Business School of Stanford University where he was in
attendance from September, 1993 to June, 1995.

     Henry N. Nassau has agreed to join us as one of our Managing Directors and
as our General Counsel as soon as reasonably possible. Mr. Nassau is currently
counsel to the law firm of Dechert Price & Rhoads where he was a Partner from
September, 1987 to May, 1999 and was Chair of the Business Department from
January, 1998 to May, 1999. At Dechert Price & Rhoads, Mr. Nassau engaged in the
practice of corporate law, concentrating on mergers and acquisitions.

     John N. Nickolas has served as one of our Managing Directors and has been
our Assistant Treasurer since January, 1999. Prior to joining us, Mr. Nickolas
served from October, 1994 to December, 1998 in various 

                                       45
finance and accounting positions for Safeguard Scientifics, Inc., most recently
serving as Corporate Controller from December, 1997 to December, 1998. Mr.
Nickolas brings to us extensive financial experience including corporate
finance, financial reporting, accounting and treasury operations. Before joining
Safeguard Scientifics, Inc., Mr. Nickolas was Audit Manager and held various
other positions at KPMG LLP from July, 1990 to October, 1994.

     Robert A. Pollan has served as one of our Managing Directors since June,
1998. Prior to joining us, Mr. Pollan served as a Chief Technology Officer and
Vice President of Business Development at General Electric Capital Corporation
from August, 1995 to June, 1998. During his tenure at General Electric Capital
Corporation, Mr. Pollan co-founded and served as President of two supply chain
ventures focused on remote telemetry and third-party logistics, returnable
packaging leasing and logistics. He led several acquisitions in Europe, Asia and
the United States. Mr. Pollan was co-founder and, from September, 1991 to July,
1995, Managing Director of OFR, Ltd., an advisory firm focused on the
organizational and financial restructuring of industrial enterprises in Central
Europe. While in Central Europe, Mr. Pollan founded the first Polish industrial
group and advised the World Bank and a number of Eastern European governments.
Mr. Pollan serves as a director of CommerX, Inc., Internet Commerce Systems,
Inc. and Universal Access, Inc.

     Michael H. Forster has served as one of our Senior Partners since June,
1998. Before joining us, Mr. Forster served as Senior Vice President of
Worldwide Field Operations for Sybase, Inc. from April, 1996 to March, 1999.
Prior to this position with the company, Mr. Forster was Sybase's Senior Vice
President and President of the company's Information Connection Division from
April, 1994 to March, 1996. Mr. Forster has over 30 years of sales, marketing
and general management experience in the information technology industry. Mr.
Forster serves as a director of Tangram Enterprise Solutions, MessageQuest, Inc.
SageMaker, Inc. and Syncra Software, Inc.

     Christopher H. Greendale has served as one of our Senior Partners since
January, 1999. Prior to joining us, Mr. Greendale served as an independent
management consultant from January, 1998 to December, 1998. Prior to becoming a 
consultant, Mr. Greendale served as Executive Vice President of Cambridge
Technology Partners, a company he co-founded in 1991. Cambridge Technology
Partners is a systems integrator that initiated fixed price, fixed time, rapid
systems development. Mr. Greendale has extensive experience in sales and
marketing, and general management in the information technology industry.

     Robert E. Keith, Jr. has served as the Chairman of our Board of Directors
since our inception in March, 1996. Mr. Keith is also Managing General Partner
of Technology Leaders II, L.P. and has had principal operating responsibility
for Technology Leaders II, L.P. since 1988. Mr. Keith also serves as a director
of American Education Centers, Inc., Cambridge Technology Partners
(Massachusetts), Inc., Diablo Research Corporation, LLC, Interactive Media
Systems, Inc., Masterpack International, Inc., MultiGen-Paradigm, Inc., National
Media Corporation, Naviant Technology Solutions, Inc., Sansource, Inc., US
Interactive, Inc., and Whisper Communications, Inc. and is Vice Chairman of the
Board of Safeguard Scientifics, Inc.

     Julian A. Brodsky has served as one of our directors since May, 1996. Mr.
Brodsky is a founder of Comcast Corporation, a developer of broadband cable
networks, cellular and personal communications systems and has served as a
director of Comcast since 1969 and Vice Chairman since 1988. He serves as Vice
President and a director of Sural. Mr. Brodsky serves as a director of Comcast
Cable Communications, Inc., Comcast Cellular Corporation, Comcast UK, Cable
Partners Limited, the RBB Fund, Inc. and Chairman of Comcast Interactive Capital
Group, Inc.

     E. Michael Forgash has served as one of our directors since May, 1998. Mr.
Forgash has been Vice President, Operations of Safeguard Scientifics, Inc. since
January, 1998. Prior to joining Safeguard Scientifics, Mr. Forgash was President
and Chief Executive Officer of Creative Multimedia from August, 1996 to October,
1997. Prior to that, Mr. Forgash was President at Continental HealthCare Systems
from November, 1994 to July, 1996. Mr. Forgash also serves as a director of US
Interactive, Inc., 4anything.com, Inc., eMerge Vision, Who? Vision Systems, Inc.
and Integrated Visions, Inc.

     Dr. Thomas P. Gerrity has served as one of our directors since December,
1998. Dr. Gerrity has also served as Dean of The Wharton School of the
University of Pennsylvania since July, 1990. Dr. Gerrity is also a member of the
board of directors of Fiserv, Inc., Fannie Mae, CVS Corporation, Sunoco, Inc.,
Reliance Group Holdings, Inc., Knight-Ridder, Inc. and Ikon Office Solutions,
Inc. and a trustee of MAS Funds.

     Scott E. Gould has served as one of our directors since December, 1998. Mr.
Gould is Vice President of General Electric Equity Capital Group, Inc., a
wholly-owned subsidiary of General Electric Corporation, in charge of Supply
Chain Technology, Logistics and Transportation Investing since August, 1997.
Prior to joining General Electric Equity Capital Group, Mr. Gould was Director
of Strategic Planning & Information from January, 1996 to August, 1997 and
Director of Finance from February, 1994 to January, 1996 for DSC Logistics, a
logistics outsourcer and software company. Mr. Gould also works with the boards
of McHugh Software International and IFCO Returnable Packaging Systems.

                                       46
Advisory Board

     Our Advisory Board members provide our Partner Companies with strategic
guidance in general management, sales and marketing, and information technology
management. Our Advisory Board members and their backgrounds are:

     General Management Guidance

     Jeff Ballowe has served on our Advisory Board since February, 1998. Mr.
Ballowe served as President, Interactive Media and Development Group, of Ziff-
Davis, Inc.'s Internet publications until the end of 1997. Mr. Ballowe was
instrumental in transforming Ziff-Davis from a national magazine publisher to an
international integrated media company. Prior to joining Ziff-Davis, Mr. Ballowe
worked as a marketing executive at various technology and marketing services
companies. Mr. Ballowe serves as Chairman of the Board of Directors of Deja.com,
Inc. and as director of drkoop.com, Inc., Xoom.com, Inc., Ziff-Davis TV Inc. and
VerticalNet, Inc.

     Alex W. "Pete" Hart has served on our Advisory Board since March, 1998. Mr.
Hart is a consultant in consumer financial services specializing in emerging
payment and distribution systems. Mr. Hart has served in numerous positions,
including Chief Executive Officer, of Advanta Corporation from March, 1994 to
October, 1997. Prior to joining Advanta Corporation, Mr. Hart served as
President and Chief Executive Officer of MasterCard International. Mr. Hart
serves as a director of Sanchez Computer Associates, Who? Vision Systems,
4anything.com, HNC Software, Integrated Vision and Destiny Systems and on the
advisory board of ONVIA.com and Qpass.

     Ron Hovsepian has served on our Advisory Board since October, 1998. Mr.
Hovsepian is the Vice President, Business Development, Distribution Industry,
for IBM Corporation. Prior to this position, Mr. Hovsepian was General Manager
of IBM's Global Retail and Distribution Industry Solution Organization, and had
global responsibility for IBM's retail store system and the consumer driven
supply chain solution units. Mr. Hovsepian joined IBM as a Marketing
Representative in 1983.

     Martha Rogers, Ph.D., has served on our Advisory Board since 1996. Dr.
Rogers is a Professor at the Duke University Fuqua School of Business. Dr.
Rogers has served as Founding Partner of Marketing 1 to 1/Peppers and Rogers
Group since 1994. Marketing 1 to 1/Peppers and Rogers Group is a management
consulting firm that focuses on thought leadership and strategy in the growing
fields of interactivity, marketing, technology, relationship management and
business development. Dr. Rogers frequently appears on a variety of radio and
television programs, including C-SPAN's "American Perspectives" covering
business trends and features.

     Yossi Sheffi has served on our Advisory Board since July, 1998. Dr. Sheffi
is a Professor at Massachusetts Institute of Technology where he serves as
Director of the Center for Transportation Studies. His teaching and research
areas include logistics, optimization, supply chain management and e-commerce.
Dr. Sheffi is the author of a textbook and over fifty technical publications. In
1997, Dr. Sheffi co-founded Syncra Software, Inc. and in 1998, he co-founded e-
Chemicals, Inc. Dr. Sheffi is Chairman of the Boards of Directors of Syncra
Software, Inc. and e-Chemicals, Inc.

     Sales and Marketing Guidance

     Rowland Hanson has served on our Advisory Board September, 1996. Mr. Hanson
is founder and President of C. Rowland Hanson & Associates which provides
strategic planning, marketing and communications to a variety of software
companies. Mr. Hanson has also been involved in the founding, development and
sale or merger of several software companies. Prior to founding C. Rowland
Hanson & Associates, Mr. Hanson served as Vice President of Corporate
Communications at Microsoft Corporation, where he is credited with developing
and executing the company's original branding strategy. Mr. Hanson serves as a
director of Webforia and Sequel Technology.

     Tom Kippola has served on our Advisory Board since February, 1997. Mr.
Kippola is the Managing Partner of The Chasm Group, which provides market 
strategy consulting and training and speaking services for start-up, growing and
established information technology companies. Mr. Kippola is co-author of the
Gorrilla Game: An Investor's Guide to Picking Winners in High Technology. Prior
to his consulting career, Mr. Kippola was director of marketing for a service
automation
                                       47
software vendor. Mr. Kippola has co-authored a book entitled The Gorilla Game:
An Investor's Guide to Picking Winners in High-Technology. Mr. Kippola serves as
a director of Whisper Communications, Inc. and Thru-Put Technologies. In 
addition, Mr. Kippola is an advisory board member of Rubric, Smart Technologies,
Inc., RTMS, Inc. and Voyager Capital.

     Geoffrey A. Moore has served on our Advisory Board since February, 1997.
Mr. Moore is Chairman of the Board and founder of The Chasm Group, where he
continues to provide market development and business strategy services to many
leading high-technology companies. He is also a venture partner with Mohr
Davidow Ventures where he provides market strategy advice to the high-tech
portfolio companies. Prior to finding The Chasm Group, Mr. Moore was a principal
and partner at Regis McKenna, Inc., a leading high-tech marketing strategy and
communications company. Mr. Moore serves as a director of many companies,
including Documentation Inc. and Objectivity, Inc.

     John A. Miller, Jr. has served on our Advisory Board since July, 1996. Mr.
Miller has served as President and Chief Executive Officer of Miller Consulting
Group since founding the company in 1996. Miller Consulting Group is a strategy-
driven public relations firm that integrates market positioning with tactical
public relations for emerging information technology companies. Prior to
founding the Miller Consulting Group, Mr. Miller founded Miller Communications,
which launched Compaq Computer Corporation, Lotus Corporation and more than 75
other emerging information technology firms throughout the 1980s.

     Don Peppers has served on our Advisory Board since August, 1996. Mr.
Peppers is a partner at Marketing 1 to 1/Pepper and Rogers Group, a management
consulting firm. Mr. Peppers is a co-author with Dr. Martha Rogers, of several
books on customer relationship management and one-on-one marketing. Mr. Peppers
serves as a director of DoubleClick, a network of Web advertising sites and ad
serving services, and Modem Media-Poppe Tyson, an interactive marketing and
advertising agency.

     Charles W. Stryker, Ph.D., has served on our Advisory Board since
September, 1997. Dr. Stryker has served as President, Marketing Information
Solutions for IntelliQuest, Inc. Dr. Stryker is a recognized leader in the
information solutions industry with his record as founder of Trinet, Inc., MkIS
User Forum, Information Technology Forum, and President of National Accounts
Division of American Business Information.

     Sergio Zyman has served on our Advisory Board since February, 1999. Mr.
Zyman is founder of The Z Group, a broad consulting and venture firm. Prior to
his consulting career, Mr. Zyman served as Vice President and Chief Marketing
Officer of the Coca-Cola Company. During Mr. Zyman's tenure with Coca-Cola, he
had responsibility for the introduction of Cherry Coke, Diet Coke, Fruitopia and
the new Coke initiative. Since leaving Coca-Cola, Mr. Zyman has also authored a
book entitled The End of Marketing As We Know It. Mr. Zyman serves as a director
of Gap, Inc., Netcentives, Inc. and VC Television Network Corp.

     Information Technology Management Guidance

     K.B. Chandrasekhar has served on our Advisory Board since April, 1999. Mr.
Chandrasekhar is Chairman of the Board of Exodus Communications, a company he
co-founded in 1994. Exodus Communications is a leading server hosting company
for Internet sites. Since establishing its first Internet data center in 1996,
Exodus Communications has expanded to nine cities with more than 1,000 employees
and 1,000 customers. Prior to co-founding Exodus Communications, Mr.
Chandrasekhar founded Fouress, Inc., a network software design and development
firm.

     Esther Dyson has served on our Advisory Board since May, 1996. Ms. Dyson is
Chief Executive Officer of EDventure Holdings, Inc. EDventure Holdings is a
company focused on emerging information technology worldwide, and on the
emerging computer markets of Central and Eastern Europe. EDventure publishes
Release 1.0, a monthly newsletter and sponsors two annual technology forums. Ms.
Dyson serves as a director of Scala Business Solutions N.V., Poland Online, New
World Publishing, Global Business Network, Graphisoft, PRT Group, Inc., Accent,
Medscape Inc. and Cygnus Solutions. Ms. Dyson also serves on the advisory board
of Perot Systems Corporation.

     John McKinley has served on our Advisory Board since July, 1998. Mr.
McKinley is Chief Technology Officer of Merrill Lynch. With Merrill Lynch, Mr.
McKinley has responsibility for 8,200 information technology 

                                       48
professionals and is responsible for driving e-commerce initiatives throughout
the company. Prior to joining Merrill Lynch, Mr. McKinley served as Chief
Technology and Information Officer for General Electric Capital Corporation. Mr.
McKinley serves as a director of Proxicom Inc., a leading Internet-focused
systems integration firm. Mr. McKinley also serves on the Executive Client
Advisory Board of AT&T Corporation.

     William Powar has served on our Advisory Board since June, 1998. Mr. Powar
is a principal of Venture Architects, a company he founded in January, 1997.
Venture Architects is a consulting firm that provides strategic guidance and
business development expertise to companies in the e-commerce industry. Prior to
founding Venture Architects, Mr. Powar served 22 years with Visa USA and Visa
International developing new markets and businesses. From 1994 through 1996, Mr.
Powar directed Visa's venture investments and strategic alliances. Mr. Powar
serves as a director of MobiNetix Systems, Inc.

     Pete Solvik has served on our Advisory Board since August, 1996. Mr. Solvik
has served as Senior Vice President and Chief Information Officer of Cisco
Systems, Inc. since January, 1999, as Vice President and CIO from 1995 to 1999,
and as Director of Information Systems and CIO from 1995 to 1995. Under Mr.
Solvik's leadership, Cisco Systems has been recognized as one of the most
innovative and successful large corporations in the use of the Internet. Mr.
Solvik serves as a director of Context Integration, Inc., SMART Technologies,
Inc., Cohera Corp. and Asera Inc.

     We expect to change the composition of our Advisory Board from time to time
to better match the evolving needs of our Partner Companies.

Classes of the Board

     Our board of directors are divided into three classes that serve staggered
three-year terms as follows:
CLASS                   EXPIRATION                   MEMBER
----------------------  ------------------------  ------------------------------
Class I                    2000           Messrs. Gould and Brodsky
        Class II                   2001           Messrs. Fox, Keith and Forgash
        Class III                  2002           Messrs. Buckley and Gerrity
Board Committees

     The compensation committee reviews and makes recommendations to the Board
regarding the compensation to be provided to our Chief Executive Officer and our
directors. In addition, the compensation committee reviews compensation
arrangements for our other executive officers. The compensation committee also
administers our equity compensation plans. The current members of the
compensation committee are Messrs. Buckley, Brodsky and Keith.

     The audit committee reviews and monitors our corporate financial reporting,
external audits, internal control functions and compliance with laws and
regulations that could have a significant effect on our financial condition or
results of operations. In addition, the audit committee has the responsibility
to consider and recommend the appointment of, and to review fee arrangements
with, our independent auditors. The current members of the audit committee are
Messrs. Forgash and Gerrity.

Director Compensation and Other Arrangements

     We do not pay cash compensation to our directors, however they are
reimbursed for the expenses they incur in attending meetings of the board or
board committees. Non-employee directors are eligible to receive options to
purchase common stock awarded under our 1999 Equity Compensation Plan. See "--
Stock Option Plans."

Compensation Committee Interlocks and Insider Participation

     Upon completion of this offering, our compensation committee will make all
compensation decisions. Messrs. Buckley, Brodsky and Keith have served as the
only members of the compensation committee since we formed the committee in
October, 1998. Prior to that time, our full board made compensation decisions.

                                       49
Messrs. Alexander and Buckley serve on the compensation committee of
VerticalNet. As of April 30, 1999, our holdings in VerticalNet were valued at
approximately $700 million. This could represent a significant portion of our
market capitalization. None of our other executive officers, directors or
compensation committee members currently serve, or in the past served, on the
compensation committee of any other company the directors or executive officers
of which served on our compensation committee.

Executive Compensation

     The following table provides certain summary information concerning the
compensation earned by our chief executive officer and the other executive
officers employed by us during the fiscal year ended December 31, 1998. Since
January 1, 1999, we have employed five additional executive officers--Messrs.
Bunker, Gathman, Hwang, Nassau and Nickolas--each of whom are expected to
receive more than $100,000 in compensation in 1999.

                           Summary Compensation Table
Long-Term
                                                                                                                     Compensation
                                                                        Annual Compensation                             Awards
                                                 ---------------------------------------------------------------   -----------------

                                                                                                                         Shares 
                                                                                                     Other             Underlying
Name and Principal Position                            Salary                 Bonus             Compensation(1)          Options
---------------------------                      -------------------   -------------------   -------------------   -----------------
Walter W. Buckley, III
President and Chief Executive Officer...........           $159,769              $ 96,000                    --
 
Douglas A. Alexander
Managing Director...............................           $225,000              $100,000                    --
 
Kenneth A. Fox
Managing Director...............................           $119,538              $ 75,000                    --
 
Robert A. Pollan
Managing Director...............................           $133,808              $ 50,000                    --
----------------------
(1) The value of certain perquisites and other personal benefits is not included
    in the amounts disclosed because it did not exceed for any officer in the
    table above the lesser of either $50,000 or 10% of the total annual salary
    and bonus reported for such officer.

                                       50
The following tables set forth certain information concerning grants to
purchase shares of our common stock of each of the officers named in the summary
compensation table above during the year ended December 31, 1998.

             Option Grants During the Year Ended December 31, 1998
Potential Realizable Value at 
                                      Number of    Percentage of                             Assumed Annual Rates of Stock 
                                     Securities    Total Options                                Price Appreciation for
                                     Underlying     Granted to     Exercise                        Option Term (3)
                                      Options      Employees in    Price per    Expiration
Name                                  Granted (1)      1998        Share (2)       Date            5%            10%
-------------------------------------------------  -------------  -----------  ------------  -------------  --------------
Walter W. Buckley, III..........
Douglas A. Alexander............
Kenneth A. Fox..................
Robert A. Pollan................
---------------------------
(1) All options granted to employees are immediately exercisable and are either
    incentive stock options or nonqualified stock options and generally vest
    over five years at the rate of 20% of the shares subject to the option per
    year. Unvested shares are subject to a right of repurchase upon termination
    of employment. Options expire ten years from the date of grant.

(2) We granted options at an exercise price equal to the fair market value of
    our common stock on the date of grant, as determined by our board of
    directors.

(3) These amounts represent hypothetical gains that could be achieved for the
    respective options if exercised at the end of the option term. These gains
    are based on assumed rates of stock price appreciation of 5% and 10%
    compounded annually from the date the respective options were granted to
    their expiration dates based upon an assumed initial public offering price
    of $                    per share. These assumptions are not intended to
    forecast future appreciation of our stock price. The potential realizable
    value computation does not take into account federal or state income tax
    consequences of option exercises or sales of appreciated stock.

     The following table sets forth certain information concerning option
exercises by our Named Officers.

                   Year-End December 31, 1998 Option Values
Number of Securities Underlying   Value of Unexercised In-The
                                                                   Unexercised Options at Fiscal      Money Options at Fiscal
                                     Shares                                  Year End                       Year-End (1)
                                   Acquired on        Value       --------------------------------------------------------------
Name                               Exercise (#)    Realized ($)    Exercisable(2) Unexercisable    Exercisable    Unexercisable
--------------------------------  --------------  --------------  -------------  ---------------  -------------  ---------------
Walter W. Buckley, III..........             --              --                                         --
Douglas A. Alexander............             --              --                                         --
Kenneth A. Fox..................             --              --                                         --
Robert A. Pollan................             --              --                                         --
(1) Based on an assumed initial public offering price of $               per
    share, less the exercise price, multiplied by the number of shares
    underlying the option.

(2) All the options listed below were exercised in May, 1999.

Employee Benefit Plans

     Membership Profit Interest Plan

     In 1996, the board of managers of Internet Capital Group, L.L.C. approved
the Membership Profit Interests Plan, which we refer to as our restricted stock
issuances after the Reorganization. Under the terms of the Membership Profit
Interest Plan, certain employees, consultants and advisors who are designated
by Messrs. Buckley and Fox received grants of units of membership interests in
Internet Capital Group, L.L.C. These units of membership interest cannot be
transferred until the rights of the holder in the units vest. Twenty percent of
each of these holder's units of membership interest vest each year over a five
year period beginning on the vesting date

                                       51
established by our board. If any holder's relationship with us is terminated,
his or her units of membership interest that have not vested are forfeited to
us.

     Following the Reorganization, all outstanding grants became grants under
our new Membership Profit Interest Plan. As of December 31, 1998 a total of
6,783,625 shares of common stock have been issued under the Membership Profit
Interest Plan, all of which were outstanding, leaving no shares available for
grant at a later date. The board has the power, subject to the limitations
contained in the Membership Profit Interest Plan, to prescribe the terms and
conditions of any award granted under the Membership Profit Interest Plan,
including the total number of shares awarded to each grantee and any applicable
vesting schedule.

     Internet Capital Group 1999 Equity Compensation Plan

     Our 1998 Equity Compensation Plan and our Managers' Option Plan were
approved by the board of managers of Internet Capital Group, L.L.C. on October
13, 1998. After the Reorganization, we converted the 1998 Equity Compensation
Plan and the Managers' Option Plan into our 1999 Equity Compensation Plan, which
combines the Equity Compensation Plan and the Managers' Option Plan into a
single plan. The 1998 Equity Compensation Plan and Managers' Option Plan
provided for the grant of non-qualified options for membership interests in
Internet Capital Group, L.L.C., restricted stock, stock appreciation rights
("SARs"), and performance awards. Our 1999 Equity Compensation Plan provides
that options outstanding under the 1998 Equity Compensation Plan and Managers'
Option Plan will be considered options issued under the 1999 Plan.

     We have adopted the Internet Capital Group, Inc. 1999 Equity Compensation
Plan, as amended and restated, effective as of February 2, 1999. The terms and
provisions of the 1999 Plan are summarized below. This summary, however, does
not purport to be a complete description of the 1999 Plan and is qualified in
its entirety by the terms of the 1999 Plan.

     Purpose. The purpose of the 1999 Plan is to provide (i) designated
employees of Internet Capital Group and its subsidiaries, (ii) certain advisors
who perform services for Internet Capital Group or its subsidiaries and (iii)
non-employee members of our board of directors with the opportunity to receive
grants of incentive stock options, non-qualified options, share appreciation
rights, restricted shares, performance shares, dividend equivalent rights and
cash awards. We believe that the 1999 Plan will encourage the participants to
contribute materially to our growth and will align the economic interests of the
participants with those of our shareholders.

     General. Subject to adjustment as described below, the plan authorizes
awards to participants of up to 21,000,000 shares of our common stock. No more
than 3,000,000 shares in the aggregate may be granted to any individual in any
calendar year. Such shares may be authorized but unissued shares of our common
stock or may be shares that we have reacquired, including shares we purchase on
the open market. If any options or stock appreciation rights granted under the
plan expire or are terminated for any reason without being exercised, or
restricted shares or performance shares are forfeited, the shares of common
stock underlying that award will again be available for grant under the plan.

     Administration of the Plan. A committee appointed by our board of directors
administers the 1999 Plan. The committee has the sole authority to designate
participants, grant awards and determine the terms of all grants, subject to the
terms of the 1999 Plan. As a result of our becoming a publicly-traded company,
the compensation committee of the board of directors will become responsible for
administering and interpreting the plan. Prior to that time, the board of
directors has fulfilled those roles. The compensation committee will consist of
two or more persons appointed by the board of directors from among its members,
each of whom will be a "non-employee director" as defined by Rule 16b-3 under
the Securities Exchange Act of 1934, and an "outside director" as defined by
Section 162(m) of the Internal Revenue Code and related Treasury regulations.
The committee has the full authority to interpret the 1999 Plan and to make
rules, regulations, agreements and instruments for implementing the plan. The
committee's determinations made under the 1999 Plan are to be conclusive and
binding on all persons having any interest in the plan or any awards granted
under the plan.

     Eligibility. Grants may be made to any employee of Internet Capital Group,
Inc. or any of its subsidiaries and to any non-employee member of the board of
directors. Key advisors who perform services for us or any of our 

                                       52
subsidiaries are eligible if they render bona fide services, not as part of the
offer or sale of securities in a capital-raising transaction. As of December 31,
1998, 6,697,000 options were outstanding under the plan.

     Options. Incentive stock options may be granted only to employees. The
maximum number of shares that may be subject to incentive stock options over the
life of the Plan is 3,000,000. Non-qualified stock options may be granted to
employees, key advisors and non-employee directors. The exercise price of common
stock underlying an option shall be determined by the compensation committee at
the time the option is granted, and may be equal to, greater than, or less than
the fair market value of such stock on the date the option is granted; provided
that the exercise price of an incentive stock option shall be equal to or
greater than the fair market value of a share of common stock on the date such
incentive stock option is granted, and the exercise price of an incentive stock
option granted to an employee who owns more than 10% of the common stock may not
be less than 110% of such fair market value.

     Unless the applicable option agreement provides otherwise, a participant
can exercise an option award at any time, before or after the option has fully
vested, by paying the applicable exercise price in cash, or, with the approval
of the compensation committee, by delivering shares of common stock owned by the
grantee and having a fair market value on the date of exercise equal to the
exercise price of the grants, or by such other method as the compensation
committee shall approve, including payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board. In addition,
the plan provides that we may make loans to participants or guarantee loans made
by third parties to the participant for the purpose of assisting participants to
exercise their options. The compensation committee has the authority to set the
terms and conditions that will apply to any loan or guarantee.

     Options vest according to the terms and conditions determined by the
compensation committee and specified in the grant instrument. In general, the
options that have already been granted under the plan are subject to a five year
vesting schedule with twenty percent of each grant vesting on each anniversary
of the grant date. The compensation committee will determine the term of each
option up to a maximum of ten years from the date of grant except that the term
of an incentive stock option granted to an employee who owns more than 10% of
the common stock may not exceed five years from the date of grant. The
compensation committee may accelerate the exercisability of any or all
outstanding options at any time for any reason.

     Non-Employee Director Option Grants. The 1999 Plan provides that each of
our non-employee directors, other than (i) non-employee directors who at any
time during their membership on our board of directors are employees of
Safeguard Scientifics, Inc. or any of its subsidiaries or affiliates, (ii) non-
employee directors who at any time during their membership on our board of
directors are employees of TL Ventures, Inc. or any of its subsidiaries or
affiliates or (iii) non-employee directors who are granted options under the
general option provisions of the 1999 Plan, is entitled to receive an option to
purchase 47,000 shares of our common stock, vesting in equal installments over
four years, upon his initial election to our board of directors, and a service
grant to purchase 20,000 shares every two years, vesting in equal installments
over two years. The plan also allows our board of directors to grant an option
to any of the eligible non-employee directors who were members of the board of
directors immediately following the execution of the Reorganization to
compensate any of those non-employee directors for the cancellation of
outstanding options held immediately prior to the Reorganization. No non-
employee director may be granted more than 107,000 shares of our common stock
under the automatic and conversion grants described above. Such automatic and
conversion grants will otherwise be generally subject to the terms provided for
options under the 1999 Plan.

     Restricted Stock. The compensation committee shall determine the number of
restricted shares granted to a participant, subject to the maximum plan limit
described above. Grants of restricted shares will be conditioned on such
performance requirements, vesting provisions, transfer restrictions or other
restrictions and conditions as the compensation committee may determine in its
sole discretion. The restrictions shall remain in force during a restriction
period set by the compensation committee. If the grantee is no longer employed
by us during the restriction period or if any other conditions are not met, the
restricted shares grant will terminate as to all shares covered by the grant for
which the restrictions are still applicable, and those shares must be
immediately returned to us.

                                       53
Stock Appreciation Rights. The compensation committee may grant stock
appreciation rights (SARs) to any participant, subject to the maximum plan limit
described above. At any time, the compensation committee may grant an SAR award,
either separately or in connection with any option; provided, that if an SAR is
granted in connection with an incentive stock option, it must be granted at the
same time that the underlying option is granted. The compensation committee will
determine the base amount of the SAR at the time that it is granted and will
establish any applicable vesting provisions, transfer restrictions or other
restrictions as it may determine is appropriate in its sole discretion. When a
participant exercises an SAR, he or she will receive the amount by which the
value of the stock has appreciated since the SAR was granted, which may be
payable to the participant in cash, shares, or a combination of cash and shares,
as determined by the compensation committee.

     Performance Share Awards. The compensation committee may grant performance
share awards to any employee or key advisor. A performance share award
represents the right to receive an amount based on the value of our stock, but
may be payable only if certain performance goals that are established by the
compensation committee are met. If the compensation committee determines that
the applicable performance goals have been met, a performance share award will
be payable to the participant in cash, shares or a combination of cash and
shares, as determined by the compensation committee.

     Dividend Equivalent Rights. The compensation committee may grant dividend
equivalent rights to any participant. A dividend equivalent right is a right to
receive payments in amounts equal to dividends declared on shares of our common
stock with respect to the number of shares and payable on such dates as
determined by the compensation committee. The compensation committee shall
determine all other terms applicable to dividend equivalent rights.

     Cash Awards. The compensation committee may grant cash awards to employees
under the 1999 Plan. Such awards shall be in such amounts and subject to such
performance goals and other terms and conditions as the compensation committee
determines.

     Amendment and Termination of the Plan. The compensation committee may amend
or terminate the plan at any time. The plan will terminate on the tenth
anniversary of its effective date, unless the compensation committee terminates
it earlier or extends it with the approval of the shareholders.

     Adjustment Provisions. In the event that certain reorganizations of
Internet Capital Group or similar transactions or events occur, the maximum
number of shares of stock available for grant, the maximum number of shares that
any participant in the 1999 Plan may be granted, the number of shares covered by
outstanding grants, the kind of shares issued under the 1999 Plan and the price
per share or the applicable market value of such grants shall be adjusted by the
committee to reflect changes to our common stock as a result of such occurrence
to prevent the dilution or enlargement of rights of any individual under the
1999 Plan.

     Change of Control and Reorganization. Upon a Change of Control, as defined
in the 1999 Plan, the compensation committee may determine that (i) outstanding
grants, whether in the form of options and stock appreciation rights shall
immediately vest and become exercisable; and (ii) the restrictions and
conditions on all outstanding restricted stock or performance share awards shall
immediately lapse. In addition, the compensation committee may (i) require that
grantees surrender their outstanding options and stock appreciation rights in
exchange for payment by us, in cash or common stock, in an amount equal to the
amount by which the then fair market value of the shares of common stock subject
to the grantee's unexercised options or stock appreciation rights exceeds the
exercise price of those options, and/or (ii) after giving grantees an
opportunity to exercise their outstanding options and stock appreciation rights,
terminate any or all unexercised options and stock appreciation rights.

     Upon a Reorganization, as defined in the 1999 Plan, where we are not the
surviving entity or where we survive only as a subsidiary of another entity,
unless the compensation committee determines otherwise, all outstanding option
or SAR grants shall be assumed by or replaced with comparable options or rights
by the surviving corporation. In addition, the compensation committee may (i)
require that grantees surrender their outstanding options in exchange for
payment by us, in cash or common stock, at an amount equal to the amount by
which the then fair market value of the shares of common stock subject to the
grantee's unexercised options 

                                       54
exceeds the exercise price of those options, and/or (ii) after accelerating all
vesting and giving grantees an opportunity to exercise their outstanding options
or SARs, terminate any or all unexercised options and SARs.

     Federal Tax Consequences of Stock Options. In general, neither the grant
nor the exercise of an incentive stock option will result in taxable income to
an option holder or a deduction to Internet Capital Group. To receive special
tax treatment as an incentive stock option under the Internal Revenue Code as to
shares acquired upon exercise of an incentive stock option, an option holder
must neither dispose of such shares within two years after the incentive stock
option is granted nor within one year after the exercise of the option. In
addition, the option holder must be an employee of Internet Capital Group or one
of its subsidiaries at all times between the date of grant and the date three
months, or one year in the case of disability, before the exercise of the
option. Special rules apply in the case of the death of the option holder.
Incentive stock option treatment under the Internal Revenue Code generally
allows the sale of our common stock received upon the exercise of an incentive
stock option to result in any gain being treated as a capital gain to the option
holder, but we will not be entitled to a tax deduction. However, the exercise of
an incentive stock option, if the holding period rules described above are
satisfied, will give rise to income includable by the option holder in his or
her alternative minimum tax in an amount equal to the excess of the fair market
value of the stock acquired on the date of the exercise of the option over the
exercise price.

     If the holding rules described above are not satisfied, gain recognized on
the disposition of the shares acquired upon the exercise of an incentive stock
option will be characterized as ordinary income. Such gain will be equal to the
difference between the exercise price and the fair market value of the shares at
the time of exercise. Special rules may apply to disqualifying dispositions
where the amount realized is less than the value at exercise. We will generally
be entitled to a deduction equal to the amount of such gain included by an
option holder as ordinary income. Any excess of the amount realized upon such
disposition over the fair market value at exercise will generally be long-term
or short-term capital gain depending on the holding period involved.
Notwithstanding the foregoing, in the event that the exercise of the option is
permitted other than by cash payment of the exercise price, various special tax
rules may apply.

     No income will be recognized by an option holder at the time a non-
qualified stock option is granted. Generally, ordinary income will, however, be
recognized by an option holder at the time a vested non-qualified stock option
is exercised in an amount equal to the excess of the fair market value of the
underlying common stock on the exercise date over the exercise price. We will
generally be entitled to a deduction for federal income tax purposes in the same
amount as the amount included in ordinary income by the option holder with
respect to his or her non-qualified stock option. Gain or loss on a subsequent
sale or other disposition of the shares acquired upon the exercise of a vested
non-qualified stock option will be measured by the difference between the amount
realized on the disposition and the tax basis of such shares, and will generally
be long-term capital gain depending on the holding period involved. The tax
basis of the shares acquired upon the exercise of any non-qualified stock option
will be equal to the sum of the exercise price of such non-qualified stock
option and the amount included in income with respect to such option.
Notwithstanding the foregoing, in the event that exercise of the option is
permitted other than by cash payment of the exercise price, various special tax
rules apply.

     Unless the holder of an unvested non-qualified stock option makes an 83(b)
election as described below, there generally will be no tax consequences as a
result of the exercise of an unvested option until the stock received upon such
exercise is no longer subject to a substantial risk of forfeiture or is
transferable. Generally, when the shares have vested, the holder will recognize
ordinary income, and we will be entitled to a deduction, equal to the difference
between the fair market value of the stock at such time and the exercise price
paid by the holder for the stock. Subsequently realized changes in the value of
the stock generally would be treated as long-term or short-term capital gain or
loss, depending on the length of time the shares were held prior to disposition
of such shares. In general terms, if a holder were to make an 83(b) election
under Section 83(b) of the Internal Revenue Code upon the exercise of the
unvested option, the holder would recognize ordinary income on the date of the
exercise of such option, and we would be entitled to a deduction, equal to (i)
the fair market value of the stock received pursuant to such exercise as though
the stock were (A) not subject to a substantial risk of forfeiture or (B)
transferable, minus (ii) the exercise price paid for the stock. If an 83(b)
election were made, there would generally be no tax consequences to the holder
upon the vesting of the stock, and all subsequent appreciation in the stock
would generally be eligible for capital gains treatment.

                                       55
Additional special tax rules may apply to those option holders who are
subject to the rules set forth in Section 16 of the Securities Exchange Act or
1934, as amended. The foregoing tax discussion is a general description of
certain expected federal income tax results under current law, and all affected
individuals should consult their own advisors if they wish any further details
or have special questions.

     Section 162(m). Section 162(m) of the Internal Revenue Code may preclude us
from claiming a federal income tax deduction if we pay total remuneration in
excess of $1.0 million to the chief executive officer or to any of the other
four most highly compensated officers in any one year. Total remuneration would
generally include amounts received upon the exercise of stock options granted
under the plan and the value of shares received when restricted shares become
transferable or such other time when income is recognized. An exception does
exist, however, for performance-based compensation which includes amounts
received upon the exercise of stock options pursuant to a plan approved by
shareholders that meets certain requirements. We intend to present the 1999 Plan
to the shareholders for their approval before completing this offering. The 1999
Plan is intended to make grants of stock options and stock appreciation rights
that meet the requirements of performance-based compensation. Other awards have
been structured with the intent that such awards may qualify as such performance
based compensation if so determined by the compensation committee.

     Internet Capital Group, Inc. Equity Compensation Loan Program

     In accordance with the 1998 Plan, the 1999 Plan and the applicable employee
option agreements, and in consideration of certain restrictive covenants, we
have offered to loan each employee who has been awarded a non-qualified stock
option under the 1999 Plan an amount necessary to pay the exercise price of
their outstanding options and an amount to pay some portion of the income tax
that such employee will owe upon the exercise of such options. These loans will
generally be available to those eligible employees who elect to exercise their
options on or prior to May 5, 1999. The loans will be full recourse, will bear
an interest rate of 5.22%, and will be for five-year terms. In addition, each
eligible employee will pledge the number of shares acquired pursuant to the
exercise of the applicable option as collateral for the loan. If an eligible
employee sells any shares acquired pursuant to the option exercise, such
eligible employee is obligated under the terms of the loan to use the proceeds
of such sale to repay any outstanding balance of the loan. If the eligible
employee's employment by the Company is terminated for any reason, such eligible
employee must repay the full outstanding loan balance to the Company within 90
days of such termination. Also, if the Company determines that a grantee
breaches any of the terms of the restrictive covenants noted above, such
eligible employee must immediately repay any outstanding loan balance to the
Company.

     Internet Capital Group, Inc. Long-Term Incentive Plan

     Our long-term incentive plan supports our growth strategy since the plan
permits participants to share directly in the growth of our Partner Companies.
Each year, we will allocate up to 12% of each acquisition made during the year
for the benefit of the participants in the long-term incentive plan. The plan
permits the compensation committee to award grants in the form of interests in
limited partnerships established by us to hold the interests acquired by us in a
given year, restricted stock in a Partner Company, or share units which entitle
a participant to share in the appreciation of the value of the stock of a
Partner Company above established threshold levels. We intend primarily to grant
limited partnership interests to plan participants to more closely align the
participants' interests with our interests.

     All grants are subject to vesting over a period of years and the attainment
of specified threshold levels. Partnership interests are generally paid out in
stock of a Partner Company after a fixed period of years. The compensation
committee can accelerate vesting and payout upon the attainment of the threshold
value. Restricted stock awards are subject to certain restrictions and are held
in escrow until the attainment of the established threshold levels. Share units
are payable in cash or in stock of a Partner Company after a fixed period of
years, subject to acceleration by the compensation committee if the threshold
levels are achieved.

     Internet Capital Group 401(k) Plan

     We sponsor the Internet Capital Group 401(k) Plan, a defined contribution
plan that is intended to qualify under Section 401(a) of the Code. All employees
who are at least 21 years old and have been employed by us for 

                                       56
one month are eligible to participate in our 401(k) Plan. An eligible employee
of the Company may begin to participate in our 401(k) Plan on the first day of
the plan quarter after satisfying our 401(k) Plan's eligibility requirements. A
participating employee may make pre-tax contributions of a percentage (not less
than 1% and not more than 15%) of his or her eligible compensation, subject to
the limitations under the federal tax laws. Employee contributions and the
investment earnings thereon are fully vested at all times. We may make
discretionary contributions to the 401(k) Plan but we have never done so.

                             CERTAIN TRANSACTIONS

     During 1998 and 1999, we leased our corporate offices in Wayne,
Pennsylvania from Safeguard Scientifics, Inc. From January 31, 1998 to April 30,
1999, our monthly lease payments to Safeguard Scientifics, Inc. totaled
approximately $40,000. Prior to this offering, Safeguard Scientifics, Inc.,
beneficially owned 25.8% of our common stock. We believe that our lease in Wayne
with Safeguard Scientifics, Inc. is on terms no less favorable to us than those
that would be available to us in an arm's-length transaction with a third party.

     In the second half of 1999, we intend to lease new corporate office space
in Wayne, Pennsylvania from Safeguard Scientifics, Inc. We expect that our new
lease with Safeguard Scientifics, Inc. will be on terms no less favorable to us
than those terms that would be available to us in an arm's-length transaction
with a third party.

     During 1998 and 1999, we paid Safeguard Scientifics for telephone and
accounting services, health and general insurance coverage, and other services.
From January 31, 1998 to April 30, 1999, our payments to Safeguard Scientifics
totaled approximately $158,000 for these services. We believe that the services
provided to us are on terms no less favorable to us than those that would be
available to us in an arm's-length transaction with a third party.

     In March, 1999 we leased office space in Boston, Massachusetts from
Safeguard Scientifics, Inc. We pay Safeguard Scientifics, Inc. $4,636 each month
under the lease. We believe that our lease in Boston with Safeguard Scientifics,
Inc. is on terms no less favorable to us than those that would be available to
us in an arm's-length transaction with a third party.

     After 180 days from the date of this prospectus, each of Comcast ICG, Inc.,
CPQ Holdings, Inc., Internet Assets, Inc., Safeguard 98 Capital L.P., Safeguard
Scientifics (Delaware), Inc., R.A.F. Ventures VII L.P., Technology Leaders II
L.P. and Technology Leaders II Offshore C.V. will have the right to demand on no
more than two occasions that we register the shares of our common stock held by
them prior to this offering and all shares of our common stock held by them
after exercise of any warrants issued to these shareholders prior to this
offering. Prior to this offering, these shareholders, together, are the holders
of 48,725,000 shares of our common stock and            warrants to purchase
shares of our common stock.

     In January, 1998 we loaned Douglas A. Alexander, one of our Managing
Directors, $117,669. Mr. Alexander used the proceeds from the loan to purchase a
portion of our interest in VerticalNet at our cost. Mr. Alexander agreed to pay
the principal amount of the loan with interest at an annual rate equal to the
prime rate plus 1% within 30 days of the date we request payment. On January 5,
1999, Mr. Alexander paid us $128,820, representing the outstanding principal
amount of the loan plus accrued interest.

     In April, 1999, in connection with our obtaining a bank credit facility,
Safeguard Scientifics, Inc. delivered a letter to the agent for the banks
stating that it intends to take any action that may in the future be necessary
to promptly cure certain defaults that could occur under our bank credit
facility.

                                       57
In May, 1999 we issued $90 million of three-year convertible notes to our
largest shareholders, directors, executive officers, certain members of the
immediate families of our executive officers and others in a round of financing
led by Comcast ICG. The notes bear interest at an annual rate of 4.99% during
the first year and at the prime rate for the remaining two years. The notes
mature on May 10, 2002. If this offering occurs prior to May, 2000, the notes
will automatically convert into shares of our common stock at our initial public
offering price and all accrued interest will be waived. We issued warrants to
the holders of these notes to purchase shares of our common stock. The warrant
holders will be entitled to purchase, at the initial public offering price, the
number of shares of our common stock determined by dividing $18 million by the
initial public offering price. The warrants expire in May, 2002.

     The following table sets forth the names of the holders of certain
convertible notes and warrants, their relationship to us and the amounts of each
of their convertible notes.
Relationship to                 Amount of
              Name of Holder                        Internet Capital Group           Convertible Note
------------------------------------------   ------------------------------------   ------------------
Ann B. Alexander..........................     family member of executive officer          $    63,000
Bradley Alexander.........................     family member of executive officer              155,000
Douglas E. Alexander......................     family member of executive officer              160,000
Susan R. Buckley..........................     family member of executive officer               50,000
Walter W. Buckley, Jr.....................     family member of executive officer              200,000
Walter W. Buckley, III....................     executive officer and director                  577,000
Comcast ICG, Inc..........................     principal shareholder                        15,000,000
E. Michael Forgash........................     director                                        100,000
Kenneth A. Fox............................     executive officer and director                1,000,000
David D. Gathman..........................     executive officer                                25,000
Thomas P. Gerrity.........................     director                                         77,000
Internet Assets, Inc......................     principal shareholder                         1,525,000
Robert E. Keith, Jr.......................     director                                         46,000
Robert A. Pollan..........................     executive officer                                31,000
R.A.F. Ventures VII, L.P..................     principal shareholder                           915,000
58
In May, 1999, some of our officers and directors exercised options to
purchase our common stock. Instead of paying us cash, the officers and directors
delivered promissory notes to us in the aggregate amount of $18,105,000. The
promissory notes bear interest at the rate of 5.22% and mature on May 5, 2004.
The following table sets forth the names of the holders of the promissory notes,
their relationship to us and the amounts owed to us by each of these holders.
Relationship to              Amount of
       Name of holder             Internet Capital Group        Promissory Note   
----------------------------  ------------------------------  ------------------
Walter W. Buckley, III......  executive officer and                $2,600,000
                               director                  
Douglas A. Alexander........  executive officer                     2,500,000
Richard G. Bunker...........  executive officer                     1,350,000
Kenneth A. Fox..............  executive officer and                 2,500,000
                               director                  
David D. Gathman............  executive officer                     1,300,000
Victor Hwang................  executive officer                     4,005,000
John N. Nickolas............  executive officer                       800,000
Robert A. Pollan............  executive officer                     2,650,000
Thomas P. Gerrity....,......  director                                400,000
59
PRINCIPAL SHAREHOLDERS

     The following table sets forth certain information regarding beneficial
ownership of our common stock as of April 30, 1999, and as adjusted to reflect
the sale of shares offered hereby, and by (i) each person (or group of
affiliated persons) who is known by us to own more than five percent of the
outstanding shares of our common stock, (ii) each of our directors and our 
executive officers named in the summary compensation table and (iii) all of 
our executive officers and directors as a group.
5% Beneficial Owners, Directors,                                 Number of Shares             Percent of Shares Outstanding (3)
                                                                                         -------------------------------------------

Nominees for Director, Named Officers                        Beneficially Owned (1)(2)    Before the Offering    After the Offering
----------------------------------------------------------  ---------------------------  ---------------------  --------------------
Comcast ICG, Inc. (4)....................................                   10,623,500                   
   c/o Comcast Corporation
   1500 Market Street
   Philadelphia, Pennsylvania 19102
CPQ Holdings, Inc. (5)...................................                    5,000,000                   
   c/o Compaq Computer Corporation
   20555 SH 249
   Building 11
   Houston, Texas 77070
Internet Assets, Inc. (6)................................                    5,000,000                    
   Sahab Tower
   Fahad Alsalim Street, 10th Floor
   P.O. Box 3216
   Safat, 13033, Kuwait
Safeguard 98 Capital L.P. (7)............................                   21,125,000                   
   103 Springer Building
   3400 Silverside Road
   Wilmington, Delaware 19810
Safeguard Scientifics (Delaware), Inc. (8)...............                   21,125,000                   
   103 Springer Building
   3400 Silverside Road
   Wilmington, Delaware 19810
R.A.F. Ventures VII, L.P. (9)............................                    6,536,550                   
   One Pitcairn Place, Suite 2100
   165 Township Line Road
   Jenkintown, Pennsylvania 19046-3953
Douglas Alexander (10)...................................
Julian A. Brodsky (11)...................................
Walter W. Buckley, III (12)..............................
E. Michael Forgash (13)..................................
Kenneth A. Fox (14)......................................
Dr. Thomas P. Gerrity (15)...............................
Scott E. Gould...........................................
Robert E. Keith, Jr. (16)................................
Robert Pollan (17).......................................
All executive officers and directors as a group (14
   persons) (10) (11) (12) (13) (14) (15) (16) (17)......
------------------------------ 
* Less than 1%

(1) Beneficial ownership is determined in accordance with the rules of the
    Securities and Exchange Commission and generally includes voting or
    investment power with respect to securities. Unless otherwise noted, we
    believe that all persons named in the table have sole voting and sole
    investment power with 

                                       60
respect to all shares beneficially owned by them. All figures include shares
    of Common Stock issuable upon the exercise of options or warrants
    exercisable within 60 days of April 30, 1999.

(2) Includes $       of convertible notes which automatically convert to shares
    of common stock issued at the initial public offering price. See "Certain
    Transactions" for a description of the convertible notes.

(3) Options or warrants that are exercisable for common stock and other
    ownership rights in common stock that vest within 60 days of April 30, 1999
    are deemed to be outstanding and to be beneficially owned by the person
    holding such options or warrants for the purpose of computing the percentage
    ownership of such person but are not treated as outstanding for the purpose
    of computing the percentage ownership of any other person.

(4) Includes                shares of common stock issuable upon the exercise of
    warrants and            shares of common stock issuable upon the exercise of
    options exercisable within 60 days of April 30, 1999. Excludes options to
    purchase           shares of common stock which are not currently
    exercisable.

(5) Includes              shares of common stock issuable upon the exercise of
    warrants exercisable within 60 days of April 30, 1999.

(6) Includes             shares of common stock issuable upon the exercise of
    warrants exercisable within 60 days of April 30, 1999.

(7) Includes 13,000,000 shares held by Safeguard Scientifics (Delaware) Inc. as
    to which Safeguard 98 Capital L.P. disclaims beneficial ownership. Assumes
    all the shares offered in the directed share subscription program will be
    purchased by the shareholders of Safeguard Scientifics, Inc. and not
    Safeguard Scientifics, Inc. See "The Directed Share Subscription Program."

(8) Includes 8,125,000 shares held by Safeguard 98 Capital L.P. as to which
    Safeguard Scientifics (Delaware) disclaims beneficial ownership. Also
    includes 858,000 shares of common stock issued to employees of Safeguard
    Scientifics, Inc. for which Safeguard Scientifics (Delaware), Inc. has sole
    voting and investment power. Assumes all the shares offered in the directed
    share subscription program will be purchased by the shareholders of
    Safeguard Scientifics, Inc. and not Safeguard Scientifics, Inc. See "The
    Directed Share Subscription Program."

(9) Includes           shares held by Kenneth A. Fox, son of Robert A. Fox and
    Esther G. Fox, and brother of Debra E., Nancy J. and Amy A. Fox, who
    together own 94% of R.A.F. Ventures VII, L.P. as Limited Partners. R.A.F.
    Ventures VII, L.P. disclaims beneficial ownership of shares held by Kenneth
    A. Fox and Kenneth A. Fox disclaims beneficial ownership of shares held by
    R.A.F. Ventures VII, L.P. Also includes               shares of common stock
    issuable upon the exercise of warrants exercisable within 60 days of April
    30, 1999.

(10) Includes               shares of common stock issuable upon the exercise of
     warrants exercisable within 60 days of April 30, 1999. Also includes
     shares of restricted common stock which have not vested pursuant to the
     Membership Profit Interest Plan. See "Employee Benefit Plans" for a
     description of the Membership Profit Interest Plan.

(11) Julian A. Brodsky is a Director and Vice-Chairman of Comcast Corporation.
     Mr. Brodsky disclaims beneficial ownership of shares held by Comcast ICG,
     Inc., a subsidiary of Comcast Corporation.

(12) Includes                 shares of common stock issuable upon the exercise
     of warrants exercisable within 60 days of April 30, 1999. Also includes
     shares of restricted common stock which have not vested pursuant to the
     Membership Profit Interest Plan.

                                       61
(13) Includes             shares of common stock issuable upon the exercise of
     warrants exercisable within 60 days of April 30, 1999. Mr. Forgash is Vice
     President-Operations of Safeguard Scientifics, Inc. and disclaims
     beneficial ownership of shares owned by Safeguard Scientifics (Delaware),
     Inc. and Safeguard 98 Capital L.P.

(14) Includes                  shares of common stock issuable upon the exercise
     of warrants exercisable within 60 days of April 30, 1999. Also includes
     shares of restricted common stock which have not yet vested pursuant to the
     Membership Profit Interest Plan.

(15) Includes           shares of common stock issuable upon the exercise of
     warrants exercisable within 60 days of April 30, 1999.

(16) Includes            shares of common stock issuable upon the exercise of
     warrants exercisable within 60 days of April 30, 1999.

(17) Includes               shares of common stock issuable upon the exercise of
     warrants exercisable within 60 days of April 30, 1999.

                                       62
DESCRIPTION OF CAPITAL STOCK

General

     Our authorized capital stock consists of 300,000,000 shares of common
stock, par value $.001 per share, and 10,000,000 shares of preferred stock. Upon
completion of this offering, we will have approximately
shares (                     shares if the underwriters' over-allotment option
is exercised in full) of common stock issued and outstanding.

     The following is qualified in its entirety by reference to our certificate
of incorporation and bylaws, copies of which are filed as exhibits to the
Registration Statement of which this prospectus is a part.

Common Stock

     As of April 30, 1999, there were            shares of our common stock
outstanding. As of April 30, 1999, 838,500 shares of our common stock were
reserved for issuance pursuant to our 1998 Equity Compensation Plan Option Plan,
Directors' Option Plan and Membership Participation Plan. In February 1999, our
board of directors approved the Internet Capital Group 1999 Equity Compensation
Plan under which 21,000,000 shares of our common stock are reserved for
issuance. Upon completion of the offering, there will be shares of common stock
outstanding.

     The holders of our common stock are entitled to dividends as our board of
directors may declare from funds legally available therefor, subject to the
preferential rights of the holders of our preferred stock, if any. The holders
of our common stock are entitled to one vote per share on any matter to be voted
upon by shareholders. Our certificate of incorporation does not provide for
cumulative voting in connection with the election of directors, and accordingly,
holders of more than 50% of the shares voting will be able to elect all of the
directors. No holder of our common stock will have any preemptive right to
subscribe for any shares of capital stock issued in the future.

     Upon any voluntary or involuntary liquidation, dissolution, or winding up
of our affairs, the holders of our common stock are entitled to share ratably in
all assets remaining after payment of creditors and subject to prior
distribution rights of our preferred stock, if any. All of the outstanding
shares of common stock are, and the shares offered by us will be, fully paid and
non-assessable.

Preferred Stock

     As of the closing of this offering, no shares of our preferred stock will
be outstanding. Our certificate of incorporation provides that our board of
directors may by resolution establish one or more classes or series of preferred
stock having such number of shares and relative voting rights, designation,
dividend rates, liquidation, and other rights, preferences, and limitations as
may be fixed by them without further shareholder approval. The holders of our
preferred stock may be entitled to preferences over common shareholders with
respect to dividends, liquidation, dissolution, or our winding up in such
amounts as are established by our board of directors resolutions issuing such
shares.

     The issuance of our preferred stock may have the effect of delaying,
deferring or preventing a change in control of Internet Capital Group without
further action by the shareholders and may adversely affect voting and other
rights of holders of our common stock. In addition, issuance of preferred stock,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, could make it more difficult for a third party to
acquire a majority of the outstanding shares of voting stock. At present, we
have no plans to issue any shares of preferred stock.

Registration Rights

     Certain holders of our securities (the "Holders") possess certain
registration rights with respect to our common stock. Certain Holders or their
transferees who are the holders of                shares of our common stock
after completion of this offering (the "Strategic Partners") are entitled to
certain demand rights with respect to the registration of such shares under the
Securities Act. The Strategic Partners have agreed to not demand registration of
their common stock for 180 days after the date of this offering. After this 180-
day period, if we propose to register any of our securities under the Securities
Act, either for our own account or the account of other 

                                       63
shareholders, the Holders are entitled to notice of such registration and,
subject to certain conditions and limitations, are entitled to include such
shares therein. In addition, at any time, any Strategic Partner may require us,
on not more than two occasions, to file a Registration Statement under the
Securities Act with respect to at least twenty-five percent (25%) of his, her or
its Registrable Securities if the gross offering price would exceed $5.0
million. We are required to use our best efforts to effect such registration,
subject to certain conditions and limitations. If a Holder requests that we file
a registration statement on Form S-3, the Holders may register their common
stock along with any such registration. The expenses incurred in connection with
such registrations will be borne by us, except that we will pay expenses of only
one registration on Form S-3 at a Holder's request per year.

Section 203 of the Delaware General Corporation Law; Certain Anti Takeover,
Limited Liability and Indemnification Provisions

     Section 203 of the Delaware General Corporation Law

     The following is a description of certain provisions of the Delaware
General Corporation Law, and our certificate of incorporation and bylaws. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Delaware General Corporation Law, and our certificate of
incorporation and bylaws.

     We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 of the Delaware General Corporation Law prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an "interested stockholder," unless
the business combination is approved in a prescribed manner. A "business
combination" includes certain mergers, asset sales, and other transactions
resulting in a financial benefit to the "interested stockholder." Subject to
certain exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within the past three years did own, 15% of
the corporation's voting stock.

     Certain provisions of our certificate of incorporation and bylaws could
have anti-takeover effects. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of our corporate
policies formulated by our board of directors. In addition, these provisions
also are intended to ensure that our board of directors will have sufficient
time to act in what the board of directors believes to be in the best interests
of us and our shareholders. These provisions also are designed to reduce our
vulnerability to an unsolicited proposal for our takeover that does not
contemplate the acquisition of all of our outstanding shares or an unsolicited
proposal for the restructuring or sale of all or part of Internet Capital Group.
The provisions are also intended to discourage certain tactics that may be used
in proxy fights. However, these provisions could delay or frustrate the removal
of incumbent directors or the assumption of control of us by the holder of a
large block of common stock, and could also discourage or make more difficult a
merger, tender offer, or proxy contest, even if such event would be favorable to
the interest of our shareholders.

     Classified Board of Directors

     Our certificate of incorporation provides for our board of directors to be
divided into three classes of directors, with each class as nearly equal in
number as possible, serving staggered three-year terms (other than directors
which may be elected by holders of preferred stock). As a result, approximately
one-third of our board of directors will be elected each year. The classified
board provision will help to assure the continuity and stability of our board of
directors and our business strategies and policies as determined by our board of
directors. The classified board provision could have the effect of discouraging
a third party from making an unsolicited tender offer or otherwise attempting to
obtain control of us without the approval of our board of directors. In
addition, the classified board provision could delay shareholders who do not
like the policies of our board of directors from electing a majority of our
board of directors for two years.

     No Shareholder Action by Written Consent; Special Meetings

     Our certificate of incorporation provides that shareholder action can only
be taken at an annual or special meeting of shareholders and prohibits
shareholder action by written consent in lieu of a meeting. Our bylaws provide
that special meetings of shareholders may be called only by our board of
directors or our Chief Executive 

                                       64
Officer. Our shareholders are not permitted to call a special meeting of
shareholders or to require that our board of directors call a special meeting.

     Advance Notice Requirements for Shareholder Proposals and Director Nominees

     Our bylaws establish an advance notice procedure for our shareholders to
make nominations of candidates for election as directors or to bring other
business before an annual meeting of our shareholders (the "Shareholder Notice
Procedure"). The Shareholder Notice Procedure provides that only persons who are
nominated by, or at the direction of, our board of directors or its Chairman, or
by a shareholder who has given timely written notice to our Secretary or any
Assistant Secretary prior to the meeting at which directors are to be elected,
will be eligible for election as our directors. The Shareholder Notice Procedure
also provides that at an annual meeting only such business may be conducted as
has been brought before the meeting by, or at the direction of, our board of
directors or its Chairman or by a shareholder who has given timely written
notice to our Secretary of such shareholder's intention to bring such business
before such meeting. Under the Shareholder Notice Procedure, if a shareholder
desires to submit a proposal or nominate persons for election as directors at an
annual meeting, the shareholder must submit written notice to Internet Capital
Group not less than 90 days nor more than 120 days prior to the first
anniversary of the previous year's annual meeting. In addition, under the
Shareholder Notice Procedure, a shareholder's notice to Internet Capital Group
proposing to nominate a person for election as a director or relating to the
conduct of business other than the nomination of directors must contain certain
specified information. If the chairman of a meeting determines that business was
not properly brought before the meeting, in accordance with the Shareholder
Notice Procedure, such business shall not be discussed or transacted.

     Number of Directors; Removal; Filling Vacancies

     Our certificate of incorporation and bylaws provide that our board of
directors will consist of not less than 5 nor more than 9 directors (other than
directors elected by holders of our preferred stock), the exact number to be
fixed from time to time by resolution adopted by our directors. Further, subject
to the rights of the holders of any series of our preferred stock, if any, our
certificate of incorporation and bylaws authorize our board of directors to
elect additional directors under specified circumstances and fill any vacancies
that occur in our board of directors by reason of death, resignation, removal,
or otherwise. A director so elected by our board of directors to fill a vacancy
or a newly created directorship holds office until the next election of the
class for which such director has been chosen and until his successor is elected
and qualified. Subject to the rights of the holders of any series of our
preferred stock, if any, our certificate of incorporation and bylaws also
provide that directors may be removed only for cause and only by the affirmative
vote of holders of a majority of the combined voting power of the then
outstanding stock of Internet Capital Group. The effect of these provisions is
to preclude a shareholder from removing incumbent directors without cause and
simultaneously gaining control of our board of directors by filling the
vacancies created by such removal with its own nominees.

     Indemnification

     We have included in our certificate of incorporation and bylaws provisions
to (i) eliminate the personal liability of our directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by the
Delaware General Corporation Law and (ii) indemnify our directors and officers
to the fullest extent permitted by Section 145 of the Delaware General
Corporation Law, including circumstances in which indemnification is otherwise
discretionary. We believe that these provisions are necessary to attract and
retain qualified persons as directors and officers.

     Certificate of Incorporation

     The provisions of our certificate of incorporation that could have anti-
takeover effects as described above are subject to amendment, alternation,
repeal, or rescission either by (i) our board of directors without the assent or
vote of our shareholders or (ii) the affirmative vote of the holder of not less
than two-thirds (66 2/3%) of the outstanding shares of voting securities. This
requirement makes it more difficult for shareholders to make changes to the
provisions in our certificate of incorporation which could have anti-takeover
effects by allowing the holders of a minority of the voting securities to
prevent the holders of a majority of voting securities from amending these
provisions of our certificate of incorporation.

                                       65
Bylaws

     Our certificate of incorporation provides that our bylaws are subject to
adoption, amendment, alteration, repeal, or rescission either by (i) our board
of directors without the assent or vote of our shareholders or (ii) the
affirmative vote of the holders of not less than two-thirds (66 2/3%) of the
outstanding shares of voting securities. This provision makes it more difficult
for shareholders to make changes in our bylaws by allowing the holders of a
minority of the voting securities to prevent the holders of a majority of voting
securities from amending our bylaws.

Transfer Agent and Registrar

     The Transfer Agent and Registrar for our common stock is ChaseMellon
Shareholder Services. The Transfer Agent's address is 4 Station Square,
Pittsburgh, Pennsylvania, and its telephone number is (412)236-8157.

                        SHARES ELIGIBLE FOR FUTURE SALE

     Upon completion of this offering, there will be                     shares
of our common stock outstanding (assuming conversion of all of our outstanding
convertible notes, no exercise of the underwriters' over-allotment option and no
exercise of outstanding options and warrants). Of these shares, the
shares sold in this offering will be freely transferable without restriction or
further registration under the Securities Act, except for any shares held by an
existing "affiliate" of Internet Capital Group, as that term is defined by the
Securities Act (an "Affiliate"), which shares will be subject to the resale
limitations of Rule 144 adopted under the Securities Act.

     Upon completion of this offering,                        "restricted
shares" as defined in Rule 144 will be outstanding. None of these shares will be
eligible for sale in the public market as of the effective date of this
registration statement (the "Effective Date"). Beginning 180 days after the
Effective Date approximately                  additional shares will become
eligible for sale subject to compliance with Rule 144 upon the expiration of
agreements not to sell such shares entered into between the underwriters and
certain of our shareholders, including the officers and directors. Restrictions
pursuant to such agreements not to sell may be waived by Merrill Lynch, Pierce,
Fenner & Smith Incorporated. See "Underwriting."

     In general, under Rule 144 as currently in effect, beginning 90 days after
the offering, a person (or persons whose shares are aggregated) who owns shares
that were purchased from us (or any Affiliate) at least one year previously,
including a person who may be deemed our Affiliate, is entitled to sell within
any three-month period a number of shares that does not exceed the greater of
(i) 1% of the then outstanding shares of our common stock (approximately
shares immediately after the offering) or (ii) the average weekly trading volume
of our common stock on the Nasdaq National Market during the four calendar weeks
preceding the date on which notice of the sale is filed with the Securities and
Exchange Commission (the "Commission"). Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and the availability of
current public information about us. Any person (or persons whose shares are
aggregated) who is not deemed to have been our Affiliate at any time during the
90 days preceding a sale, and who owns shares within the definition of
"restricted securities" under Rule 144 under the Securities Act that were
purchased from us (or any Affiliate) at least two years previously, would be
entitled to sell such shares under Rule 144(k) without regard to the volume
limitations, manner of sale provisions, public information requirements or
notice requirements.

     We have agreed not to offer, sell or otherwise dispose of any shares of our
common stock or any securities convertible into or exercisable or exchangeable
for our common stock or any rights to acquire our common stock for a period of
180 days after the date of this prospectus, without the prior written consent of
the representatives of the underwriters, subject to certain limited exceptions.
See "Underwriting."

     The holders of                      shares of our common stock have agreed
not to demand registration of their common stock for 180 days after the date of
this prospectus without the prior written consent of the underwriters.

     After such period, if such holders cause a large number of shares to be
registered and sold in the public market, such sales could have an adverse
effect on the market price for the common stock.

                                       66
UNDERWRITING

General

     Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
BancBoston Robertson Stephens, Inc., BT Alex. Brown Incorporated, NationsBanc
Montgomery Securities LLC and Wit Capital Corporation are acting as
representatives (the "Representatives") of each of the underwriters. Subject to
the terms and conditions set forth in the Purchase Agreement (the "Purchase
Agreement") among us and the underwriters, we have agreed to sell to each of the
underwriters, and each of the underwriters, severally and not jointly, has
agreed to purchase from us the number of shares of our common stock set forth
opposite its name below.
Underwriters                                  Number of Shares
                ------------                                  ----------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated........
BancBoston Robertson Stephens, Inc........................
BT Alex. Brown Incorporated...............................
NationsBanc Montgomery Securities LLC.....................
Wit Capital Corporation...................................
 
 
 
 
 
 
 
 
 
                                                              ----------------
 
 
       Total..............................................
                                                              ================
In the Purchase Agreement, the several underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the shares of our
common stock being sold pursuant to the Purchase Agreement if any shares of our
common stock are purchased. Under certain circumstances, under the terms of the
Purchase Agreement, the commitments of the non-defaulting underwriters may be
increased or the Purchase Agreement may be terminated. We have agreed to
indemnify the underwriters against some liabilities, including some liabilities
under the Securities Act, or to contribute to payments the underwriters may be
required to make in respect of those liabilities.

     The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the underwriters and certain
other conditions. The underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part.

                                       67
Commissions and Discounts

     The Representatives have advised us that they propose initially to offer
the shares of our common stock to the public at the initial public offering
price set forth on the cover page of this prospectus, and to certain dealers at
such price less a concession not in excess of $        per share of common
stock. The underwriters may allow, and such dealers may reallow, a discount not
in  excess of $          per share of common stock on sales to certain other
dealers. After the initial public offering, the public offering price,
concession and discount may be changed.

     The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us. This information is presented assuming either no exercise
or full exercise by the underwriters of their over-allotment options.
Without          With
                                                                         Per Share       Option         Option
                                                                       ------------   ------------   ------------
Public offering price..................................................      $              $              $
Underwriting discount..................................................      $              $              $
Proceeds, before expenses, to Internet Capital Group...................      $              $              $
The expenses of the offering, exclusive of the underwriting discount, are
estimated at $         million and are payable by us.

Over-Allotment Option

     We have granted to the underwriters an option exercisable for 30 days after
the date of this prospectus, to purchase up to an aggregate of an additional
shares of common stock at the initial public offering price set forth on the
cover of this prospectus, less the underwriting discount. The underwriters may
exercise this option solely to cover over-allotments, if any, made on the sale
of our common stock offered hereby. To the extent that the underwriters exercise
this option, each underwriter will be obligated, subject to certain conditions,
to purchase a number of additional shares of our common stock proportionate to
such underwriter's initial amount reflected in the foregoing table.

Directed Shares

     At our request, the underwriters have reserved approximately
shares of our common stock for sale at the initial public offering price to our
employees, directors and certain other persons with relationships to Internet
Capital Group. The number of shares of our common stock available for sale to
the general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares which are not so orally confirmed for
purchase within one day of the pricing of the offering will be offered by the
underwriters to the general public on the same basis as the other shares offered
by this prospectus.

Directed Share Subscription Program

    
     As part of this offering, we are offering          shares of our common 
stock in a directed share subscription program to certain shareholders of 
Safeguard Scientifics, Inc., one of our principal and founding shareholders. 
Only persons who owned at least        shares of Safeguard Scientifics, Inc. 
common stock as of        , 1999 are eligible to participate in the program. 
Such shareholders may subscribe for one share of our common stock for every ten
shares of Safeguard Scientifics, Inc. common stock held by them, and may not
transfer the opportunity to subscribe to another person except involuntarily by
operation of law. Sales under the program will close on the same day as other
sales under this offering. If any of the shares offered under the program are
not purchased by the shareholders of Safeguard Scientifics, Inc., then Safeguard
Scientifics, Inc. or one or more of its designees will purchase these shares.
The purchase price under the program, whether paid by Safeguard Scientifics,
Inc. or its shareholders, will be the same price per share as set forth on the
cover page of this prospectus.

No Sales of Similar Securities

     We, our executive officers and directors, Safeguard Scientifics (Delaware),
Inc., Safeguard 98 Capital, L.P., Comcast ICG, Inc., CPQ Holdings, Inc.,
Internet Assets, Inc., RAF Ventures VII, L.P., Technology Leaders II L.P. and
Technology Leaders II Offshore C.V. have agreed, with certain exceptions, not to
directly or indirectly:

     .  offer, pledge, sell, contract to sell, sell any option or contract to
        purchase, purchase any option or contract to sell, grant any option,
        right or warrant for the sale of, lend or otherwise dispose of or
        transfer any shares of our common stock or securities convertible into
        or exchangeable or exercisable for or repayable with our common stock,
        whether now owned or later acquired by the person executing the
        agreement or with respect to which the person executing the agreement
        later acquires the power of disposition, or file a registration
        statement under the Securities Act relating to any shares of our common
        stock for a period of 180 days after the date of this prospectus; or

     .  enter into any swap or other agreement that transfers, in whole or in
        part, the economic consequence of ownership of our common stock whether
        any such swap or transaction is to be settled by delivery of our common
        stock or other securities, in cash or otherwise, without the prior
        written consent of 

                                       68
Merrill Lynch on behalf of the underwriters for a period of 180 days
        after the date of this prospectus. See "Shares Eligible for Future
        Sale."

Quotation on the Nasdaq National Market

     Prior to this offering, there has been no public market for our common
stock. The initial public offering price was determined through negotiations
among us and the Representatives. Among the factors considered by us and the
Representatives in determining the initial public offering price of our common
stock, in addition to prevailing market conditions, are the trading multiples of
publicly traded companies that the Representatives believe to be comparable to
us, certain of our financial information, the history of, and the prospects for,
our company and the industry in which we compete, and an assessment of our
management, its past and present operations, the prospects for, and timing of,
our future revenue, the present state of our development, the percentage
interest of Internet Capital Group being sold as compared to the valuation for
the entire company and the above factors in relation to market values and
various valuation measures of other companies engaged in activities similar to
ours. There can be no assurance that an active trading market will develop for
our common stock or that our common stock will trade in the public market
subsequent to the offering at or above the initial public offering price.

     We have applied for a listing of our common stock on the Nasdaq National
Market under the symbol "ICGE."

     The underwriters have advised us that they do not expect sales to accounts
over which the underwriters exercise discretionary authority to exceed five
percent of the total number of shares of our common stock offered by them.

Price Stabilization, Short Positions and Penalty Bids

     Until the distribution of our common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
certain selling group members to bid for and purchase our common stock. As an
exception to these rules, the Representatives are permitted to engage in certain
transactions that stabilize the price of our common stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of our common stock.

     If the underwriters create a short position in our common stock in
connection with the offering, that is, if they sell more shares of common stock
than are set forth on the cover page of this prospectus, the Representatives may
reduce that short position by purchasing common stock in the open market. The
Representatives may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.

     The Representatives may also impose a penalty bid on certain underwriters
and selling group members. This means that if the Representatives purchase
shares of our common stock in the open market to reduce the underwriters' short
position or to stabilize the price of our common stock, they may reclaim the
amount of the selling concession from the underwriters and selling group members
who sold those shares as part of the offering.

     In general purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of our common stock to the extent that it
discourages resales of our common stock.

     Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
we nor any of the underwriters makes any representation that the Representatives
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.

Electronic Format

     Wit Capital is making a prospectus in electronic format available on its
Internet Web site. All dealers purchasing shares from Wit Capital in the
offering similarly have agreed to make a prospectus in electronic format
available on Web sites maintained by each of the dealers. The information on
these Web sites relating to the 

                                       69
Internet Capital Group offering is filed as an exhibit to the registration
statement. Please see the exhibit for a more complete description of the
information relating to the offering contained on those Web sites.

     Wit Capital, a member of the National Association of Securities Dealers,
Inc., will participate in the offering as one of the underwriters. The National
Association of Securities Dealers, Inc. approved the membership of Wit Capital
on September 4, 1997. Since that time, Wit Capital has acted as an underwriter,
e-Manager(TM) or selected dealer in more than 70 public offerings. Except for
its participation in this offering and as disclosed below, Wit Capital has no
relationship with Internet Capital Group or any of its founders or significant
shareholders.

     Robert Lessin, the Chairman, Chief Executive Officer and a significant
shareholder of Wit Capital, owned 154,861 shares of VerticalNet's Series C
Preferred Stock, which converted into 154,861 shares of VerticalNet's common
stock prior to consummation of VerticalNet's initial public offering. Except for
its participation as e-Manager(TM) in VerticalNet's initial public offering, or
as otherwise disclosed in the underwriting section of VerticalNet's initial
public offering prospectus, Wit Capital has no relationship with VerticalNet or
any of its founders or significant shareholders. Walter W. Buckley, President,
Chief Executive Officer and a director of Internet Capital Group, owns 50,000
shares of Wit Capital Corporation. Kenneth A. Fox, a Managing Director and
director of Internet Capital Group, owns 50,000 shares of Wit Capital
Corporation.

                                 LEGAL MATTERS

     The validity of our common stock offered hereby will be passed upon for us
by Dechert Price & Rhoads, Philadelphia, Pennsylvania. An attorney associated
with Dechert Price & Rhoads beneficially owns (i)           shares of our common
stock, (ii) an aggregate principal amount of $504,000 convertible notes that
will automatically convert into shares of our common stock at the initial public
price, (iii) warrants exercisable at the initial public offering price per share
to purchase an aggregate number of shares of our common stock equal to $100,800
divided by the initial public offering price. This attorney disclaims beneficial
ownership as to $475,000 aggregate principal amount of the convertible notes and
warrants exercisable at the initial public offering price per share to purchase
an aggregate number of shares of our common stock equal to $95,000 divided by
the initial public offering price.

     Certain legal and regulatory matters in connection with the offering will
be passed upon for the underwriters by Davis Polk & Wardwell, New York, New
York. Members of and an attorney associated with Davis Polk & Wardwell
beneficially own (i) an aggregate principal amount of $150,000 of convertible
notes that will automatically convert into shares of our common stock at the
initial public offering price and (ii) warrants exercisable at the initial
public offering price per share to purchase an aggregate number of shares of our
common stock equal to $30,000 divided by the initial public offering price.

                                    EXPERTS

     The consolidated financial statements of Internet Capital Group, Inc. as of
December 31, 1997 and 1998 and for the period March 4, 1996 (inception) through
December 31, 1996, and for each of the years in the two-year period ended
December 31, 1997 and 1998 have been included herein in reliance upon the report
of KPMG LLP, independent certified public accountants, appearing elsewhere
herein, and upon authority of said firm as experts in auditing and accounting.

     The financial statements of ComputerJobs.com, Inc. as of December 31, 1997
and 1998, and for the period from January 16, 1996 (inception) through December
31, 1996 and for the years ended December 31, 1997 and 1998 appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth on their report thereon appearing elsewhere
herein, and are included in reliance upon such report given on the authority of
said firm as experts in auditing and accounting.

     The financial statements of Syncra Software, Inc. as of December 31, 1998
and for the period from February 11, 1998 (inception) through December 31, 1998
included in this prospectus, have been so included in reliance on the report of
PricewaterhouseCoopers LLP given on the authority of said firm as experts in
auditing and accounting.

                                       70
WHERE YOU CAN FIND MORE INFORMATION

     We have filed with the Commission, Washington, D.C. 20549, a Registration
Statement on Form S-1 under the Securities Act with respect to our common stock
offered hereby. This prospectus does not contain all of the information set
forth in the registration statement and the exhibits to the registration
statement. For further information with respect to Internet Capital Group and
our common stock offered hereby, reference is made to the Registration Statement
and the exhibits filed as a part of the Registration Statement. Statements
contained in this prospectus concerning the contents of any contract or any
other document are not necessarily complete; reference is made in each instance
to the copy of such contract or any other document filed as an exhibit to the
registration statement. Each such statement is qualified in all respects by such
reference to such exhibit. The registration statement, including exhibits
thereto, may be inspected without charge at the Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World
Trade Center, 13th Floor, New York, New York 10048 after payment of fees
prescribed by the Commission. The Commission also maintains a World Wide Web
site which provides online access to reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission at the address http://www.sec.gov.

                                       71
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
                                                                                ----
INTERNET CAPITAL GROUP, INC.

Report of Independent Auditors................................................   F-2
Consolidated Balance Sheets...................................................   F-3
Consolidated Statements of Operations.........................................   F-4
Consolidated Statements of Shareholders' Equity...............................   F-5
Consolidated Statements of Comprehensive Income (Loss)........................   F-5
Consolidated Statements of Cash Flows.........................................   F-6
Notes to Consolidated Financial Statements....................................   F-7

COMPUTERJOBS.COM, INC.

Report of Independent Auditors................................................  F-23
Balance Sheets................................................................  F-24
Statements of Income..........................................................  F-25
Statements of Changes in Stockholders' Equity (Deficit).......................  F-26
Statements of Cash Flows......................................................  F-27
Notes to Financial Statements.................................................  F-28

SYNCRA SOFTWARE, INC.

Report of Independent Accountants.............................................  F-34
Balance Sheet.................................................................  F-35
Statement of Operations.......................................................  F-36
Statement of Changes in Redeemable Preferred Stock and Stockholders' Deficit..  F-37
Statement of Cash Flows.......................................................  F-38
Notes to Financial Statements.................................................  F-39
F-1
Report of Independent Auditors

The Board of Directors and Shareholders
Internet Capital Group, Inc.:

We have audited the accompanying consolidated balance sheets of Internet Capital
Group, Inc. and subsidiaries as of December 31, 1997 and 1998, and the related
consolidated statements of operations, shareholders' equity, comprehensive
income (loss) and cash flows for the period March 4, 1996 (inception) to
December 31, 1996 and for the years ended December 31, 1997 and 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the financial
statements of certain nonsubsidiary investee companies, which Internet Capital
Group, Inc. originally acquired an interest in during 1998. The Company's
ownership interests in and advances to these nonsubsidiary investee companies at
December 31, 1998 was $8,392,155, and its equity in net (income) loss of these
nonsubsidiary investee companies was $3,876,148 for the year ended December 31,
1998. The financial statements of these nonsubsidiary investee companies were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included for these nonsubsidiary
investee companies, is based solely on the reports of the other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Internet Capital Group, Inc. and
subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for the period March 4, 1996 (inception) to
December 31, 1996 and for the years ended December 31, 1997 and 1998, in
conformity with generally accepted accounting principles.

KPMG LLP
Philadelphia, Pennsylvania
May 7, 1999

                                      F-2
INTERNET CAPITAL GROUP, INC.

                          Consolidated Balance Sheets
DECEMBER 31,
                                                                    --------------------------------------
                                                                            1997                 1998
                                                                    -----------------    -----------------
Assets
--------------------------------------------------------------------
CURRENT ASSETS
 Cash and cash equivalents..........................................      $ 5,967,461          $26,840,904
 Accounts receivable, less allowances for doubtful accounts
   ($30,000-1997; $61,037-1998).....................................          721,381            1,842,137
 Prepaid expenses and other current assets..........................          148,313            1,119,062
                                                                    -----------------    -----------------
   Total current assets.............................................        6,837,155           29,802,103
 
 Fixed assets, net..................................................          544,443            1,151,268
 Ownership interests in and advances to Partner Companies...........       24,045,080           59,491,940
 Available-for-sale securities......................................               --            3,251,136
 Intangible assets, net.............................................           34,195            2,476,135
 Other..............................................................           20,143              613,393
                                                                    -----------------    -----------------
TOTAL ASSETS........................................................      $31,481,016          $96,785,975
                                                                    =================    =================
 
LIABILITIES AND SHAREHOLDERS' EQUITY
--------------------------------------------------------------------
CURRENT LIABILITIES
 Current maturities of long-term debt...............................      $   150,856          $   288,016
 Line of credit.....................................................        2,500,000            2,000,000
 Accounts payable...................................................          696,619            1,348,293
 Accrued expenses...................................................          388,525            1,823,407
 Note payable to Partner Company....................................               --            1,713,364
 Deferred revenue...................................................          710,393            2,176,585
                                                                    -----------------    -----------------
   Total current liabilities........................................        4,446,393            9,349,665
 
 Long-term debt.....................................................          399,948              351,924
 
 Minority interest and other liabilities............................               --            6,360,008
 
 Commitments and contingencies (Note 14)
 
SHAREHOLDERS' EQUITY
 Preferred stock, $.001 par value; no shares authorized.............               --                   --
 Common stock, $.001 par value; authorized 130,000,000 shares;
   46,783,625 (1997) and 66,043,625 (1998) issued and
   outstanding......................................................           46,784               66,044
 Additional paid-in capital.........................................       36,144,814           74,935,262
 Retained earnings (accumulated deficit)............................       (8,642,113)           5,256,815
 Unamortized deferred compensation..................................         (914,810)          (1,266,814)
 Accumulated other comprehensive income.............................               --            1,733,071
                                                                    -----------------    -----------------
   Total shareholders' equity.......................................       26,634,675           80,724,378
                                                                    -----------------    -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..........................      $31,481,016          $96,785,975
                                                                    =================    =================
See notes to consolidated financial statements.

                                      F-3
INTERNET CAPITAL GROUP, INC.

                     Consolidated Statements of Operations
MARCH 4, 1996 
                                                              (INCEPTION) TO             YEAR ENDED DECEMBER 31,
                                                               DECEMBER 31,     --------------------------------------
                                                                   1996                 1997                 1998
                                                           -----------------    -----------------    -----------------
REVENUE....................................................      $   285,140          $   791,822         $  3,134,769
                                                           -----------------    -----------------    -----------------
OPERATING EXPENSES
  Cost of revenue..........................................          427,470            1,767,017            4,642,528
  Sales and marketing......................................          268,417            2,300,365            7,894,662
  General and administrative...............................        1,652,481            3,442,241            7,619,169
  Minority interest........................................         (427,185)             106,411           (5,381,640)
  Equity (income) loss.....................................          514,540             (106,298)           7,937,861
                                                           -----------------    -----------------    -----------------
   Total operating expenses................................        2,435,723            7,509,736           22,712,580
                                                           -----------------    -----------------    -----------------
OPERATING LOSS.............................................       (2,150,583)          (6,717,914)         (19,577,811)
  Other income, net (Note 13)..............................               --                   --           32,552,151
  Interest income, net.....................................           88,098              138,286              924,588
                                                           -----------------    -----------------    -----------------
NET INCOME (LOSS)..........................................      $(2,062,485)         $(6,579,628)        $ 13,898,928
                                                           =================    =================    =================
 
PRO FORMA INFORMATION (UNAUDITED) (NOTE 2):
 
Pro forma net income
  Net income as reported...................................                                               $ 13,898,928
  Pro forma income tax provision...........................                                                 (5,142,603)
                                                                                                     -----------------
  Pro forma net income.....................................                                               $  8,756,325
                                                                                                     =================
 
Pro forma net income per share
  Basic....................................................                                                      $0.16
  Diluted..................................................                                                      $0.16
 
Pro forma shares used in computing net income per share
  Basic....................................................                                                 56,102,289
  Diluted..................................................                                                 56,149,289
See notes to consolidated financial statements.

                                      F-4
INTERNET CAPITAL GROUP, INC.

                Consolidated Statements of Shareholders' Equity
Retained                             
                                            Common Stock            Additional          Earnings          Unamortized         
                                    -------------------------         Paid-In         (Accumulated         Deferred           
                                        Shares        Amount          Capital           Deficit)         Compensation         
                                    ------------------------------------------------------------------------------------
BALANCE AS OF MARCH 4, 1996                   --      $    --        $        --       $         --        $        --            
Issuance of common stock, net.......  13,723,426       13,723         13,672,290                 --                 --        
Issuance of common stock (Note 9)...   6,139,074        6,139          1,102,313                 --                 --        
Issuance of restricted stock........   6,027,017        6,027          1,013,639                 --         (1,019,666)       
Amortization of deferred                                                                                                      
 compensation.......................          --           --                 --                 --            126,876        
                                                                                                                              
Net loss............................          --           --                 --         (2,062,485)                --        
                                    ------------------------------------------------------------------------------------      
BALANCE AS OF DECEMBER 31, 1996       25,889,517       25,889         15,788,242         (2,062,485)          (892,790)       
Issuance of common stock............  20,137,500       20,138         20,117,367                 --                 --        
Issuance of restricted stock........   1,773,053        1,773            416,562                 --           (418,335)       
Forfeitures of restricted stock.....  (1,016,445)      (1,016)          (177,357)                --            178,373        
Amortization of deferred                                                                                                      
 compensation.......................          --           --                 --                 --            217,942        
                                                                                                                              
Net loss............................          --           --                 --         (6,579,628)                --        
                                    ------------------------------------------------------------------------------------      
BALANCE AS OF DECEMBER 31, 1997       46,783,625       46,784         36,144,814         (8,642,113)          (914,810)       
Issuance of common stock, net.......  19,260,000       19,260         38,185,359                 --                 --        
Issuance of stock options to                                                                                                  
 non-employees......................          --           --            605,089                 --           (605,089)       
                                                                                                                              
Net unrealized appreciation in                                                                                                
 available-for-sale securities......          --           --                 --                 --                 --        
                                                                                                                              
Amortization of deferred                                                                                                      
 compensation.......................          --           --                 --                 --            253,085        
                                                                                                                              
Net income..........................          --           --                 --         13,898,928                 --        
                                    ------------------------------------------------------------------------------------      
BALANCE AS OF DECEMBER 31, 1998       66,043,625      $66,044        $74,935,262        $ 5,256,815        $(1,266,814)       
                                    ====================================================================================      

                                        Accumulated                  
                                           Other                     
                                       Comprehensive                 
                                           Income            Total   
                                    ---------------------------------
BALANCE AS OF MARCH 4, 1996                $  --             $  --
Issuance of common stock, net.......               --      13,686,013
Issuance of common stock (Note 9)...               --       1,108,452
Issuance of restricted stock........               --              --
Amortization of deferred                                             
 compensation.......................               --         126,876
                                                                     
Net loss............................               --      (2,062,485)
                                    ---------------------------------
BALANCE AS OF DECEMBER 31, 1996                    --      12,858,856
Issuance of common stock............               --      20,137,505
Issuance of restricted stock........               --              --
Forfeitures of restricted stock.....               --              --
Amortization of deferred                                             
 compensation.......................               --         217,942
                                                                     
Net loss............................               --      (6,579,628)
                                    ---------------------------------
BALANCE AS OF DECEMBER 31, 1997                    --      26,634,675
Issuance of common stock, net.......               --      38,204,619
Issuance of stock options to                                         
 non-employees......................               --              --
                                                                     
Net unrealized appreciation in                                       
 available-for-sale securities......        1,733,071       1,733,071
                                                                     
Amortization of deferred                                             
 compensation.......................               --         253,085
                                                                     
Net income..........................               --      13,898,928
                                    ---------------------------------
BALANCE AS OF DECEMBER 31, 1998            $1,733,071     $80,724,378
                                    =================================
Consolidated Statements of Comprehensive Income (Loss)
MARCH 4, 1996
                                                                         (INCEPTION) TO DECEMBER
                                                                                   31,                  YEAR ENDED DECEMBER 31,
                                                                      ------------------------------------------------------------
                                                                                  1996                   1997             1998
                                                                      ------------------------------------------------------------
NET INCOME (LOSS).....................................................               $(2,062,485)     $(6,579,628)     $13,898,928
                                                                      ------------------------------------------------------------
OTHER COMPREHENSIVE INCOME
 Unrealized holding gains on available-for-sale                                                                          
   securities.........................................................                        --               --        1,733,071 
 Reclassification adjustments.........................................                        --               --               --
                                                                      ------------------------------------------------------------
 Net unrealized appreciation in available-for-sale
   securities.........................................................                        --               --        1,733,071
                                                                      ------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS)...........................................               $(2,062,485)     $(6,579,628)     $15,631,999
                                                                      ============================================================
See notes to consolidated financial statements.

                                      F-5
INTERNET CAPITAL GROUP, INC.

                     Consolidated Statements of Cash Flows
MARCH 4, 1996
                                                              (INCEPTION) TO
                                                               DECEMBER 31,             YEAR ENDED DECEMBER 31,
                                                           -----------------    ------------------------------------
                                                                   1996                 1997               1998
                                                           -----------------    ------------------    --------------
OPERATING ACTIVITIES
 Net income (loss).........................................      $(2,062,485)        $ (6,579,628)      $ 13,898,928
 Adjustments to reconcile to net cash used in operating
   activities:
   Other income............................................               --                   --        (32,552,151)
   Depreciation and amortization...........................          481,796              446,289          1,135,269
   Equity (income) loss....................................          514,540             (106,298)         7,937,861
   Minority interest.......................................         (427,185)             106,411         (5,381,640)
 Changes in assets and liabilities, net of effect of
   acquisitions:
   Accounts receivable, net................................       (2,176,869)           1,574,374         (1,183,360)
   Prepaid expenses and other assets.......................          (69,558)            (142,384)        (1,346,515)
   Accounts payable........................................           43,727              565,672            620,127
   Deferred revenue........................................          147,100              493,960          1,249,624
   Accrued expenses........................................          145,977              204,645          1,415,265
                                                           -----------------    ------------------    --------------
        Net cash used in operating activities..............       (3,402,957)          (3,436,959)       (14,206,592)
INVESTING ACTIVITIES
 Capital expenditures......................................         (100,480)            (272,488)          (545,432)
 Proceeds from sales of available-for-sale securities......               --                   --         36,431,927
 Acquisitions of ownership interests in and
   advances to Partner Companies...........................       (6,994,129)         (16,315,874)       (47,624,193)
 Other acquisitions (Note 4)...............................               --                   --         (1,858,389)
                                                           -----------------    ------------------    --------------
        Net cash used in investing activities..............       (7,094,609)         (16,588,362)       (13,596,087)
FINANCING ACTIVITIES
 Issuance of common stock, net.............................       13,686,013           20,137,505         38,204,619
 Long-term debt and capital lease repayments...............          (30,191)             (57,979)          (321,857)
 Line of credit borrowings.................................        1,208,000            2,500,000          2,000,000
 Line of credit repayments.................................       (1,106,000)              (2,000)        (2,500,000)
 Treasury stock purchase by subsidiary.....................          (60,000)                  --                 --
 Issuance of stock by subsidiary...........................           15,000              200,000         11,293,360
                                                           -----------------    ------------------    --------------
        Net cash provided by financing activities..........       13,712,822           22,777,526         48,676,122
                                                           -----------------    ------------------    --------------
Net increase in cash and cash equivalents..................        3,215,256            2,752,205         20,873,443
Cash and cash equivalents at beginning of period...........               --            3,215,256          5,967,461
                                                           -----------------    ------------------    --------------
Cash and cash equivalents at end of period.................      $ 3,215,256         $  5,967,461       $ 26,840,904
                                                           =================    ==================    ==============
See notes to consolidated financial statements.

                                      F-6
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

1.  SIGNIFICANT ACCOUNTING POLICIES

     DESCRIPTION OF THE COMPANY

     Internet Capital Group, Inc. (the "Company") was formed on March 4, 1996.
The Company is an Internet holding company primarily engaged in managing and
operating a network of business-to-business, or B2B, e-commerce companies. The
Company defines e-commerce as conducting or facilitating business transactions
over the Internet. As of December 31, 1998, the Company owned interests in more
than 20 companies engaged in e-commerce, which the Company calls its "Partner
Companies". The Company's goal is to become the premier B2B e-commerce company.
The Company's operating strategy is to integrate its Partner Companies into a
collaborative network that leverages the collective knowledge and resources of
the Company.

     BASIS OF PRESENTATION

     On February 2, 1999, the Company converted from a Limited Liability
Corporation ("LLC") to a C Corporation. All shareholder transactions have been
presented as if the conversion occurred on March 4, 1996 (inception).

     PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiary, Internet Capital Group Operations, Inc. (the
"Operations Company") and its majority owned subsidiary, VerticalNet, Inc.
("VerticalNet"). The various interests that the Company acquires in its Partner
Companies are accounted for under three broad methods: consolidation, equity
method and cost method. The applicable accounting method is generally determined
based on the Company's voting interest in a Partner Company.

     Consolidation. Partner Companies in which the Company directly or
indirectly owns more than 50% of the outstanding voting securities are generally
accounted for under the consolidation method of accounting. Under this method, a
Partner Company's results of operations are reflected within the Company's
Consolidated Statements of Operations. All significant intercompany accounts and
transactions have been eliminated. Participation of other Partner Company
shareholders in the earnings or losses of a consolidated Partner Company is
reflected in the caption "Minority interest" in the Company's Consolidated
Statements of Operations. Minority interest adjusts the Company's consolidated
results of operations to reflect only the Company's share of the earnings or
losses of the consolidated Partner Company.

     Equity Method. Partner Companies whose results are not consolidated, but
over whom the Company exercises significant influence, are accounted for
under the equity method of accounting. Whether or not the Company exercises
significant influence with respect to a Partner Company depends on an evaluation
of several factors including, among others, representation on the Partner
Company's Board of Directors and ownership level, which is generally a 20% to
50% interest in the voting securities of the Partner Company, including voting
rights associated with the Company's holdings in common, preferred and other
convertible instruments in the Partner Company. Under the equity method of
accounting, a Partner Company's results of operations are not reflected within
the Company's Consolidated Statements of Operations; however, the Company's
share of the earnings or losses of the Partner Company is reflected in the
caption "Equity (income) loss" in the Consolidated Statements of Operations.

     The amount by which the Company's carrying value exceeds its share of the
underlying net assets of Partner Companies accounted for under the consolidation
or equity method of accounting is amortized on a straight-line basis over three
years which adjusts the Company's share of the Partner Company's earnings or
losses.

     Cost Method. Partner Companies not accounted for under the consolidation or
the equity method of accounting are accounted for under the cost method of
accounting. Under this method, the Company's share of the earnings or losses of
such companies is not included in the Consolidated Statements of Operations.

                                      F-7
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     The Company continually evaluates the carrying value of its ownership
interests in each of its Partner Companies for possible impairment based on
achievement of business plan objectives and milestones, the value of each
ownership interest in the Partner Company relative to carrying value, the
financial condition and prospects of the Partner Company, and other relevant
factors.

     AVAILABLE-FOR-SALE SECURITIES

     Available-for-sale securities are reported at fair value, based on quoted
market prices, with the net unrealized gain or loss reported as a component of
accumulated other comprehensive income in shareholders' equity.

     Unrealized gains or losses related to available-for-sale securities will be
recorded net of deferred taxes subsequent to February 2, 1999, the date the
Company converted from an LLC to a C Corporation.

     ACCOUNTING ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

     CASH AND CASH EQUIVALENTS

     The Company considers all highly liquid instruments with an original
maturity of 90 days or less at the time of purchase to be cash equivalents. Cash
and cash equivalents at December 31, 1998 are invested principally in money
market accounts.

     FINANCIAL INSTRUMENTS

     Cash and cash equivalents, accounts receivable, accounts payable and
accrued expenses are carried at cost which approximates fair value due to the
short-term maturity of these instruments. Long-term debt is carried at cost
which approximates fair value as the debt bears interest at rates approximating
current market rates.

     INTANGIBLES

     Goodwill, the excess of cost over net assets of businesses acquired, is
amortized on a straight-line basis over three years. Goodwill at December 31,
1998 of $2.5 million, net of accumulated amortization of $.3 million, was
attributable to acquisitions by VerticalNet.

     FIXED ASSETS

     Fixed assets are carried at cost less accumulated depreciation, which is
based on the estimated useful lives of the assets (approximately three to seven
years) computed using the straight-line method.

     Equipment acquired under long-term capital lease arrangements is recorded
at amounts equal to the net present value of the future minimum lease payments
using the interest rate implicit in the lease. Amortization is provided by use
of the straight-line method over the estimated useful lives of the related
assets.

     REVENUE RECOGNITION

     All of the Company's revenue from March 4, 1996 (inception) through
December 31, 1998 was attributable to VerticalNet.

     VerticalNet's revenue is derived principally from advertising contracts
which include the initial construction of storefronts. The advertising contracts
generally do not extend beyond one year. Advertising revenue is recognized
ratably over the period of the advertising contract.

                                      F-8
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     VerticalNet also generates revenue through providing educational courses
and selling books. Revenue from educational courses is recognized in the period
in which the course is completed and revenue from the sale of books is
recognized in the period in which the books are shipped.

     Barter transactions are recorded at the lower of estimated fair value of
goods or services received or the estimated fair value of the advertisements
given. Barter revenue is recognized when the VerticalNet advertising impressions
(VNAI) are delivered to the customer and advertising expense is recorded when
the customer advertising impressions (CAI) are received from the customer. If
the CAI are received from the customer prior to VerticalNet delivering the VNAI,
a liability is recorded, and if VerticalNet delivers the VNAI to the customer
prior to receiving the CAI, a prepaid expense is recorded. For the period March
4, 1996 (inception) through December 31, 1997, VerticalNet barter transactions
were immaterial. For the year ended December 31, 1998, VerticalNet recognized
approximately $.6 million and $.5 million of advertising revenues and expenses,
respectively, from barter transactions. Included in prepaid expenses and other
current assets at December 31, 1998 is approximately $.2 million relating to
barter transactions.

     CONCENTRATION OF CREDIT RISK

     VerticalNet performs ongoing credit evaluations of its customers' financial
condition and generally does not require collateral on accounts receivable.
VerticalNet maintains allowances for credit losses and such losses have been
within management's expectations. No single customer accounted for greater than
10% of total revenue during the period from March 4, 1996 (inception) to
December 31, 1996 and the years ended December 31, 1997 and 1998.

     ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS

     In accordance with Statement of Financial Accounting Standards Board No.
121, the Company records an impairment loss on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount.

     DEFERRED OFFERING COSTS

     As of December 31, 1998, specific incremental costs directly attributable
to a planned initial public offering (IPO) of VerticalNet shares have been
deferred. These deferred costs, totaling $.5 million, are included in non-
current other assets on the Consolidated Balance Sheet. These costs were charged
against VerticalNet's additional paid-in-capital in connection with the
consummation of VerticalNet's IPO in February 1999.

     STOCK BASED COMPENSATION

     The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25) for stock options and other stock-based
awards while disclosing pro forma net income and net income per share as if the
fair value method had been applied in accordance with Statement of Financial
Accounting Standards Board No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation".

     COMPREHENSIVE INCOME

     In 1998, the Company adopted Statement of Financial Accounting Standard No.
130, "Reporting Comprehensive Income" (SFAS 130), which requires companies to
report and display comprehensive income and its components in financial
statements. Comprehensive income is the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. Excluding net income, the Company's source of
comprehensive income is from net unrealized appreciation on its available-for-
sale securities. Reclassification adjustments result from the recognition in net
income of gains or losses that were included in comprehensive income in prior
periods.

                                      F-9
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     SEGMENT INFORMATION

     At December 31, 1998, the Company adopted Statement of Financial Accounting
Standard No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131) which requires companies to present financial and
descriptive segment information (Note 10).

     INCOME TAXES

     Income taxes are accounted for under the asset and liability method whereby
deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which the temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

     From the Company's inception in March 1996 to February 1999, the Company
was not subject to federal and state income taxes. The Company has no net
operating loss carry forwards at December 31, 1998 (Note 2).

     NET INCOME PER SHARE

     Net income per share (EPS) is computed using the weighted average number of
common shares outstanding during each year. Dilutive EPS includes common stock
equivalents (unless anti-dilutive) which would arise from the exercise of stock
options and conversion of other convertible securities and is adjusted, if
applicable, for the effect on net income (loss) of such transactions.

     Pursuant to SEC Staff Accounting Bulletin No. 98, common stock and
convertible preferred stock issued for nominal consideration, prior to the
anticipated effective date of an IPO, are required to be included in the
calculation of basic and diluted net income per share as if they were
outstanding for all periods presented. To date, the Company has not had any
issuances or grants for nominal consideration.

     GAIN OR LOSS ON ISSUANCES OF STOCK BY PARTNER COMPANIES

     Pursuant to SEC Staff Accounting Bulletin No. 84, at the time a public
Partner Company accounted for under the consolidation or equity method of
accounting sells its stock at a price different from the Partner Company's book
value per share, the Company's share of the Partner Company's net equity
changes. If at that time, the Partner Company is an operating entity and not
engaged principally in research and development, the Company records the change
in its share of the Partner Company's net equity as a gain or loss in its
Consolidated Statements of Operations (Note 15).

     RECENT ACCOUNTING PRONOUNCEMENTS

     The Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position or cash flows.

2.   PRO FORMA INFORMATION (UNAUDITED)

     On February 2, 1999, the Company converted from an LLC to a C corporation.
The Company became subject to corporate federal and state income taxes
concurrent with the conversion to a C corporation. The accompanying Consolidated
Statement of Operations for 1998 includes pro forma information with respect to
income taxes, net income and net income per share assuming the Company had been
taxed as a C Corporation since January 1, 1998. The unaudited pro forma
information provided does not necessarily reflect the income taxes, net income
and net income per share that would have occurred had the Company been taxed as
a C corporation since January 1, 1998.

                                      F-10
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     PRO FORMA INCOME TAXES

     The Company's 1998 pro forma effective tax rate of 37% differed from the
federal statutory rate of 35% principally due to non-deductible permanent
differences.

     Based upon the cumulative temporary differences (primarily relating to the
difference between the book and tax carrying value of its Partner Companies),
the Company would have recognized a pro forma net deferred federal and state tax
asset of $8.2 million at December 31, 1998. In the opinion of management, it is
more likely than not that such asset would be realized and accordingly, a
valuation allowance was not considered necessary in calculating this pro forma
amount.

     PRO FORMA NET INCOME PER SHARE

     Pro forma net income per share was calculated as follows:
PRO FORMA YEAR
                                                                      ENDED DECEMBER
                                                                         31, 1998
                                                                    -----------------
Basic:
Pro forma net income...............................................      $ 8,756,325
 Pro forma shares used in computing basic net income per share......       56,102,289
                                                                    -----------------
 Basic pro forma net income per share...............................      $      0.16
                                                                    =================
Diluted:
 Pro forma net income...............................................      $ 8,756,325
 Pro forma shares used in computing basic net income per share......       56,102,289
 Effect of dilutive options.........................................           47,000
                                                                    -----------------
 Pro forma shares used in computing diluted net income per share....       56,149,289
                                                                    -----------------
 Diluted pro forma net income per share.............................      $      0.16
                                                                    =================
3.   OWNERSHIP INTERESTS IN AND ADVANCES TO PARTNER COMPANIES

     The following summarizes the Company's ownership interests in and advances
to Partner Companies accounted for under the equity method or cost method of
accounting. The ownership interests are classified according to applicable
accounting methods at December 31, 1997 and 1998. Cost basis represents the
Company's original acquisition cost less any impairment charges in such
companies.
DECEMBER 31, 1997                       DECEMBER 31, 1998
                                               -------------------------------------   -------------------------------------
                                                 CARRYING VALUE        COST BASIS        CARRYING VALUE        COST BASIS
                                               -----------------   -----------------   -----------------   -----------------
Equity Method..................................      $ 1,200,210         $ 1,608,452         $22,242,349         $30,588,452
Cost Method....................................       22,844,870          22,844,870          37,249,591          37,249,591
                                               -----------------                       -----------------
                                                     $24,045,080                             $59,491,940
                                               =================                       =================
F-11
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     The following summarized financial information for Partner Companies
accounted for under the equity method of accounting at December 31, 1997 and
1998 has been compiled from the financial statements of the respective Partner
Companies:

BALANCE SHEETS
DECEMBER 31,
                                                                                -------------------------------------
                                                                                       1997                1998
                                                                                -----------------   -----------------
Current assets..................................................................      $ 7,042,767         $34,239,732
Non-current assets..............................................................        3,876,167           8,003,286
                                                                                -----------------   -----------------
   Total assets.................................................................       10,918,934          42,243,018
                                                                                -----------------   -----------------
Current liabilities.............................................................        5,406,510          12,159,173
Non-current liabilities.........................................................        1,203,524             758,840
Shareholders' equity............................................................        4,308,900          29,325,005
                                                                                -----------------   -----------------
   Total liabilities and shareholders' equity...................................      $10,918,934         $42,243,018
                                                                                =================   =================
RESULTS OF OPERATIONS
MARCH 4, 1996 
                                                                  (INCEPTION) TO            YEAR ENDED DECEMBER 31,
                                                                   DECEMBER 31,     -------------------------------------
                                                                      1996                 1997                1998
                                                               -----------------    -----------------   -----------------
Revenue........................................................      $ 9,365,872          $18,911,691        $ 21,495,832
Net income (loss)..............................................      $(1,369,774)         $   255,280        $(17,038,167)
4.   OTHER ACQUISITIONS

     In 1998, VerticalNet acquired all of  the outstanding capital stock of
Boulder Interactive Technology Services Company (BITC) for $1.9 million in cash
and all of the outstanding capital stock of Informatrix Worldwide, Inc.
(Informatrix) for 49,892 shares of VerticalNet's common stock valued at $.2
million. These acquisitions were accounted for using the purchase method of
accounting. The excess of the purchase price over the fair value of the net
assets acquired of approximately $2.8 million was recorded as goodwill and is
being amortized over three years. Accumulated amortization relating to this
goodwill totaled $.3 million at December 31, 1998.

     The following unaudited pro forma financial information presents the
combined results of operations as if VerticalNet had owned BITC and Informatrix
since January 1, 1997 and October 15, 1997 (inception), respectively, after
giving effect to certain adjustments including goodwill and income taxes. The
unaudited pro forma financial information does not necessarily reflect the
results of operations that would have occurred had the Company, VerticalNet,
BITC and Informatrix constituted a single entity during such periods.
(UNAUDITED)
                                                                                        YEAR ENDED DECEMBER 31,
                                                                                --------------------------------------
                                                                                        1997                1998
                                                                                -----------------    -----------------
Revenue.........................................................................      $ 1,118,030           $3,606,027
Pro forma net income (loss) (1).................................................      $(7,590,016)          $8,023,846
Pro forma net income per share (1)..............................................                            $     0.14
                                        
(1) Includes for 1998 the effect of the pro forma adjustments described in Note 2.
F-12
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

5.  FIXED ASSETS

    Fixed assets consists of the following:
DECEMBER 31,
                                                                                --------------------------------------
                                                                                        1997                 1998
                                                                                -----------------    -----------------
Computer equipment and software.................................................        $ 681,656           $1,564,297
Office equipment and furniture..................................................          148,430              271,809
Trade show equipment............................................................           34,079               40,587
Leasehold improvements..........................................................           29,402               45,864
                                                                                -----------------    ----------------- 
                                                                                          893,567            1,922,557
Less: accumulated depreciation and amortization.................................         (349,124)            (771,289)
                                                                                -----------------    ----------------- 
                                                                                        $ 544,443           $1,151,268
                                                                                =================    =================
6.   DEBT

     REVOLVING CREDIT FACILITIES

     In March 1998, the Company entered into an unsecured $3 million revolving
credit facility. Borrowings under this facility accrued interest at a premium to
prime ranging from .75% to 1.5%. The Company borrowed up to $2 million under
this facility during 1998. No amounts were outstanding at December 31, 1998 and
the facility expired in March 1999.

     In April 1999, the Company entered into a $50 million revolving bank credit
facility. In connection with the facility, the Company issued 200,000 warrants
exercisable for seven years at $10 per share. The facility matures in April
2000, is subject to a .25% unused commitment fee, bears interest, at the
Company's option, at prime and/or LIBOR plus 2.5%, and is secured by
substantially all of the Company's assets (including the Company's holdings in
VerticalNet). Borrowing availability under the facility is based on the fair
market value of the Company's holdings of publicly traded Partner Companies
(currently only VerticalNet) and the value, as defined in the facility, of the
Company's private Partner Companies. Based on the provisions of the borrowing
base, borrowing availability at April 30, 1999 was $32.6 million, of which none
was outstanding. As of May 7, 1999, the Company had borrowed $13 million under
the facility.

     VerticalNet had a line of credit with a bank in the amount of $2.5 million
at December 31, 1997. Borrowings under the facility were collateralized by a
security interest in all assets of VerticalNet and required VerticalNet to meet
specified financial ratios. As of December 31, 1997, VerticalNet was in
technical default, as it did not meet the specified financial ratios, but the
bank waived these violations. The facility accrued interest at prime plus 1.5%
(10% at December 31, 1997). The weighted average interest rate for borrowings
under this facility was 10% for the year ended December 31, 1997.

     As of June 1998, VerticalNet modified the agreement, reducing its line of
credit with the bank to $.5 million. On November 25, 1998, the agreement was
additionally amended allowing the Company to execute a $2.0 million note with
the bank. The note accrues interest at prime plus 1.5% and matures at the
earlier of March 31, 1999 or the completion of VerticalNet's next financing. In
connection with the loan, VerticalNet issued warrants to purchase 20,513 shares
of VerticalNet's common stock at an exercise price of $16 per share with an
estimated fair value of $.1 million. As of December 31, 1998, the outstanding
balance for borrowings under this facility was $2 million and the weighted
average interest rate for the year ended December 31, 1998 was 10%. Upon the
completion of VerticalNet's IPO in February 1999, VerticalNet repaid $2 million
and the line of credit with the bank was reduced to $.5 million.

                                      F-13
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     LONG-TERM DEBT

     All of the Company's long-term debt is attributable to VerticalNet and
consists of the following:
DECEMBER 31,
                                                                                --------------------------------------
                                                                                        1997                 1998
                                                                                -----------------    -----------------
Term notes with related parties.................................................        $ 100,000           $       --
Term bank notes.................................................................           32,852                   --
Capital leases..................................................................          417,952              639,940
                                                                                -----------------    ----------------- 
                                                                                          550,804              639,940
Less: current portion...........................................................         (150,856)            (288,016)
                                                                                -----------------    ----------------- 
Long-term debt..................................................................        $ 399,948            $ 351,924
                                                                                =================    =================
VerticalNet had three unsecured term notes due to shareholders with an
interest rate of 7%. The notes were to mature on February 2001. One of the
holders of these notes is a Board member of the Company. These notes were repaid
in May 1998.

     VerticalNet had a term loan with another bank with an interest rate at
prime plus 2.75% (11.25% at December 31, 1997) which was payable in 36 monthly
installments. This note was repaid in May 1998.

     VerticalNet has several capital leases on its equipment with lease terms
ranging from three to five years. The interest rates implicit in the leases are
8% to 20%. At December 31, 1997 and 1998, the book value of assets held under
capital leases was approximately $.3 million and $.5 million, respectively, and
the aggregate remaining minimum lease payments at December 31, 1998 were
approximately $.7 million including interest of approximately $.1 million.

     At December 31, 1998, long-term debt is scheduled to mature as follows:
1999..............................................         $288,016
2000..............................................          230,338
2001..............................................           95,718
2002..............................................           19,810
2003..............................................            6,058
                                                  -----------------
Total.............................................         $639,940
                                                  =================
Interest paid in the periods ended December 31, 1997 and 1998 was $.1
million and $.2 million, respectively.

7.    ACCRUED EXPENSES

      Accrued expenses consists of the following:
DECEMBER 31,
                                                                                -------------------------------------
                                                                                       1997                1998
                                                                                -----------------   -----------------
Accrued compensation and benefits...............................................         $ 90,833          $  454,230
Accrued marketing costs.........................................................               --             446,334
Other...........................................................................          297,692             922,843
                                                                                -----------------   -----------------
                                                                                         $388,525          $1,823,407
                                                                                =================   =================
8.   SHAREHOLDERS' EQUITY

     The Company's authorized capital stock consists of 130,000,000 shares of
common stock, par value $.001 per share. The holders of common stock are
entitled to one vote per share and are entitled to dividends as declared.

                                      F-14
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

Dividends may be restricted by the inability to liquidate ownership interests in
Partner Companies to fund cash dividends and may be subject to the preferential
rights of the holders of the Company's preferred stock, if any.

     The Company may establish one or more classes or series of preferred stock.
The holders of the preferred stock may be entitled to preferences over common
stock or shareholders with respect to dividends, liquidation, dissolution, or
winding up of the Company, as established by the Company's Board of Directors.
No preferred stock is authorized at December 31, 1998.

     Certain shareholders were granted registration rights which become
effective after completion of a public offering.

     Shareholders' equity contributions are recorded when received. The Company
issued 15,990,000 shares of common stock for net proceeds of $32 million in 
1999. These shares had been subscribed for at December 31, 1998.

     RESTRICTED STOCK

     During 1996 and 1997, 6,027,017 and 756,608 shares of restricted common
stock ("restricted stock") were granted, net of forfeitures, to employees,
consultants and advisors at no cost as performance incentives. The restricted
stock vests in equal annual installments over a five year period.

     At December 31, 1997 and 1998, the 6,783,625 shares of restricted stock had
been granted at a weighted average fair value of $0.19 per share or an aggregate
of $1.3 million based on independent valuations of the shares. These independent
valuations took into account certain factors, primarily the restrictions on the
ability of restricted shareholders to receive distributions of dividends or
profits and the uncertainty of realization of any return from these shares. The
$1.3 million of deferred compensation is classified as a reduction of
shareholders' equity and is being amortized over the five-year vesting period.
Compensation expense related to the restricted stock totaling $.1 million, $.2
million and $.3 million was recorded in 1996, 1997 and 1998, respectively.

     STOCK OPTION PLANS

     Incentive or non-qualified stock options may be granted to Company
employees, directors and consultants under several stock option plans ("Plans").
Generally, the options vest over a four to five year period and expire eight to
ten years after the date of grant. At December 31, 1998, the Company reserved
10,470,000 shares of common stock for possible future issuance under the Plans.
VerticalNet and most Partner Companies also maintain their own stock option
plans.

     The following table summarizes the activity of the Company's stock option
plans:
WEIGHTED
                                                                                                           AVERAGE
                                                                                       SHARES           EXERCISE PRICE
                                                                                -----------------    -----------------
Outstanding at January 1, 1997                                                                 --                $  --
Options granted.................................................................           94,000                 1.00
Options canceled/forfeited......................................................               --                   --
                                                                                -----------------
Outstanding at December 31, 1997................................................           94,000                 1.00
Options granted.................................................................        6,650,000                 2.00
Options canceled/forfeited......................................................          (47,000)               (1.00)
                                                                                -----------------
Outstanding at December 31, 1998................................................        6,697,000               $ 1.99
                                                                                =================
No options were issued by the Company in 1996. At December 31, 1997 there
were no options exercisable under the Plans. At December 31, 1998 there were
11,750 options exercisable at $1.00 per share under the Plans.

                                   F-15
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     The following table summarizes information about stock options outstanding:
WEIGHTED AVERAGE  
                                NUMBER OUTSTANDING AT         REMAINING CONTRACTUAL
     EXERCISE PRICE               DECEMBER 31, 1998              LIFE (IN YEARS)   
-------------------------   ---------------------------   ---------------------------
$1.00                          47,000                          7
         $2.00                       6,650,000                         10
Included in the 1998 option grants are 450,000 stock options to non-
employees. The fair value of these options of $.6 million was recorded as
deferred compensation in 1998 and is being amortized over the five year vesting
period. The fair value of these options was determined using the Black-Scholes
method assuming a volatility of 80%, a dividend yield of 0%, an average expected
option life of 5 years, and a risk-free interest rate of 5.2%.

     The Company applies APB 25 and related interpretations in accounting for
its stock option plans. Had compensation cost been recognized pursuant to SFAS
123, the Company's net income (loss) would have been as follows:
YEAR ENDED DECEMBER 31,
                                                                                --------------------------------------
                                                                                        1997                1998
                                                                                -----------------    -----------------
Net income (loss)
   As reported (pro forma in 1998)..............................................      $(6,579,628)          $8,756,325
   SFAS 123 pro forma...........................................................      $(6,648,952)          $8,293,979
 
Net income per share:
   Pro forma as reported........................................................                            $     0.16
   SFAS 123 pro forma...........................................................                            $     0.15
The per share weighted-average fair value of options issued to employees 
by the Company during 1997 and 1998 was approximately $0.22 and $0.45,
respectively.

     The following assumptions were used to determine the fair value of stock
options granted to employees by the Company, its subsidiaries, and Partner
Companies accounted for under the equity method using the minimum value option-
price model:
Dividend yield....................................               0%
Average expected option life......................            5 years
Risk-free interest rate...........................              5.2%
In 1999, the Company granted 2,934,500 options to employees and non-
employees at exercise prices ranging from $2.00 to $4.88.

9.  RELATED PARTIES

     A principal shareholder satisfied a portion of its initial 1996 funding
commitment by contributing its interests valued at $6.1 million in the
securities of a Partner Company. As this shareholder controlled the Company at
the time of the transfer, the shareholder's cost basis in the shares of the
Partner Company ($1.1 million), together with a $.5 million equity contribution
made by the Company, comprise the Company's cost basis in the Partner Company.

     The Company entered into various cost sharing arrangements with the same
principal shareholder during 1996, 1997, and 1998, whereby the Company
reimbursed, under fair market terms, this shareholder for certain operational
expenses. The amounts incurred for such items were $.1 million, $.1 million and
$.2 million in 1996, 1997, and 1998, respectively.

     The Company loaned an officer $.1 million during 1998, evidenced by a term
note with an interest rate of prime plus 1% (8.75% at December 31, 1998) to
purchase a portion of the Company's interest in a Partner Company at the 

                                      F-16
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

Company's cost. This note was repaid in January 1999 and is included in other 
current assets in the December 31, 1998 Consolidated Balance Sheets.

     In September 1998 the Company entered into a $.2 million one-year
consulting contract with a Partner Company.

     The Company shares certain acquisition rights with certain of its principal
shareholders whereby these shareholders have the ability to purchase a portion
of the Company's interest in certain Partner Companies. During 1998 and 1999,
one shareholder exercised this right and acquired a portion of the Company's
interest in three Partner Companies at the Company's cost basis of approximately
$3.4 million. The agreement under which these rights were granted will terminate
automatically upon an initial public offering.

     Certain executives of the Company and its Partner Companies have the option
to purchase a portion of the Company's ownership interest in various Partner
Companies at the Company's cost.

10.  OPERATING SEGMENTS

     In 1998, the Company adopted SFAS 131, which requires the reporting of
operating segments using the "management approach" versus the "industry
approach" previously required. The Company's reportable segments consist of
Partner Company Operations and General ICG Operations. Partner Company
Operations includes the effect of consolidating VerticalNet and recording the
Company's share of earnings and losses of Partner Companies accounted for under
the equity method. VerticalNet operations include creating and operating
industry-specific trade communities on the Internet. Partner Companies accounted
for under the equity method of accounting operate in various Internet-related
businesses. General ICG Operations represents the expenses of providing
strategic and operational support to the Internet related Partner Companies, as
well as the related administrative costs related to such expenses. General ICG
Operations also includes the effect of transactions and other events incidental
to the Company's general operations and the Company's ownership interests in
Partner Companies. The Company's and Partner Companies' operations were
principally in the United States of America during 1996, 1997 and 1998.

                                      F-17
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     The following summarizes information related to the Company's segments. All
significant intersegment activity has been eliminated. Assets are owned or
allocated assets used by each operating segment.
MARCH 4, 1996
                                                               (INCEPTION)
                                                                 THROUGH
                                                               DECEMBER 31,              YEAR ENDED DECEMBER 31,
                                                           -----------------    --------------------------------------
                                                                   1996                 1997                 1998
                                                           -----------------    -----------------    -----------------
PARTNER COMPANY OPERATIONS
Revenue...................................................      $   285,140          $   791,822         $  3,134,769
                                                           -----------------    -----------------    ----------------- 
 Operating expenses
   Cost of revenue.........................................          427,470            1,767,017            4,642,528
   Sales and marketing.....................................          268,417            2,300,365            7,894,662
   General and administrative..............................          291,660            1,388,123            4,106,583
                                                           -----------------    -----------------    ----------------- 
 Operating loss -- Partner Company Operations before
   minority interest and equity income (loss)..............         (702,407)          (4,663,683)         (13,509,004)
 Minority interest.........................................          427,185             (106,411)           5,381,640
 Equity income (loss)......................................         (514,540)             106,298           (7,937,861)
                                                           -----------------    -----------------    -----------------
 Operating loss -- Partner Company Operations..............         (789,762)          (4,663,796)         (16,065,225)
 Other income, net.........................................               --                   --                   --
 Interest expense, net.....................................           (6,440)            (115,106)             (85,271)
                                                           -----------------    -----------------    ----------------- 
 Net loss -- Partner Company Operations....................      $  (796,202)         $(4,778,902)        $(16,150,496)
                                                           =================    =================    ================= 
 
GENERAL ICG OPERATIONS
 General and administrative................................      $ 1,360,821          $ 2,054,118         $  3,512,586
                                                           -----------------    -----------------    -----------------
 Operating loss -- General ICG Operations..................       (1,360,821)          (2,054,118)          (3,512,586)
 Other income, net.........................................               --                   --           32,552,151
 Interest income, net......................................           94,538              253,392            1,009,859
                                                           -----------------    -----------------    ----------------- 
 Net income (loss) -- General ICG Operations...............      $(1,266,283)         $(1,800,726)        $ 30,049,424
                                                           =================    =================    =================
 
 
                                                                                              December 31,
                                                                                --------------------------------------
                                                                                       1997                 1998
                                                                                -----------------    -----------------
Total Assets
   Partner Company Operations..............................                           $ 2,104,087         $ 12,342,975
   General ICG Operations..................................                            29,376,929           84,443,000
                                                                                -----------------    -----------------
                                                                                      $31,481,016         $ 96,785,975
                                                                                =================    =================
11.  PARENT COMPANY FINANCIAL INFORMATION

     Parent Company financial information is provided to present the results of
operations and financial position of the Company assuming VerticalNet was
accounted for under the equity method of accounting instead of consolidation.

                                      F-18
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

     The following summarizes the Company's Parent Company Balance Sheets which
differ from the Consolidated Balance Sheets due to not consolidating VerticalNet
with the Company but instead including the losses recorded in excess of the
Company's carrying value in VerticalNet in the caption "Non-current
liabilities".

BALANCE SHEETS
DECEMBER 31,
                                                                                -------------------------------------
                                                                                       1997                1998
                                                                                -----------------   -----------------
Assets
Current assets...............................................................      $ 5,245,064         $21,596,575
   Ownership interests in and advances to Partner Companies.....................       24,045,080          59,491,940
   Other........................................................................           86,785           3,354,485
                                                                                -----------------   ----------------- 
Total assets....................................................................       29,376,929          84,443,000
Liabilities and shareholders' equity
   Current liabilities..........................................................          318,729           2,082,463
   Non-current liabilities......................................................        2,423,525           1,636,159
   Shareholders' equity.........................................................       26,634,675          80,724,378
                                                                                -----------------   ----------------- 
Total liabilities and shareholders' equity......................................      $29,376,929         $84,443,000
                                                                                =================   =================
The following summarizes the Company's Parent Company Statements of
Operations which differ from the Consolidated Statements of Operations due to
not consolidating VerticalNet with the Company but instead including the
Company's share of VerticalNet's losses in the caption "Equity (income) loss".

STATEMENTS OF OPERATIONS
MARCH 4, 1996
                                                                  (INCEPTION) TO
                                                                   DECEMBER 31,              YEAR ENDED DECEMBER 31,
                                                                                    --------------------------------------
                                                                       1996                 1997                 1998
                                                               -----------------    -----------------    -----------------
 
Revenue                                                               $  --                $  --                $  --
                                                               -----------------    -----------------    -----------------
Operating expenses                                                              
 General and administrative....................................        1,360,821            2,054,118            3,512,586
 Equity (income) loss..........................................          796,202            4,778,902           16,150,496
                                                               -----------------    -----------------    ----------------- 
 Total operating expenses......................................        2,157,023            6,833,020           19,663,082
                                                               -----------------    -----------------    ----------------- 
Operating loss.................................................       (2,157,023)          (6,833,020)         (19,663,082)
Other income, net..............................................               --                   --           32,552,151
Interest income, net...........................................           94,538              253,392            1,009,859
                                                               -----------------    -----------------    ----------------- 
Net income (loss)..............................................      $(2,062,485)         $(6,579,628)        $ 13,898,928
                                                               =================    =================    =================
12.  DEFINED CONTRIBUTION PLAN

     In 1997, the Company established a defined contribution plan that covers
all of its employees. Participants may contribute 1% to 15% of pre-tax
compensation, as defined. The Company may make discretionary contributions to
the plan but has never done so.

                                      F-19
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

13.  OTHER INCOME

     Other income consists of the following for the year ended December 31,
1998:
Sale of Matchlogic to Excite..................................      $12,822,162
Sale of Excite holdings.......................................       16,813,844
Sale of WiseWire to Lycos.....................................        3,324,238
Sale of Lycos holdings........................................        1,471,907
Partner Company impairment charge.............................       (1,880,000)
                                                              -----------------
                                                                    $32,552,151
                                                              =================
Gains on sales of Partner Companies and available-for-sale securities are
determined using average cost.

     In February 1998, the Company exchanged all of its holdings in Matchlogic
for 763,820 shares of Excite resulting in a gain at the date of exchange of
$12.8 million. Throughout the remainder of 1998, the Company sold 716,082 shares
of Excite which resulted in $30.2 million of proceeds and a gain of $16.8
million.

     In April 1998, the Company exchanged all of its holdings in WiseWire
for 196,130 shares of Lycos, Inc. resulting in a gain at the date of exchange of
$3.3 million. Throughout the remainder of 1998, the Company sold 173,756 shares
of Lycos which resulted in $6.2 million of proceeds and a gain of $1.5 million.

     In December 1998, the Company recorded an impairment charge of $1.9 million
for the decrease in value of a Partner Company.

14.  COMMITMENTS AND CONTINGENCIES

     The Company and its subsidiaries are involved in various claims and legal
actions arising in the ordinary course of business. In the opinion of
management, the amount of the ultimate liability with respect to these actions
will not materially affect the financial position, results of operations or cash
flows of the Company and its subsidiaries.

     In connection with its ownership interests in certain Partner Companies,
the Company guaranteed $3.2 million of bank loan and other commitments and has
committed capital of $2 million to an existing Partner Company to be funded in
1999.

     The Company and VerticalNet lease their facilities under operating lease
agreements expiring through 2004. Future minimum lease payments as of December
31, 1998 under the leases are as follows:
1999..............................................         $385,316
2000..............................................          402,565
2001..............................................          266,970
2002..............................................          239,984
2003..............................................          246,274
Thereafter........................................          103,385
Rent expense under the noncancelable operating leases was approximately $.1
million and $.3 million for the years ended December 31, 1997 and 1998,
respectively.

     On June 30, 1998, VerticalNet entered into a three year Sponsorship
Agreement with Excite, Inc. (Excite). The Sponsorship Agreement provides for
VerticalNet and Excite to sponsor and promote thirty co-branded Web pages and
for each company to sell advertising on the Web pages. Excite has guaranteed a
minimum number of advertising impressions for each of the three years. The
agreement is cancelable by either party, as 

                                      F-20
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

defined, and requires VerticalNet to pay Excite $0.9 million, $2.0 million and
$3.0 million, respectively, in year one, two and three under the agreement. Such
payments will be charged to expense as the advertising impressions are provided
by Excite. In addition, each company will provide the other with $.2 million in
barter advertising during the term of the Sponsorship Agreement. As of December
31, 1998, each company has satisfied the barter provisions under the Sponsorship
Agreement.

     On January 19, 1999, VerticalNet entered into a one-year agreement with
Compaq Computer Corporation (Compaq) and its Internet Web site known as
AltaVista. The agreement provides for VerticalNet and AltaVista to sponsor and
promote thirty-one co-branded Web pages. The agreement requires VerticalNet to
pay Compaq $1.0 million over the term of the agreement based on the number of
advertising impressions delivered. Such amount will be charged to expense as the
advertising impressions are provided by AltaVista. In addition, each company
will provide the other with $.3 million in barter advertising during the term of
the agreement.

     VerticalNet has entered into non-cancelable obligations with several
content service providers and Internet search engines. Under these agreements,
exclusive of the Excite and AltaVista agreements discussed above, VerticalNet's
obligations are as follows:
1999..............................................       $1,488,734
2000..............................................           65,500
VerticalNet has entered into employment agreements with several employees.
The agreements are cancelable, but require severance upon termination. As of
December 31, 1998, VerticalNet would be required to pay approximately $1 million
in severance in the event that these employment agreements are canceled.

15.  SUBSEQUENT EVENTS

     ISSUANCE OF COMMON STOCK

     The Company issued 15,990,000 shares of common stock for net proceeds of
$32 million from January through March, 1999 (Note 8).

     In April, 1999 the Company's Board of Directors authorized the acceptance
of full recourse promissory notes from its employees and a director as
consideration for exercising all or a portion of their vested and unvested stock
options. The Company has the right, but not the obligation, to repurchase
unvested shares under certain circumstances. The exercise of unvested options by
the employees and director and the acceptance of promissory notes by the Company
are in accordance with the terms of the Company's equity compensation plans and
related option agreements. The Company's Board of Directors also approved
loaning employees the funds, under the terms of full recourse promissory notes,
to pay the income taxes that become due in connection with the option exercises.

     VERTICALNET INITIAL PUBLIC OFFERING

     In February 1999, VerticalNet completed its initial public offering (IPO)
of 4,025,000 shares of its common stock at $16.00 per share. Net proceeds to 
VerticalNet were approximately $58.3 million. As a result of the VerticalNet
IPO, the Company expects to record a gain in 1999 of approximately $28 million
relating to the increase in the Company's share of VerticalNet's net equity.

     TAX DISTRIBUTION

     In March 1999 the Company made a distribution of $10.7 million to
former LLC members in accordance with the LLC agreements to satisfy the members'
tax liabilities.

     OWNERSHIP INTERESTS IN AND ADVANCES TO PARTNER COMPANIES

     Through May 7, 1999, the Company expended approximately $60 million to
acquire interests in or make advances to new and existing Partner Companies.

     REVOLVING BANK CREDIT FACILITY

     In April 1999, the Company entered into a $50 million revolving bank credit
facility (Note 6).

     CONVERTIBLE SUBORDINATED NOTES

     On May 5, 1999, the Company's Board of Directors authorized the issuance of
up to $90 million of convertible subordinated notes. The notes bear interest at
an annual rate of 4.99% during the first year and at the prime rate for the
remaining two years. Prior to May 2000, the notes will automatically convert
into shares of the 

                                      F-21
INTERNET CAPITAL GROUP, INC.
                                        
                   Notes to Consolidated Financial Statements

Company's common stock at the initial public offering price upon consummation of
an initial public offering or at the per share value of a private round of
equity financing of at least $50 million. If the notes are converted, all
accrued interest is waived. The Company's Board of Directors also approved the
issuance of warrants to the holders of these convertible notes to purchase
shares of the Company's common stock. The warrant holders will be entitled to
purchase the number of shares of the Company's common stock determined by
dividing 20% of the principal amount of the notes converted by the price per
share at which the notes are converted. The warrants expire in May 2002.

     INITIAL PUBLIC OFFERING

     On May 7, 1999 the Company's Board of Directors authorized the filing of a
registration statement on Form S-1 in connection with the Company's initial
public offering.

                                      F-22
Report of Independent Auditors

Board of Directors and Stockholders of
ComputerJobs.com, Inc.

     We have audited the accompanying balance sheets of ComputerJobs.com, Inc.
(formerly ComputerJobs Store, Inc.) as of December 31, 1997 and 1998, and the
related statements of income, changes in stockholders' equity (deficit), and
cash flows for the period from January 16, 1996 (inception) through December 31,
1996 and for the years ended December 31, 1997 and 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ComputerJobs.com, Inc. at
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from January 16, 1996 (inception) through December 31, 1996 and
for the years ended December 31, 1997 and 1998 in conformity with generally
accepted accounting principles.

                                         ERNST & YOUNG LLP

Atlanta, Georgia
March 11, 1999, except Note 1 as to which the date 
  is April 1, 1999

                                      F-23
COMPUTERJOBS.COM, INC.

                                Balance Sheets
December 31,
                                                            --------------------------------------
                                                                    1997                 1998
                                                            -----------------    -----------------
Assets
Current assets:
 Cash and cash equivalents..................................         $315,213          $ 9,385,180
 Trade accounts receivable, net of allowance for doubtful
  accounts of $4,000 and $20,000 at December 31, 1997 and
  1998, respectively........................................          136,528              315,081
 Unbilled trade accounts receivable.........................           17,000               62,990
 Prepaid expenses...........................................               --                1,197
 Loan receivable from stockholder...........................            1,086                   --
                                                            -----------------    -----------------
Total current assets........................................          469,827            9,764,448
 
Property and equipment:
 Furniture and fixtures.....................................           15,291               35,728
 Computer and office equipment..............................           73,721              189,288
 Accumulated depreciation...................................          (21,159)             (64,249)
                                                            -----------------    -----------------
Net property and equipment..................................           67,853              160,767
 
Other assets................................................            2,000               99,721
                                                            -----------------    -----------------
Total assets................................................         $539,680          $10,024,936
                                                            =================    =================
 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
 Accounts payable and accrued expenses......................         $ 47,323          $   136,209
 Deferred income taxes payable..............................               --               89,261
 Note payable to stockholders...............................               --            1,000,000
 Distribution payable to stockholders.......................               --              346,817
 Current portion of notes payable...........................            6,279                   --
 Deferred revenue...........................................           16,271               27,996
                                                            -----------------    -----------------
Total current liabilities...................................           69,873            1,600,283
 
Notes payable, less current portion.........................            6,354                   --
 
Series A Preferred Stock, no par value -- ($2 per share
 redemption value; minimum liquidation value of $10,000,000
 plus accrued and unpaid dividends plus a portion of
 remaining assets, as defined), convertible to Class 2
 common stock, 5,000,000 shares authorized, issued and
 outstanding................................................               --            9,986,126
Stockholders' equity:
 Class 1 common stock, no par value-- 5,500,000 shares
  authorized, 5,500,000 shares issued and outstanding.......           10,510               10,510
 Class 2 common stock, no par value-- 14,000,000 shares
  authorized, no shares issued or outstanding...............               --                   --
 Retained earnings (deficit)................................          452,943           (1,571,983)
                                                            -----------------    ----------------- 
Total stockholders' equity (deficit)........................          463,453           (1,561,473)
                                                            -----------------    -----------------
Total liabilities and stockholders' equity (deficit)........         $539,680          $10,024,936
                                                            =================    =================
See accompanying notes.

                                      F-24
COMPUTERJOBS.COM, INC.

                             Statements of Income
Period from 
                                                       January 16, 
                                                       1996 through              YEAR ENDED DECEMBER 31,
                                                       December 31,     --------------------------------------
                                                           1996                 1997                 1998
                                                   -----------------    -----------------    -----------------
Revenue............................................       $  377,163           $1,504,742           $4,431,060
 
Expenses:
 Operations........................................           38,477               65,178              469,519
 Sales and marketing...............................           38,509              198,586            1,893,589
 General and administrative........................          189,126              776,572            1,121,918
 Depreciation......................................            3,617               17,542               45,383
                                                   -----------------    -----------------    ----------------- 
                                                             269,729            1,057,878            3,530,409
 
Operating income...................................          107,434              446,864              900,651
 
Other income (deductions):
 Interest expense..................................             (982)              (1,646)             (12,537)
 Interest income...................................              401                8,258               53,610
                                                   -----------------    -----------------    ----------------- 
                                                                (581)               6,612               41,073
                                                   -----------------    -----------------    ----------------- 
Income before income taxes.........................          106,853              453,476              941,724
Income tax expense.................................               --                   --               89,261
                                                   -----------------    -----------------    ----------------- 
Net income.........................................       $  106,853           $  453,476           $  852,463
                                                   =================    =================    =================
 
Supplemental unaudited pro forma information:
 Income before taxes, as above.....................       $  106,853           $  453,476           $  941,724
 Pro forma provision for income taxes..............          (40,604)            (172,320)            (357,853)
                                                   -----------------    -----------------    ----------------- 
 Pro forma net income..............................       $   66,249           $  281,156           $  583,871
                                                   =================    =================    =================
 
 Basic pro forma earnings per common share.........            $0.01                $0.05                $0.09
 
 Average outstanding common shares.................        5,500,000            5,500,000            5,500,000
See accompanying notes.

                                      F-25
COMPUTERJOBS.COM, INC.

            Statements of Changes in Stockholders' Equity (Deficit)
RETAINED              TOTAL
                                          CLASS 1 COMMON      CLASS 2 COMMON          EARNINGS          SHAREHOLDERS'
                                               STOCK               STOCK             (DEFICIT)         EQUITY (DEFICIT)
                                        -----------------   -----------------   -----------------    -----------------
BALANCE AT JANUARY 16, 1996 (INCEPTION).
                                                  $10,510                  --          $  --               $    10,510
  Net income............................               --                  --             106,853              106,853
  Distribution to stockholders..........               --                  --             (33,879)             (33,879)
                                        -----------------   -----------------   -----------------    ----------------- 
BALANCE AT DECEMBER 31, 1996............           10,510                  --              72,974               83,484
 Net income.............................               --                  --             453,476              453,476
 Distribution to stockholders...........               --                  --             (73,507)             (73,507)
                                        -----------------   -----------------   -----------------    ----------------- 
BALANCE AT DECEMBER 31, 1997............           10,510                  --             452,943              463,453
 Net income.............................               --                  --             852,463              852,463
 Distribution to stockholders...........               --                  --          (2,796,817)          (2,796,817)
 Accretion and dividends on Series A
  Preferred Stock.......................               --                  --             (80,572)             (80,572)
                                        -----------------   -----------------   -----------------    ----------------- 
BALANCE AT DECEMBER, 31 1998............          $10,510                  --         $(1,571,983)         $(1,561,473)
                                        =================   =================   =================    =================
See accompanying notes.

                                      F-26
COMPUTERJOBS.COM, INC.

                           Statements of Cash Flows
Period from 
                                                               January 16, 
                                                               1996 through              YEAR ENDED DECEMBER 31,
                                                               December 31,     --------------------------------------
                                                                   1996                 1997                 1998
                                                           -----------------    -----------------    -----------------
Operating activities
Net income.................................................         $106,853            $ 453,476          $   852,463
Adjustments to reconcile net income to net cash provided
 by operating activities:
  Depreciation.............................................            3,617               17,542               45,383
  Provision for deferred taxes.............................               --                   --               89,261
  Changes in operating assets and liabilities:
   Trade accounts receivable...............................          (30,880)            (105,648)            (178,553)
   Unbilled trade accounts receivable......................               --              (17,000)             (45,990)
   Loan receivable from stockholder........................               --               (1,086)               1,086
   Prepaid expenses and other assets.......................               --               (2,000)             (98,918)
   Accounts payable and accrued expenses...................           12,394               34,930               88,886
   Deferred revenue........................................           21,903               (5,632)              11,725
                                                           -----------------    -----------------    -----------------
 
Net cash provided by operating activities..................          113,887              374,582              765,343
 
INVESTING ACTIVITIES
Purchase of property and equipment.........................          (23,980)             (65,033)            (138,297)
                                                           -----------------    -----------------    -----------------
Net cash used in investing activities......................          (23,980)             (65,033)            (138,297)
 
FINANCING ACTIVITIES
Sale of Series A Preferred Stock, less expenses............               --                   --            9,905,554
Distributions to stockholders..............................          (33,879)             (73,507)          (1,450,000)
Proceeds from notes payable................................           21,100                   --                   --
Repayment of notes payable.................................           (2,817)              (5,650)             (12,633)
Sales of common stock......................................           10,510                   --                   --
                                                           -----------------    -----------------    ----------------- 
Net cash provided (used) by financing activities...........           (5,086)             (79,157)           8,442,921
                                                           -----------------    -----------------    -----------------
 
Net increase in cash and cash equivalents..................           84,821              230,392            9,069,967
 
Cash and cash equivalents, beginning of period.............               --               84,821              315,213
                                                           -----------------    -----------------    ----------------- 
Cash and cash equivalents, end of year.....................         $ 84,821            $ 315,213          $ 9,385,180
                                                           =================    =================    =================
See accompanying notes.

                                      F-27
COMPUTERJOBS.COM, INC.

                         Notes to Financial Statements
                               December 31, 1998

1.  DESCRIPTION OF THE BUSINESS

     The Company is an Internet-based interactive technology company that
provides an employment Web site for information technology (IT) professionals.
The Company's web site enables recruiters and employers to post job
opportunities and search for employment opportunities based on an array of
search criteria. The Company also offers banner advertising and job reposting
services for companies wanting access to IT professionals. The Company operates
primarily on a regional basis and at December 31, 1998, served five regions in
the United States: Atlanta, the Carolinas, Chicago, Florida, and Texas.

     On April 1, 1999 the Company changed its name from ComputerJobs Store, Inc.
to ComputerJobs.com, Inc.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     CASH AND CASH EQUIVALENTS

     The Company considers short-term investments with original maturity dates
of 90 days or less at the date of purchase to be cash equivalents.

     CONCENTRATION OF CREDIT RISK

     Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash equivalents and accounts receivable.
Cash equivalents are held primarily with one financial institution. The Company
performs periodic evaluations of the relative credit standing of this financial
institution. Accounts receivable are unsecured and the Company is at risk to the
extent such amounts become uncollectible.

     ACCOUNTS RECEIVABLE

     The Company performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral. Receivables are
generally due within 30 days. Credit losses have been within management's
expectations.

     PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost. The Company provides for
depreciation computed on a straight-line basis over the estimated useful lives
of the related assets which range from 3 to 5 years.

     If facts and circumstances indicate that the property and equipment or
other assets may be impaired, an evaluation of continuing value would be
performed. If an evaluation is required, the estimated future undiscounted cash
flows associated with these assets would be compared to their carrying amount to
determine if a write down to fair market value or discounted cash flow value is
required.

     REVENUE RECOGNITION

     The Company recognizes advertising and service revenue as earned over the
service period. Advance payments received by the Company are deferred and
credited to operations on the straight-line basis over the life of the
agreement.

     ADVERTISING COSTS

     Advertising costs are expensed in the period in which they are incurred.
The Company incurred $11,583, $178,870 and $1,528,590 in advertising costs for
the period from January 16, 1996 (inception) through December 31, 1996 and for
the years ended December 31, 1997 and 1998, respectively.

                                      F-28
COMPUTERJOBS.COM, INC.

                         Notes to Financial Statements
                               December 31, 1998

     INCOME TAXES

     The Company elected to be taxed under the provision of Subchapter S of the
Internal Revenue Code for the period from January 16, 1996 (inception) through
November 25, 1998. Under these provisions, the income of the Company was
reported by the stock or shareholders on their individual income tax returns. As
such, the accompanying financial statements do not include a provision for
income taxes for the period from January 16, 1996 (inception) to November 25,
1998.

     In connection with the Company's amended and restated articles of
incorporation, the Company terminated its tax status as a Subchapter S
corporation. Effective November 25, 1998, the Company is taxed as a subchapter C
corporation. The deferred tax effects of the change in tax status of
approximately $54,000 are included in income at the date the change in tax
status occurred. Supplemental unaudited pro forma information related to net
income and earnings per share is presented as if the Company had been taxed as a
subchapter C corporation for all periods presented.

     Income taxes for the period November 25, 1998 through December 31, 1998
have been provided using the liability method in accordance with FASB Statement
109, Accounting for Income Taxes. Under the liability method, the Company
recognizes deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Using the enacted tax rates in effect for the year in which the
differences are expected to reverse, deferred tax liabilities and assets are
determined based on the differences between the book basis for financial
reporting and the tax basis of an asset or liability.

     USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

     CASH FLOW INFORMATION

     During 1998, the Company recorded a distribution payable to the
stockholders of $346,817, a note payable to stockholders for $1,000,000 and
accrued dividends of $79,000 on the Series A Preferred Stock which are non-cash
financing activities.

     RECLASSIFICATIONS

     Certain prior year balances have been reclassified to conform with the
current presentation.

3.   NOTES PAYABLE

     Notes payable consist of the following:
December 31,
                                                                    --------------------------------------
                                                                           1997                 1998
                                                                    -----------------   ------------------
Note payable; interest at prime rate plus 2.0% (10.5% at
December 31, 1997)..................................................          $ 5,052          $  --
 
Note payable; interest at prime rate plus 2.0% (10.25% at
December 31, 1997)..................................................            7,581                   --
                                                                    -----------------   ------------------
                                                                               12,633                   --
 
Less amounts due within one year....................................            6,279                   --
                                                                    -----------------   ------------------
                                                                              $ 6,354          $  --
                                                                    =================   ==================
F-29
COMPUTERJOBS.COM, INC.

                         Notes to Financial Statements
                               December 31, 1998
                                        
     The notes payables were secured by the property and equipment of the
Company and guaranteed by stockholders of the Company.

     Interest paid for the period from January 16, 1996 (inception) through
December 31, 1996 and during the years ended December 31, 1997 and 1998 totaled
$982, $1,646 and $1,030, respectively.

     At December 31, 1996 and 1997, the Company had an unused line of credit of
$50,000, for general working capital purposes. The line of credit expired on
April 5, 1998 and was not renewed.

4.  INCOME TAXES

     Income tax expense (benefit) consists of the following for the period from
November 25, 1998 through December 31, 1998:
CURRENT             DEFERRED              TOTAL
                                                   -----------------    -----------------   -----------------
Federal............................................          $(7,267)             $86,665             $79,398
State..............................................             (481)              10,344               9,863
                                                   -----------------    -----------------   -----------------
                                                             $(7,748)             $97,009             $89,261
                                                   =================    =================   =================
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company's deferred
tax assets and liabilities as of December 31, 1998 are as follows:
Deferred income tax assets (liabilities):
Property and equipment..............................        $  17,420
 Net operating loss carryforwards....................            7,748
 Accrual to cash adjustment..........................         (114,429)
                                                     -----------------
Net deferred income taxes............................        $ (89,261)
                                                     =================
The Company uses the cash basis for its calculation of income tax expense
in accordance with internal revenue code 448(b)(3). For income tax purposes,
income is generally reported in the period that cash is actually received and
expenses are generally reported in the period the payment is actually made.

     Pro forma income tax expense differed from the amounts computed by applying
the statutory federal rate of 34% as a result of the following:
PERIOD FROM
                                                       JANUARY 16,
                                                      1996 THROUGH             YEAR ENDED DECEMBER 31,
                                                      DECEMBER 31,     -------------------------------------
                                                          1996                1997                1998
                                                   -----------------   -----------------   -----------------
Computed using a 34% tax rate......................          $36,330            $154,182            $320,186
State income taxes, net of federal tax.............            4,274              18,138              37,667
                                                   -----------------   -----------------   ----------------- 
                                                             $40,604            $172,320            $357,853
                                                   =================   =================   =================
5.   STOCKHOLDERS' EQUITY

     On November 25, 1998, the Company amended and restated its articles of
incorporation. Pursuant to this amendment and restatement, the Company converted
its original 1,000 shares of issued common stock into 5,500,000 shares of Class
1 common stock. The common stock authorized, outstanding and issued, as of
December 

                                      F-30
COMPUTERJOBS.COM, INC.

                         Notes to Financial Statements
                               December 31, 1998

31, 1996 and 1997, has been adjusted to reflect this recapitalization. The
Company also authorized 14,000,000 shares of Class 2 common stock and 5,000,000
shares of Series A Preferred Stock. The Company has reserved 2,000,000 shares of
Class 2 common stock for issuance in connection with its stock option plan.

     Each share of Class 1 common stock is convertible to one share of Class 2
common stock at the option of the holder. Class 1 common stock automatically
converts to Class 2 common stock upon a qualifying initial public offering (IPO)
of the Company.

     The rights and privileges of Class 1 and Class 2 stockholders are equal
except that Class 1 stockholders are entitled to receive certain preferences
over Class 2 stockholders in the event of the Company's liquidation, dissolution
or sale or merger.

     PREFERRED STOCK

     In November 1998, the Company sold 5,000,000 shares of Series A Preferred
Stock for an aggregate sales price of $10,000,000. The Series A Preferred Stock
is cumulative and accrues dividends at 8%. Each share of preferred stock is
currently convertible into one share of Class 2 common stock at the option of
the holder. Each holder of Series A Preferred Stock is entitled to certain
protections against sales of common stock at less than the original Series A
purchase price, which may result in the right of such holder to convert each
share of Series A into more than one share of Class 2 common stock. The Series A
preferred stock automatically converts into Class 2 common stock upon a
qualifying IPO of the Company. The Company has reserved 5,000,000 shares of
Class 2 common stock for the conversion of Series A Preferred Stock.

     The voting rights of the Series A Preferred Stock are equal to the voting
rights of the Class 2 common stock. Dividends are payable in cash or stock on
the sale, liquidation, or merger of the Company or redemption of such preferred
stock. To the extent the holders have not converted the Series A Preferred Stock
into Class 2 common stock, the holders of least 75% of the preferred stock may
cause the Company to redeem all such preferred stock at any time after November
25, 2003 at the greater of the purchase price plus accrued dividends or the
appraised value, as defined.

     In the event of the Company's liquidation, dissolution or sale or merger,
the holders of Series A Preferred Stock are entitled to $10,000,000 plus all
accrued dividends on the Series A Preferred Stock before any amounts may be
distributed to the holders of Class 1 or Class 2 common stock.

     No dividends may be paid to the holders of Class 1 and Class 2 common stock
until all outstanding dividends are paid on the Series A Preferred Stock. In the
event that the holders of the Series A Preferred Stock elect to convert their
shares into Class 2 common stock, the Company is not required to distribute the
accrued dividends on the Series A Preferred Stock.

     At December 31, 1998, the Series A Preferred Stock was increased by $79,000
representing dividends not currently declared or paid. The cost of issuance of
the Series A Preferred Stock of $94,446 is being accreted over a five year
period. Such accretion amounted to $1,572 in the year ended December 31, 1998.

     WARRANTS

     In connection with the sale of Series A Preferred Stock, the Company issued
warrants for the purchase of 1,250,000 shares of Class 2 common stock at $5.00
per share. The Company has reserved 1,250,000 shares of Class 2 common stock for
the exercise of these warrants. The warrants expire on the earlier of 1) three
years after an IPO by the Company, 2) the closing date of the sale or merger of
the Company, or 3) December 31, 2003.

                                      F-31
COMPUTERJOBS.COM, INC.

                         Notes to Financial Statements
                               December 31, 1998

6.  EARNINGS PER SHARE

     The following table sets forth the computation of the unaudited pro forma
earnings per common share:
1996                 1997                 1998
                                                   ------------------   ------------------   ------------------
NUMERATOR:
Pro forma net income..............................        $   66,249           $  281,156           $  583,871
 Accretion and dividends on Series A Preferred
  Stock............................................                --                   --              (80,572)
                                                   ------------------   ------------------   ------------------ 
 Numerator for basic pro forma earnings per common
  share - income available to common stockholders..
                                                           $   66,249           $  281,156           $  503,299
                                                   ==================   ==================   ==================
 
DENOMINATOR:
 Denominator for basic pro forma earning per
  common share - weighted average shares...........         5,500,000            5,500,000            5,500,000
                                                   ==================   ==================   ==================
 
Basic pro forma earnings per common share..........        $     0.01           $     0.05           $     0.09
                                                   ==================   ==================   ==================
Series A Preferred Stock, which is convertible into Class 2 common stock
and was outstanding during 1998 (issued on November 25, 1998), and common shares
issuable upon the exercise of warrants were not included in the computation of
pro forma earnings per share because their effect would be anti-dilutive.

7.  EMPLOYEE BENEFITS

     On January 1, 1998, the Company established a 401(k) plan that covers
substantially all employees. The Company contributed $26,965 to the 401(k) plan
in 1998.

     In 1997, the Company sponsored a simplified employee pension plan under
section 408(k) of the Internal Revenue Code. The plan provides discretionary
contributions in each calendar year to the individual retirement accounts of all
eligible employees. Full time employees with more than a year of service are
eligible to participate. Total contributions by the Company totaled $42,119 for
the year ended December 31, 1997. The 408(k) Plan was terminated upon the
establishment of the 401(k) Plan.

8.  LEASE COMMITMENTS 

     During December 1998, the Company entered into a five year operating lease
for office space. This lease agreement provides for rent escalation clauses to
cover increases in certain of the lessors' operating costs. Rental expense
totaled $11,630, $30,646 and $92,217 for the period from January 16, 1996
through December 31, 1996 and for the years ended December 31, 1997 and 1998,
respectively. Future minimum rental payments (excluding any estimate of
operating costs) under noncancelable operating leases with terms of one year or
more at December 31, 1998 are $360,679 in 1999, $327,043 in 2000, $320,254 in
2001, $320,254 in 2002 and $320,254 in 2003.

9.  RELATED PARTY TRANSACTIONS

     On November 2, 1998, the Company declared a $2,000,000 dividend payable to
the stockholders. During 1998, $1,000,000 of the dividends were paid. The
Company issued notes to the stockholders for the remaining $1,000,000. These
notes accrue interest at the federal funds interest rate and are payable in
February 1999.

                                      F-32
COMPUTERJOBS.COM, INC.

                         Notes to Financial Statements
                               December 31, 1998

10.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts reported in the accompanying balance sheets for cash
and cash equivalents, accounts receivable, accounts payable and notes payable
approximates their fair value.

11.  YEAR 2000 ISSUE (UNAUDITED)

     Year 2000 issues may arise if computer programs have been written using two
digits rather than four digits to define the applicable year. In such cases,
programs that have time sensitive logic may recognize a date using "00" as the
year 1900 rather than the year 2000, which could result in miscalculations or
system failures.

     The Company has determined that it will not need to modify or replace
significant portions of its software so that its computer systems will function
properly with respect to dates in the year 2000 and beyond. The Company
anticipates that any remaining costs to ensure year 2000 compliance will not be
significant.

     Although no formal assessment of the information and operational systems of
its major clients and vendors has been made, the Company is not aware of any
significant problems as a result of the year 2000. However, if the customers and
clients encounter operational problems related to year 2000 and are unable to
resolve such problems in a timely manner, it could result in a material
financial risk to the Company.

                                      F-33
REPORT OF INDEPENDENT ACCOUNTANTS
                                        

To the Board of Directors and Stockholders of
Syncra Software, Inc.

     In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in redeemable preferred stock and stockholders'
deficit and of cash flows present fairly, in all material respects, the
financial position of Syncra Software, Inc. (a development stage enterprise) at
December 31, 1998 and the results of its operations and its cash flows for the
period from inception (February 11, 1998) through December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 29, 1999

                                      F-34
SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                                 Balance Sheet
PRO FORMA
                                                                                             DECEMBER 31,
                                                                        DECEMBER 31,             1998
Assets                                                                      1998           (NOTES 2 AND 16)
------                                                                ----------------    -----------------
CURRENT ASSETS:
Cash and cash equivalents..........................................      $ 1,700,370         $ 11,700,370
 Prepaid expenses...................................................          185,506              185,506
 Other current assets...............................................           22,704               22,704
                                                                    -----------------    -----------------
 
 Total current assets...............................................        1,908,580           11,908,580
 
Fixed assets, net...................................................          351,752              351,752
Deposits............................................................          136,998              136,998
                                                                    -----------------    -----------------
 
                                                                          $ 2,397,330         $ 12,397,330
                                                                    =================    =================
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
-----------------------------------------------------------------
CURRENT LIABILITIES:
 Accounts payable...................................................      $   233,281         $    233,281
 Accrued expenses...................................................          316,918              300,271
 Notes payable to stockholders......................................        3,926,370                   --
                                                                    -----------------    -----------------
 
 Total current liabilities..........................................        4,476,569              533,552
                                                                    -----------------    -----------------
 
REDEEMABLE PREFERRED STOCK:
 Series A redeemable convertible preferred stock, $0.001 par value;
  authorized: 2,941,031 shares; issued and outstanding: 2,586,207
  shares plus accrued dividends of $334,652 (liquidation value of
  $6,334,651).......................................................        6,334,651            6,334,651
 Series B redeemable convertible preferred stock, $0.001 par value;
  authorized: 3,737,602 shares; issued and outstanding: 3,537,602
  shares (liquidation value of $14,150,408).........................               --           14,150,408
 Preferred stock warrants...........................................          120,000              120,000
 Redeemable non-voting, non-convertible preferred stock, $0.001 par
  value; authorized: 150,000 shares; issued and outstanding 130,000
  shares plus accrued dividends of $94,135 (liquidation value of
  $1,389,468).......................................................        1,389,468            1,389,468
                                                                    -----------------    -----------------
 Total redeemable preferred stock...................................        7,844,119           21,994,527
                                                                    -----------------    -----------------
 
STOCKHOLDERS' DEFICIT:
 Common stock, $0.001 par value; 10,000,000 shares authorized;
  396,000 shares issued and outstanding at December 31, 1998........              396                  396
 Deficit accumulated during the development stage...................       (9,923,754)         (10,131,145)
                                                                    -----------------    -----------------
 Total stockholders' deficit........................................       (9,923,358)         (10,130,749)
                                                                    -----------------    -----------------
Commitments and contingencies (Note 14).............................
                                                                    -----------------    -----------------
                                                                          $ 2,397,330         $ 12,397,330
                                                                    =================    =================
The accompanying notes are an integral part of these financial statements

                                      F-35
SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                            Statement of Operations
FOR THE PERIOD
                                                                 FROM INCEPTION
                                                                 (FEBRUARY 11,
                                                                 1998) THROUGH
                                                               DECEMBER 31, 1998
                                                             -------------------
COSTS AND EXPENSES:
Research and development....................................        $ 1,670,803
 Selling and marketing.......................................          2,617,460
 General and administrative..................................          1,588,689
 Impairment charge for intangible goods......................          1,312,500
 Settlement charge...........................................          1,795,333
                                                             ------------------- 
 
Loss from operations.........................................         (8,984,785)
 
Interest expense, net........................................             90,430
                                                             -------------------
 
Net loss.....................................................        $(9,075,215)
                                                             ===================
The accompanying notes are an integral part of these financial statements

                                      F-36
SYNCRA SOFTWARE, INC.
                       (a development stage enterprise)

Statement of Changes in Redeemable Preferred Stock and Stockholders' Deficit
  For the period from inception (February 11, 1998) through December 31, 1998
SERIES A
                                                         REDEEMABLE        REDEEMABLE NON-VOTING                       
                             SERIES A REDEEMABLE          PREFERRED           NON-CONVERTIBLE                          
                               PREFERRED STOCK         STOCK WARRANTS         PREFERRED STOCK                          
                         ---------------------------------------------------------------------------                   
                                         CARRYING         CARRYING                      CARRYING                       
                            SHARES         VALUE            VALUE          SHARES        VALUE                         
                         ---------------------------------------------------------------------------
Issuance of common stock                                                                                               
 to founders.............                                                                                              
                                                                                                                       
Issuance of Series A                                                                                                   
 redeemable convertible                                                                                                
 preferred stock,                                                                                                      
 issuance costs of                                                                                                     
 $170,752................  2,586,207     $5,999,999                                                                    
                                                                                                                       
Issuance of redeemable                                                                                                 
 non-voting,                                                                                                           
 non-convertible                                                                                                       
 preferred stock.........                                                 150,000      $1,500,000                      
                                                                                                                       
Repurchase and                                                                                                         
 retirement of common                                                                                                  
 stock...................                                                                                              
                                                                                                                       
Redemption of redeemable                                                                                               
 non-voting,                                                                                                           
 non-convertible                                                                                                       
 preferred stock.........                                                 (20,000)       (204,667)                     
                                                                                                                       
Series A redeemable                                                                                                    
 convertible preferred                                                                                                 
 stock warrants..........                                     $120,000                                                 
                                                                                                                       
Accrual of cumulative                                                                                                  
 dividends on redeemable                                                                                               
 preferred stock.........                   334,652                                        94,135                      
                                                                                                                       
Net loss.................                                                                                              
                         ---------------------------------------------------------------------------                   
                                                                                                                       
Balance at December 31,                                                                                                
 1998....................  2,586,207     $6,334,651           $120,000    130,000      $1,389,468                      
                         ===========================================================================                   

                                                                                        
                                                                                        
                                                              DEFICIT                   
                                    COMMON STOCK              DURING                    
                            --------------------------      DEVELOPMENT                 
                                SHARES       PAR VALUE         STAGE            TOTAL   
                            ------------------------------------------------------------
Issuance of common stock                                                                
 to founders.............      1,396,000       $ 1,396                       $     1,396
                                                                                        
Issuance of Series A                                                                    
 redeemable convertible                                                                 
 preferred stock,                                                                       
 issuance costs of                                                                      
 $170,752................                                   $  (170,752)        (170,752)
                                                                                        
Issuance of redeemable                                                                  
 non-voting,                                                                            
 non-convertible                                                                        
 preferred stock.........                                                               
                                                                                        
Repurchase and                                                                          
 retirement of common         (1,000,000)       (1,000)        (249,000)        (250,000)
 stock...................                                                               
                                                                                        
Redemption of redeemable                                                                
 non-voting,                                                                            
 non-convertible                                                                        
 preferred stock.........                                                               
                                                                                        
Series A redeemable                                                                     
 convertible preferred                                                                  
 stock warrants..........                                                               
                                                                                        
Accrual of cumulative                                                                   
 dividends on redeemable                                                                
 preferred stock.........                                      (428,787)        (428,787)
                                                                                        
Net loss.................                                    (9,075,215)      (9,075,215)
                            ------------------------------------------------------------
                                                                                        
Balance at December 31,                                                                 
 1998....................        396,000       $   396      $(9,923,754)     $(9,923,358)
                            ============================================================
The accompanying notes are an integral part of these financial statements

                                      F-37
SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                            Statement of Cash Flows
FOR THE PERIOD
                                                                 FROM INCEPTION
                                                                 (FEBRUARY 11,
                                                                 1998) THROUGH
                                                               DECEMBER 31, 1998
                                                             -------------------
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.....................................................        $(9,075,215)
Adjustments to reconcile net loss to net cash used for
 operating activities:.......................................
 Depreciation................................................             58,537
 Amortization and impairment of intangible assets............          1,500,000
 Amortization of discounts on notes payable..................             46,370
 Changes in assets and liabilities:
   Prepaid expenses..........................................           (185,506)
   Other current assets......................................            (22,704)
   Accounts payable..........................................            233,281
   Accrued expenses..........................................            316,918
                                                             -------------------
 
   Net cash used for operating activities....................         (7,128,319)
                                                             -------------------
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets....................................           (410,289)
Increase in deposits.........................................           (136,998)
                                                             ------------------- 
 
   Net cash used for investing activities....................           (547,287)
                                                             ------------------- 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable to stockholders......          4,000,000
Proceeds from Series A redeemable convertible preferred
 stock, net of issuance costs................................          5,829,247
 
Proceeds from issuance of common stock.......................              1,396
Redemption of non-voting, non convertible redeemable
 preferred stock and related dividends.......................           (204,667)
 
Repurchase of common stock...................................           (250,000)
                                                             -------------------
 
 Net cash provided by financing activities...................          9,375,976
                                                             -------------------
 
Net increase in cash and cash equivalents....................          1,700,370
 
Cash and cash equivalents, beginning of period...............                 --
                                                             -------------------
 
Cash and cash equivalents, end of period.....................        $ 1,700,370
                                                             ===================
 
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Software acquired in exchange for 150,000 shares of
 non-voting, non-convertible redeemable preferred............        $ 1,500,000
                                                             ===================
The accompanying notes are an integral part of these financial statements

                                      F-38
SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements

1. NATURE OF THE BUSINESS

     Syncra Software, Inc. ("Syncra" or "the Company") was incorporated in
Delaware on February 11, 1998. Syncra was formed to design, develop, produce and
market supply chain collaboration software and solutions. Since its inception,
Syncra has devoted substantially all of its efforts to business planning,
research and development, recruiting management and technical staff, acquiring
operating assets, raising capital, marketing and business development.
Accordingly, Syncra is considered to be in the development stage as defined in
Statement of Financial Accounting Standards ("SFAS") No. 7 "Accounting and
Reporting by Development Stage Enterprise".

     Syncra is subject to risks and uncertainties common to growing technology-
based companies, including rapid technological changes, growth and commercial
acceptances of the Internet, dependence on principal products and third party
technology, new product development and performance, new product introductions
and other activities of competitors, dependence on key personnel, development of
a distribution channel, international expansion, lengthy sales cycles and
limited operating history.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     CASH AND CASH EQUIVALENTS

     Syncra considers all highly liquid instruments with an original maturity of
three months or less at the time of purchase to be cash equivalents. Included in
cash and cash equivalents at December 31, 1998 is approximately $1.6 million in
money market accounts.

     FINANCIAL INSTRUMENTS

     The carrying amount of Syncra's financial instruments, principally cash,
notes payable, and redeemable preferred stock, approximates their fair values at
December 31, 1998.

     FIXED ASSETS

     Fixed assets are recorded at cost and depreciated using the straight-line
method over their estimated useful lives. Repairs and maintenance costs are
expensed as incurred.

     RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS

     Costs incurred in the research and development of Syncra's products are
expensed as incurred, except for certain research and development costs. Costs
associated with the development of computer software are expensed prior to the
establishment of technological feasibility, as defined by SFAS No. 86,
"Accounting for the Cost of Computer Software to be Sold, Leased or Otherwise
Marketed." Costs incurred subsequent to the establishment of technological
feasibility and prior to the general release of the products are capitalized.
During the period ended December 31, 1998, costs eligible for capitalization
were immaterial.

     ACCOUNTING FOR IMPAIRMENT OF LONG LIVED ASSETS

     In accordance with SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"), the
Company records impairment of losses on long lived assets used in operations
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
amount.

     STOCK-BASED COMPENSATION

     Syncra accounts for stock-based awards to employees using the intrinsic
value method as prescribed by Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations.
Accordingly, no compensation expense is recorded for options issued to employees
in fixed amounts and with fixed exercise prices at least equal to the fair
market value of Syncra's Common Stock at the date of grant. Syncra has adopted
the provisions of SFAS No. 123, " Accounting for Stock-Based Compensation",

                                      F-39
SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements

through disclosure only (Note 11). All stock-based awards to non-employees are
accounted for at their fair value in accordance with SFAS No. 123.

     PRO FORMA BALANCE SHEET

     The pro forma balance sheet as of December 31, 1998, reflects the issuance
of 3,537,602 shares of convertible Series B Preferred Stock (the "Series B
Preferred Stock") (Note 16) in 1999. Upon issuance of the convertible Series B
Preferred Stock, the Company effected the conversion of the notes payable to
stockholders plus accrued interest of $4,150,408 and received cash proceeds of
$10.0 million from existing and new investors.

     USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

3.  PREPAID EXPENSES

     Prepaid expenses consist of the following at December 31, 1998:
Trade shows and other marketing prepayments.............           $135,774
Others.......................................................             49,732
                                                             -------------------
 
                                                                        $185,506
                                                             ===================
4.  FIXED ASSETS

     Fixed assets consist of the following:
ESTIMATED         DECEMBER 31,
                                                                        USEFUL LIFE            1998
                                                                          (YEARS)
                                                                    -----------------   -----------------
Computer equipment...............................................            3                $246,631
Office equipment.................................................            5                  71,783
Furniture and fixtures...........................................            7                  91,875
                                                                                        -----------------
                                                                                               410,289
                                                                                         
Less: accumulated depreciation......................................                            58,537
                                                                                        -----------------
 
                                                                                              $351,752
                                                                                        =================
5.  IMPAIRMENT OF INTANGIBLE ASSETS

     In accordance with SFAS No. 121, Syncra reviews for impairment of long-
lived assets when events or changes in circumstances indicate that an asset's
carrying value may not be recoverable. In connection with the organization of
Syncra in February 1998, Syncra purchased the rights to certain software from
Benchmarking Partners, Inc. ("Benchmarking") in exchange for the issuance of
150,000 shares of Syncra's non-voting, non-convertible Redeemable Preferred
Stock (Note 8) with an aggregate value of $1.5 million. Syncra expected to use
the acquired software as a core technology in its product development. In May
1998, management reassessed the status of Syncra's product development and the
additional features and functionality planned to be included in  Syncra's
products. As a result of this re-evaluation, management concluded that the core
technology acquired from Benchmarking would not be able to support Syncra's
planned products. Accordingly, management decided to 

                                      F-40
SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements

restart Syncra's product development activities without the use of the acquired
software. An impairment charge of $1,312,500 was recognized in the 1998
statement of operations.

6.  NOTES PAYABLE TO STOCKHOLDERS

     During 1998, the Company received aggregate cash proceeds totaling
$4,000,000 pursuant to the issuance of convertible promissory notes (the
"Notes") payable to certain of its stockholders. No repayments of principal or
interest (which accrues at a rate of 9% per annum) were made during the year.
The Note holders were also issued warrants to purchase preferred stock (`the
Preferred Stock Warrants"). The aggregate value of the warrants issued to all
Note holders was estimated to be $120,000, which was accounted for as discount
on the Notes and Preferred Stock Warrants. The discount is being amortized over
the term of the Notes. The Preferred Stock Warrants have a term of ten years.
Each Note holder is entitled to a number of the securities to be issued in the
Company's next financing equal to 20% of the face value of the Note held by such
holder divided by the price per share of such securities. As a result of the
Series B financing in 1999 (Note 16), the warrant holders are now entitled to
purchase 200,000 shares of Series B Preferred Stock at $4.00 per share.

7.  REDEEMABLE CONVERTIBLE SERIES A PREFERRED STOCK

     At December 31, 1998, the Company has authorized preferred stock of
5,000,000 shares, $.001 par value per share, of which 2,941,031 shares were
designated as redeemable convertible Series A Preferred Stock  ("Series A
Preferred Stock") and 150,000 shares of which were designated as Redeemable
Preferred Stock (the "Redeemable Preferred Stock").

     The Series A Preferred Stock has the following characteristics:

     VOTING

     Holders of Series A Preferred Stock are entitled to that number of votes
equal to the number of shares of common stock into which the shares of Series A
Preferred Stock are then convertible.

     DIVIDENDS

     Holders of Series A Preferred Stock are entitled to receive out of funds
legally available, cumulative dividends at the rate of 8% per share per annum on
the Base Amount of each share when, as, and if declared by the Board of
Directors. The Base Amount of each share is equal to the price paid for each
share of Series A Preferred Stock ($2.32) plus unpaid dividends which accrue
commencing on the date of original issuance of the Series A Preferred Stock. In
the event that the full amount of dividends is not paid in any twelve-month
period, the Base Amount will be increased by the amount of the unpaid dividend.

     LIQUIDATION

     In the event of any liquidation, dissolution or winding-up of the affairs
of the Company, the holders of Series A Preferred Stock are entitled to receive,
prior to and in preference to holders of both Redeemable Preferred Stock and
common stock, an amount equal to $2.32 per share plus all unpaid cumulative
dividends. After full payment of (i) the foregoing amounts and (ii) amounts to
be paid to the holders of Redeemable Preferred Stock pursuant to the terms
thereof (see Note 8), holders of Series A Preferred Stock were, as of December
31, 1998, entitled to share ratably in the remaining proceeds of the Company, if
any, on an as-converted basis.

     CONVERSION

     Each share of Series A Preferred Stock may be converted at any time, at the
option of the stockholder, into one share of common stock, subject to certain
anti-dilution adjustments, as defined in the terms of the Series A Preferred
Stock.

                                      F-41
SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements

     The Series A Preferred Stock will automatically convert into shares of
common stock upon (i) a public offering which results in net proceeds to Syncra
of at least $10,000,000, at a price per share of the Common Stock of at least
$9.28 or  (ii) upon approval of the two-thirds of the outstanding Series A
preferred stockholders to convert all outstanding shares of Series A Preferred
Stock to Common Stock.

     REDEMPTION

     Any time after the fifth anniversary of the original issuance of the Series
A Preferred Stock, at the option of the holder thereof, Syncra shall redeem all,
but not less than all of such holder's shares of Series A Preferred Stock, at a
redemption price equal to the original purchase price of $2.32 per share plus 
all unpaid dividends thereon which have accrued through and including the
redemption date.

     ACCRETION

     The issuance cost incurred by the Company was accreted in full in 1998 as
an adjustment to the carrying value of redeemable convertible Series A Preferred
Stock.

8.  NON-VOTING, NON-CONVERTIBLE REDEEMABLE PREFERRED STOCK

     As described in Note 5, Syncra's Redeemable Preferred Stock was issued in a
non-cash exchange with Benchmarking for certain software. Subsequent to the
issuance of the Redeemable Preferred Stock to Benchmarking, Syncra repurchased
20,000 shares of its Redeemable Preferred Stock from Benchmarking at a price per
share of $10.00 plus accrued dividends of $4,667. In a separate transaction,
Benchmarking transferred the remaining 130,000 shares of the Redeemable
Preferred Stock to Internet Capital Group, Inc. ("ICG"), an existing stockholder
of Syncra in exchange for a $1.3 million note, bearing interest at 8% per annum.
At December 31, 1998, ICG continued to hold the 130,000 shares of Redeemable
Preferred Stock. ICG is also a stockholder of Benchmarking.

     The Redeemable Preferred Stock has the following characteristics:

     VOTING

     Except as required by law, holders of Redeemable Preferred Stock are not
entitled to vote on any matters submitted to a vote of the stockholders of
Syncra, including the election of directors.

     DIVIDENDS

     Holders of Redeemable Preferred Stock are entitled to receive out of funds
legally available, cumulative dividends at the rate of 8% per share per annum on
the Base Amount of each share when, as and if declared by the Board of
Directors. The Base Amount of each share is equal to purchase price paid for
such share of Redeemable Preferred Stock ($10.00) plus unpaid dividends which
accrue commencing on the date of original issuance of the Redeemable Preferred
Stock. In the event that the full amount of dividends is not paid in any twelve-
month period, the Base Amount will be increased by the amount of the unpaid
dividend.

     LIQUIDATION

     In the event of any liquidation, dissolution or winding-up of the affairs
of Syncra, the holders of Redeemable Preferred Stock are entitled to receive,
prior to and in preference to any holders of Common Stock, but after all
distribution or payments required to be made to the holders of Series A
Preferred Stock, an amount equal to $10.00 per share plus accrued but unpaid
dividends. After payment in full of the amounts owed to holders of the
Redeemable Preferred Stock, such holders are not entitled to share in the
distribution of the remaining assets of Syncra.

                                      F-42
SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements

     REDEMPTION

     At any time after the fifth anniversary of the original issuance of the
Redeemable Preferred Stock, each holder may require Syncra to redeem all or any
portion of such holder's shares at a redemption price equal to the original
issuance price per share ($10.00) plus all unpaid dividends thereon which have
accrued through and including the redemption date.

     At any time, and from time to time, Syncra may elect to redeem all, or any
portion of the outstanding shares of its Redeemable Preferred Stock, at a
redemption price equal to the original issuance price per share ($10.00) plus
all unpaid dividends thereon which have accrued through and including the
redemption date.

     Redeemable Preferred Stock is also redeemable by Syncra upon the earlier of
(i) a public offering of Syncra's common stock with a per share price of at
least $7.86; or (ii) the consummation of a sale of all or substantially all of
Syncra's assets or capital stock, either through a direct sale, merger,
reorganization or other form of business combination in which control of Syncra
is transferred and as a result holders of Series A Preferred Stock receive at
least $7.86 per share.

9.  COMMON STOCK

     Each share of Common Stock entitles the holder to one vote on all matters
submitted to a vote of Syncra's stockholders. Common stockholders are entitled
to receive dividends, if any, as may be declared by the Board of Directors,
subject to the preferential dividend rights of the holders of the Series A
Preferred Stock and the Redeemable Preferred Stock.

     RESTRICTED STOCK AGREEMENTS

     Syncra has entered into agreements with certain of its stockholders
providing for restrictions on transfers of the shares subject to such agreement.
Each agreement provides Syncra with a right to repurchase the shares held by
such individual, in the event that the Company terminates the employment of the
individual. The number of shares which may be repurchased by the Company and the
price at which such shares may be repurchased differs per individual and is
contingent on whether such individual's termination is for `cause' (as defined
in the agreement) or other than for `cause'. At December 31, 1998, none of the
restricted shares were subject to repurchase due to the restrictions contained
in these agreements.

     At December 31, 1998, all of the outstanding capital stock (including the
Common Stock, Series A Preferred Stock and Redeemable Preferred Stock) of the
Company is subject to certain restrictions as to sale or transfer of such
shares. The Company and its non-founder stockholders also maintain a right of
first refusal, under certain circumstances, on shares offered by a stockholder
for sale to third parties, at the price per share to be paid by such third
party.

     RESERVED SHARES

     At December 31, 1998, 2,833,857 shares were reserved for issuance upon
conversion of the Series A Preferred Stock and exercise of outstanding options.

10.  REPURCHASE OF COMMON STOCK AND REDEMPTION OF PREFERRED STOCK

     On June 5, 1998, the Company repurchased 1,000,000 shares of Common Stock
and redeemed 20,000 shares of its Redeemable Preferred Stock from Benchmarking,
one of the original founders in exchange for $2,250,000. The transaction was
financed through the sale of additional Series A Preferred Stock to certain of
the existing holders of Series A Preferred Stock. Of the 150,000 shares of
Redeemable Preferred Stock originally issued to Benchmarking, the remaining
130,000 shares were transferred by Benchmarking to ICG (see Note 8).

     In addition to the shares acquired, the withdrawal of Benchmarking as a
stockholder eliminated a potential conflict of interest for Syncra and its other
stockholders with Benchmarking and its customers. The 

                                      F-43
SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements

transaction also settled potential claims by Benchmarking against Syncra with
respect to the transfer of technical talent from Benchmarking to Syncra and
other potential claims by Benchmarking against the potential future value of
Syncra.

     The difference between the total amount paid to Benchmarking and the
aggregate of the redemption value of the Redeemable Preferred Stock plus accrued
dividends of $204,667 and the fair value of the Common Stock of $250,000 was
treated as settlement charge in the statement of operations.

11.  STOCK OPTION PLAN

     In 1998, the Company adopted the 1998 Stock Option Plan (the "1998 Plan")
which provides for the grant of incentive stock options and non-qualified stock
options, stock awards and stock purchase rights for the purchase of up to
1,000,000 shares of the Company's Common Stock by officers, employees,
consultants, and directors of the Company. The Board of Directors is responsible
for administration of the 1998 Plan. The Board determines the term of each
option, the option exercise price, the number of shares for which each option is
granted, the rate at which each option is exercisable and the vesting period
(generally ratably over four to five years). Incentive stock options may be
granted to any officer or employee at an exercise price of not less than the
fair value per common share on the date of the grant (not less than 110% of the
fair value in the case of holders of more than 10% of the Company's voting
stock) and with a term not to exceed ten years from the date of the grant (five
years for incentive stock options granted to holders of more than 10% of the
Company's voting stock). Non-qualified stock options may be granted to any
officer, employee, consultant, or director at an exercise price per share of not
less than the book value per share.

     No compensation expense has been recognized for employee stock-based
compensation in 1998 because the fair value of the options did not exceed the
exercise price. Further, options vest over several years and additional option
grants are expected to be made in future years. Had compensation expense been
determined based on the fair value of the of the options granted to employees at
the grant date consistent with the provision of SFAS 123, the Company's net loss
would have been the same.

     For purposes of pro forma disclosure of net loss, the fair value of each
option grant was estimated on the date of grant using the Black-Scholes option-
pricing model with the following assumptions for grants in 1998; zero dividend
yield; zero volatility; risk-free interest rate of 4.55%, and expected life of
five years.

     During the period, Syncra granted options aggregating 803,300 shares with a
weighted average exercise price of $0.87 per share. Of the total options
granted, 99,374 shares were exercisable at December 31, 1998 but none of these
vested options were exercised during the period. Options totaling 196,700 were
available for future grant at December 31, 1998. The weighted-average remaining
contractual life of the options is 9.5 years. Further, since the exercise price
of the options is more than the fair market value of the common stock, the
weighted average fair value per share of the options granted during the year
using the Black-Scholes option-pricing model is zero at December 31, 1998.

                                      F-44
SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements

12.  INCOME TAXES

     Deferred tax assets consist of the following at December 31, 1998:
Net operating loss carryforward.....................         $2,386,619
         Fixed and intangible assets.........................            482,690
         Research and development credit carryforwards.......             90,891
         Accrued vacation....................................             35,687
                                                             -------------------
 
Net deferred tax assets......................................          2,995,887
 
Deferred tax asset valuation allowance.......................          2,995,887
                                                             -------------------
 
                                                                     $        --
                                                             ===================
The Company has provided a valuation allowance for the full amount of its
net deferred tax assets since realization of any future benefit from deductible
temporary differences and net operating loss and tax credit carryforwards cannot
be sufficiently assured at December 31, 1998.

     At December 31, 1998, the Company has federal and state net operating loss
carryforwards of approximately $5.9 million available to reduce future taxable
income, which will expire in 2019. The Company also has federal and state
research and development tax credit carryforwards of approximately $72,490 and
$27,881, respectively, available to reduce future tax liabilities.

     Under the provisions of the Internal Revenue Code, certain substantial
changes in the Company's ownership may limit the amount of net operating loss
carryforwards and research and development credit carryforwards which could be
utilized annually to offset future taxable income and taxes payable.

13.  401(K) SAVINGS PLAN

     The Company has established a retirement savings plan under Section 401(k)
of the Internal Revenue Code (the "401(k) Plan"). The 401(k) Plan covers
substantially all employees of the Company who meet minimum age and service
requirements, and allows participants to defer a portion of their annual
compensation on a pre-tax basis. Company contributions to the 401(k) Plan may be
made at the discretion of the Board of Directors. The Company has not made any
contributions to the 401(k) Plan through December 31, 1998.

14.  COMMITMENTS AND CONTINGENCIES

     The Company leases its office space and certain office equipment under
noncancelable operating leases. Total rent expense under these operating leases
was approximately $134,000 for the period ended December 31, 1998.

     Future minimum lease commitments at December 31, 1998 are as follows:

YEAR ENDING DECEMBER 31,                                       Operating leases
                                                             -------------------

 1999........................................................         $  272,328
 2000........................................................            254,728
 2001........................................................            254,728
 2002........................................................            254,728
 Thereafter..................................................            127,364
                                                             -------------------
 
                                                                      $1,163,876
                                                             ===================

                                      F-45
SYNCRA SOFTWARE, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         Notes to Financial Statements

15.  RELATED PARTY TRANSACTIONS

     In the normal course of business, Syncra had transactions with Benchmarking
during the period from inception until May 1998 for certain operating expenses
such as organizational costs, payroll, marketing, legal and other expenses. The
total expenses reimbursed by Syncra to Benchmarking amounted to $496,344.
Furthermore, Syncra also paid Benchmarking a management fee totaling $80,000
during the same period.

     In addition to the above transactions, Syncra also reimbursed ICG $500,000
related to professional services provided by Benchmarking to Syncra that
originally were funded by ICG.

16.  SUBSEQUENT EVENTS

     In March and April 1999, 3,737,602 shares of convertible Series B Preferred
Stock were authorized. Syncra issued 3,537,602 shares of Series B Preferred
Stock in exchange for net cash proceeds of $10.0 million plus the conversion of
all principal and accrued interest due on the Notes (Note 6) ("the Series B
Financing"). The terms of the Series B Preferred Stock are substantially similar
to Series A Preferred Stock, except that the Base Amount of the Series B
Preferred Stock and its purchase price are $4.00 per share.

     Further, certain terms of both the Series A Preferred Stock (including
conversion rights associated therewith and participating rights upon
liquidation) and the Redeemable Preferred Stock (including redemption rights
associated therewith) were amended in connection with the Series B Financing.

                                      F-46
================================================================================

     Through and including                 , 1999 (the 25th day after the date
of this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to the unsold allotments
or subscriptions.

                                                     Shares

                  [Internet Capital Group logo appears here]

                                 Common Stock

                                 ------------

                              P R O S P E C T U S
                                        
                                 ------------

                              Merrill Lynch & Co.

                         BancBoston Robertson Stephens

                                BT Alex. Brown

                     NationsBanc Montgomery Securities LLC

                            Wit Capital Corporation

                                             , 1999
                                        
================================================================================
PART II

                    INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

     The expenses to be paid by Internet Capital Group in connection with the
distribution of the securities being registered, other than underwriting
discounts and commissions, are as follows:
Amount (1)
                                                                             --------------------
Securities and Exchange Commission Registration Fee.....................          $   73,531
     NASD Filing Fee.........................................................              26,950
     Nasdaq National Market Listing Fee......................................              95,000
     Accounting Fees and Expenses............................................             250,000
     Blue Sky Fees and Expenses..............................................               1,000
     Legal Fees and Expenses.................................................             450,000
     Transfer Agent and Registrar Fees and Expenses..........................              10,000
     Printing and Engraving Expenses.........................................             200,000
     Director and Officer Liability Insurance (2)............................             150,000
     Miscellaneous Fees and Expenses.........................................              18,519
                                                                             --------------------
       Total.................................................................          $1,275,000
                                                                             ====================
---------------------- 
(1) All amounts are estimates except the SEC filing fee, the NASD filing fee and
    the Nasdaq National Market listing fee.

(2) Represents premiums paid by Internet Capital Group on policies that insure
    Internet Capital Group's directors and officers against certain liabilities
    they may incur in connection with the registration, offering and sale of the
    securities described herein.

Item 14. Indemnification of Directors and Officers

     Under Section 145 of the General Corporate Law of the State of Delaware,
Internet Capital Group has broad powers to indemnify its directors and officers
against liabilities they may incur in such capacities, including liabilities
under the Securities Act of 1933, as amended (the "Securities Act"). Internet
Capital Group's bylaws (Exhibit 3.2 hereto) also provide for mandatory
indemnification of its directors and executive officers, and permissive
indemnification of its employees and agents, to the fullest extent permissible
under Delaware law.

     Internet Capital Group's certificate of incorporation (Exhibit 3.1 hereto)
provides that the liability of its directors for monetary damages shall be
eliminated to the fullest extent permissible under Delaware law. Pursuant to
Delaware law, this includes elimination of liability for monetary damages for
breach of the directors' fiduciary duty of care to Internet Capital Group and
its shareholders. These provisions do not eliminate the directors' duty of care
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to Internet Capital Group, for acts or omissions
not in good faith or involving intentional misconduct, for knowing violations of
law, for any transaction from which the director derived an improper personal
benefit, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws.

     Prior to the effective date of the Registration Statement, Internet Capital
Group will have entered into agreements with its directors and certain of its
executive officers that require Internet Capital Group to indemnify such persons
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person may
be made a party by reason of the fact that such person is or was a director or
officer of Internet Capital Group or any of its affiliated enterprises, provided
such person acted in good faith and in a manner 

                                      II-1
such person reasonably believed to be in or not opposed to the best interests of
Internet Capital Group and, with respect to any criminal proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The indemnification
agreements also set forth certain procedures that will apply in the event of a
claim for indemnification thereunder.

     Internet Capital Group intends to obtain in conjunction with the
effectiveness of the Registration Statement a policy of directors' and officers'
liability insurance that insures the Company's directors and officers against
the cost of defense, settlement or payment of a judgment under certain
circumstances.

     The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the underwriters of Internet Capital
Group and its officers and directors for certain liabilities arising under the
Securities Act or otherwise.

Item 15. Recent Sales of Unregistered Securities

     Since its inception in March 1996, Internet Capital Group (or its
predecessor, Internet Capital Group, L.L.C.) has issued and sold unregistered
securities in the transactions described below.

     Shares of Common Stock

     (1)  On May 9, 1996, Internet Capital Group, L.L.C. issued 13,000,000 units
          of Membership Interests to Safeguard Scientifics (Delaware), Inc. for
          an aggregate purchase price of $13,000,000 consisting of $6,860,926 in
          cash and the assignment of 182,500 shares of Common Stock, 127,000
          shares of Series C Preferred Stock, 855,400 shares of Series D
          Preferred Stock and 134,375 shares of Series F Preferred Stock of Sky
          Alland Marketing, Inc. and related rights and obligations in respect
          thereof.

     (2)  In July, 1996, Internet Capital Group, L.L.C. issued an aggregate of
          27,000,000 units of Membership Interests to employees, directors,
          consultants and other purchasers in a subscription offering for an
          aggregate purchase price of $27,000,000.

     (3)  On September 30, 1996, Internet Capital Group, L.L.C. issued an
          aggregate of 4,968,935 units of Membership Profit Interests to
          employees, directors and consultants pursuant to the Membership Profit
          Interest Plan in consideration for services rendered to Internet
          Capital Group, L.L.C.

     (4)  In December, 1996, Internet Capital Group, L.L.C. issued an aggregate
          of 20,000 units if Membership Profit Interests to employees and
          consultants pursuant to the Membership Profit Interest Plan in
          consideration for services rendered to Internet Capital Group, L.L.C.

     (5)  In February, 1997, Internet Capital Group, L.L.C. issued an aggregate
          of 210,070 units of Membership Profit Interests to employees and
          consultants pursuant to the Membership Profit Interest Plan in
          consideration for services rendered to Internet Capital Group, L.L.C.

     (6)  On April 11, 1997, Internet Capital Group, L.L.C. issued 46,783 units
          of Membership Interests to Lou Ryan pursuant to the Membership Profit
          Interest Plan in consideration for services rendered to Internet
          Capital Group, L.L.C.

     (7)  In September, 1997, Internet Capital Group, L.L.C. issued an aggregate
          of 1,209,519 units of Membership Profit Interests to employees and
          consultants to the Membership Profit Interest Plan in consideration
          for services rendered to Internet Capital Group, L.L.C.

     (8)  In November, 1997, Internet Capital Group, L.L.C. issued an aggregate
          of 115,175 units of Membership Profit Interests to employees and
          consultants pursuant to the Membership Profit Interest Plan in
          consideration for services rendered to Internet Capital Group, L.L.C.

                                      II-2
(9)  In December, 1997, Internet Capital Group, L.L.C. issued 185,000 units
          of Membership Profit Interests to employees and consultants pursuant
          to the Membership Profit Interest Plan in consideration for services
          rendered to Internet Capital Group, L.L.C.

     (10) In March, 1998, Internet Capital Group, L.L.C. issued 250,000 units of
          Membership Interests to Mr. Austin Hearst in a subscription offering
          for an aggregate purchase price of $500,000.

     (11) In April, 1998, Internet Capital Group, L.L.C. issued an aggregate of
          125,000 units of Membership Interests to Mr. Britton Murdock, Mr.
          Robert E. Keith and Mrs. Margot W. Keith in a subscription offering
          for an aggregate purchase price of $250,000.

     (12) In May, 1998, Internet Capital Group, L.L.C. issued an aggregate of
          1,912,500 units of Membership Interests to employees, consultants and
          other purchasers in a subscription offering for an aggregate purchase
          price of $3,825,000.

     (13) In June, 1998, Internet Capital Group, L.L.C. issued an aggregate of
          11,143,750 units of Membership Interests to employees, consultants and
          other purchasers in a subscription offering for an aggregate purchase
          price of $22,287,500.
     
     (14) In July, 1998, Internet Capital Group, L.L.C. issued an aggregate of
          551,250 units of Membership Interests to employees, consultants and
          other purchasers in a subscription offering for an aggregate purchase
          price of $1,102,500.

     (15) In August, 1998, Internet Capital Group, L.L.C. issued an aggregate of
          225,000 units of Membership Interests to employees, consultants and
          other purchasers in a subscription offering for an aggregate purchase
          price of $450,000.

     (16) In September, 1998, Internet Capital Group, L.L.C. issued an aggregate
          of 1,092,500 units of Membership Interests to employees, consultants
          and other purchasers in a subscription offering for an aggregate
          purchase price of $2,185,000.

     (17) In October, 1998, Internet Capital Group, L.L.C. issued an aggregate
          of 3,883,750 units of Membership Interests to employees, consultants
          and other purchasers in a subscription offering for an aggregate
          purchase price of $7,767,500.

     (18) In November, 1998, Internet Capital Group, L.L.C. issued an aggregate
          of 76,250 units of Membership Interests to Mr. Roger S. Penske, Jr.,
          Mr. Ron Trichon and Mr. T. Richard Butera in a subscription offering
          for an aggregate purchase price of $152,500.

     (19) In January, 1999, internet Capital Group, L.L.C. issued an aggregate
          of 158,750 units of Membership Interests to Mr. Samuel A. Plum, Mrs.
          Susan R. Buckley and Dr. Thomas P. Gerrity, a director of Internet
          Capital Group, in a subscription offering for an aggregate purchase
          price of $317,500.

     (20) On February 2, 1999, each unit of the foregoing Membership Interests
          and Membership Profit Interests was converted into one share of Common
          Stock of Internet Capital Group as a result of the merger of Internet
          Capital Group, L.L.C. into Internet Capital Group.

     (21) In February, 1999, Internet Capital Group issued an aggregate of
          14,706,250 shares of Common Stock to employees, directors, consultants
          and other purchasers in a subscription offering for an aggregate
          purchase price of $29,412,500.

     (22) In March, 1999, Internet Capital Group issued an aggregate of
          1,125,000 shares of Common Stock to consultants and other purchasers
          in a subscription offering for an aggregate purchase price of
          $2,250,000.

     Warrants to Purchase Common Stock

     On May 10, 1999, in connection with Internet Capital Group's issuance of
the convertible notes, Internet Capital Group granted warrants, exercisable at
the public offering price, to the holders of the convertible notes to purchase a
number shares of common stock of Internet Capital Group equal to $ 18 million
divided by the initial public offering price.

     On April 30, 1999, in connection with the Secured Revolving Credit Facility
dated April 30, 1999, between Internet Capital Group, Inc. and certain lenders
and guarantors, Internet Capital Group granted to the lenders warrants to
purchase an aggregate of 200,000 shares of common stock of Internet Capital
Group for a purchase price of $10 per share.

     Notes Convertible to Common Stock

     On May 10, 1999, Internet Capital Group issued convertible notes in an
aggregate principal amount of $90 million. Upon consummation of this
offering, the convertible notes automatically convert into shares of common
stock of Internet Capital Group at the initial public offering price.

     Options to Purchase Common Stock

     Internet Capital Group from time to time has granted stock options to
employees, directors, advisory board members and certain employees of our
Partner Companies. The following table sets forth certain information regarding
such grants:
Range of
                                                     No. of Shares     Exercise Prices
                                                   -----------------  -----------------
1996...............................................       --                N/A
1997...............................................
1998...............................................
The sale and issuance of securities in the transactions described above
were exempt from registration under the Securities Act in reliance on Section
4(2) of the Securities Act or Regulation D promulgated thereunder as
transactions by an issuer not involving a public offering, where the purchasers
were sophisticated investors who represented their intention to acquire
securities for investment only and not with a view to distribution and received
or had access to adequate information about the Registrant.

     Appropriate restrictive legends were affixed to the stock certificates
issued in the above transactions. Similar legends were imposed in connection
with any subsequent sales of any such securities. No underwriters were employed
in any of the above transactions.

                                      II-3
Item 16. Exhibits and Financial Statement Schedules

     (a)  Exhibits

Exhibit
Number      Document
-------     --------
1.1*        Form of Underwriting Agreement
2.1         Agreement of Merger, dated February 2, 1999, between Internet
            Capital Group, L.L.C., and Internet Capital Group, Inc.
3.1*        Restated Certificate of Incorporation
3.2*        Amended and Restated Bylaws
4.1         Specimen Certificate for Internet Capital Group's Common Stock
5.1*        Opinion of Dechert Price & Rhoads as to the legality of the shares
            of Common Stock being registered
10.1        Internet Capital Group, L.L.C. 1998 Equity Compensation Plan
10.1.1      Internet Capital Group, Inc. 1999 Equity Compensation Plan
10.1.2      Internet Capital Group, Inc. 1999 Equity Compensation Plan as
            Amended and Restated May 1, 1999
10.2        Internet Capital Group, L.L.C. Option Plan for Non-Employee Managers
10.2.1      Internet Capital Group, Inc. Directors' Option Plan
10.3        Internet Capital Group, L.L.C. Membership Profit Interest Plan
10.4*       Internet Capital Group, Inc. Long-Term Incentive Plan
10.5        Amended and Restated Limited Liability Company Agreement of Internet
            Capital Group, L.L.C. dated September 30, 1998
10.5.1      Amended and Restated Limited Liability Company Agreement of Internet
            Capital Group, L.L.C. dated January 4, 1999
10.6        Securities Holders Agreement dated February 2, 1999 among Internet
            Capital Group, Inc. and certain securities holders named therein
10.7        Amended and Restated 1996 Equity Compensation Plan of VerticalNet,
            Inc. (incorporated by reference to Exhibit 10.1 to Amendment No. 1
            to the Registration Statement on Form S-1 filed by VerticalNet, Inc.
            on January 22, 1999 (Registration No. 333-68053) ("VerticalNet
            Amendment No. 1"))
10.8        Employment Letter with Mark L. Walsh (incorporated by reference to
            Exhibit 10.2 to Amendment No. 2 to the Registration Statement on
            Form S-1 filed by VerticalNet, Inc. on February 8, 1999
            (Registration No. 333-68053) ("VerticalNet Amendment No. 2"))
10.9        Employment Letter with Bary E. Wynkoop (incorporated by reference to
            Exhibit 10.3 to VerticalNet Amendment No. 2)
10.10       Share Purchase Agreement dated September 1, 1998, between Boulder
            Interactive Technology Services Co. and VerticalNet, Inc.
            (incorporated by reference to Exhibit 10.4 to VerticalNet Amendment
            No. 1)
10.11       Agreement and Plan of Merger dated September 30, 1998, among
            VerticalNet, Inc., Informatrix Acquisition Corp., Informatrix
            Worldwide, Inc. and the Stockholders of Informatrix Worldwide, Inc.
            (incorporated by reference to Exhibit 10.5 to VerticalNet Amendment
            No. 2)
10.12       Sponsorship Agreement dated June 30, 1998, between Excite!, Inc. and
            VerticalNet, Inc. (incorporated by reference to Exhibit 10.6 to
            VerticalNet Amendment No. 1)
10.13       Internet Services Agreement dated as of January 19, 1999 by and
            between Compaq Computer Corporation and VerticalNet, Inc.
            (incorporated by reference to Exhibit 10.7 to Amendment No. 3 to the
            Registration Statement on Form S-1 filed by VerticalNet, Inc. on
            February 10, 1999 (Registration No. 333-68053))
10.14       Asset Purchase Agreement dated January 13, 1999 by and among
            VerticalNet, Inc., Coastal Video Communications Corp., Paul V.
            Michels and Phillip P. Price (incorporated by reference to Exhibit
            10.8 to VerticalNet Amendment No. 1)
10.15       Common Stock Purchase Warrant to purchase 40,000 or 60,000 shares of
            VerticalNet, Inc. Common Stock dated November 25, 1998 issued to
            Progress Capital, Inc. (incorporated by reference to Exhibit 10.9 to
            VerticalNet Amendment No. 1)

                                      II-4
10.16       Form of VerticalNet, Inc. Common Stock Purchase Warrant dated
            November 25, 1998 issued in connection with the Convertible Note
            (incorporated by reference to Exhibit 10.10 to VerticalNet Amendment
            No. 1)
10.17       Form of VerticalNet, Inc. Convertible Note dated November 25, 1998
            (incorporated by reference to Exhibit 10.11 to VerticalNet Amendment
            No. 1)
10.18       Series A Preferred Stock Purchase Agreement dated as of September
            12, 1996 between Internet Capital Group, L.L.C. and Water Online,
            Inc. (incorporated by reference to Exhibit 10.12 to VerticalNet
            Amendment No. 2)
10.19       Series D Investor Rights Agreement dated as of May 8, 1998 by and
            among VerticalNet, Inc. and the Investors (incorporated by reference
            to Exhibit 10.13 to VerticalNet Amendment No. 2)
10.20       Registration Rights Agreement dated as of November 25, 1998 between
            VerticalNet, Inc. and the Convertible Note Holders (incorporated by
            reference to Exhibit 10.14 to VerticalNet Amendment No. 2)
10.21       Form of Internet Capital Group, Inc. Common Stock Purchase Warrant
            dated May 10, 1999 issued in connection with the Convertible Note
10.22       Form of Internet Capital Group, Inc. Convertible Note dated May 10,
            1999
10.23*      Stock Purchase Agreement between Internet Capital Group and
            Safeguard Scientifics, Inc.
10.24*      Lease between Internet Capital Group and Safeguard Scientifics, Inc.
            for premises located in Wayne, Pennsylvania.
10.25       Office Lease dated July 22, 1996 between State Street Bank and
            Trust, Internet Capital Group, The Access Fund, Hamilton Lane
            Advisors and Martin S. Gans for office space in San Francisco,
            California.
10.26       Credit Agreement dated as of April 30, 1999 by and among Internet
            Capital Group, Inc., Internet Capital Group Operations, Inc., the
            Banks named therein and PNC Bank, N.A.
10.27       Breakaway Solutions, Inc. Option Agreement dated January 6, 1999 by
            and between Gordon Brooks and Internet Capital Group, L.L.C.
10.28       Benchmarking Partners, Inc. Option Agreement dated January 1, 1997
            by and between Christopher H. Greendale and Internet Capital Group,
            L.L.C.
10.29       Syncra Software, Inc. Option Agreement dated August 1, 1998 by and
            between Michael H. Forster and Internet Capital Group, L.L.C.
21.1        Subsidiaries of Internet Capital Group
23.1        Consent of KPMG LLP
23.2*       Consent of Dechert Price & Rhoads, included in Exhibit 5.1
23.3        Consent of Ernst & Young LLP
23.4        Consent of PricewaterhouseCoopers LLP
24.1        Power of Attorney, included on the signature page hereof
27.1        Financial Data Schedule
99.1        Form of Letter from Internet Capital Group, Inc. to Safeguard
            Scientifics, Inc.'s shareholders describing the Directed Share
            Subscription Program
99.2        Form of Letter from Merrill Lynch & Co. to Safeguard Scientifics,
            Inc.'s shareholders to accompany the Internet Capital Group, Inc.
            letter to Safeguard Scientifics, Inc. shareholders
99.3        Form of Letter from Internet Capital Group, Inc. to Brokers
            describing the Directed Share Subscription Program
99.4        Form of Subscription Form for Directed Share Subscription Program
99.5*       Information placed by Wit Capital on its Web site regarding Internet
            Capital Group, Inc.
--------------------------- 

* To be filed by amendment.

     (b)  Financial Statement Schedules

          None.

                                      II-5
Schedules other than those listed above have been omitted since they are
not required or are not applicable or the required information is shown in the
financial statements or related notes. Columns omitted from schedules filed have
been omitted since the information is not applicable.

Item 17. Undertakings

     The undersigned Registrant hereby undertakes to provide the underwriters at
the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

     In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

     The undersigned Registrant hereby undertakes that:

     (1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

     (2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

                                      II-6
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Philadelphia,
Commonwealth of Pennsylvania on the 11th day of May, 1999.

                                    INTERNET CAPITAL GROUP, INC.

                                    By:     Walter W. Buckley, III
                                       ---------------------------
                                         Walter W. Buckley, III
                                         President and Chief Executive Officer
  
                               POWER OF ATTORNEY

     KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Walter W. Buckley, III and David D.
Gathman, and each of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and sign
any registration statement for the same offering covered by the Registration
Statement that is to be effective upon filing pursuant to Rule 462 promulgated
under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature                                    Title                                Date
------------------------------------------  ---------------------------------------  ------------------------------
Walter W. Buckley, III                    President, Chief Executive Officer and   May 11, 1999
------------------------------------------  Director
Walter W. Buckley, III                      (principal executive officer)

  David D. Gathman                          Chief Financial Officer, Secretary and   May 11, 1999
------------------------------------------  Treasurer
David D. Gathman                            (principal financial and accounting
                                            officer)

  Julian A. Brodsky                         Director                                 May 11, 1999
------------------------------------------
Julian A. Brodsky

  E. Michael Forgash                        Director                                 May 11, 1999
------------------------------------------
E. Michael Forgash

  Kenneth A. Fox                            Director                                 May 11, 1999
------------------------------------------
Kenneth A. Fox
II-7
Dr. Thomas P. Gerrity                     Director                                 May 11, 1999
------------------------------------------
Dr. Thomas P. Gerrity

  Scott Gould                               Director                                 May 11, 1999
------------------------------------------
Scott Gould

  Robert E. Keith, Jr.                      Director                                 May 11, 1999
------------------------------------------
Robert E. Keith, Jr.
II-8
EXHIBIT INDEX

Exhibit
Number      Document
-------     --------
1.1*        Form of Underwriting Agreement
2.1         Agreement of Merger, dated February 2, 1999, between Internet
            Capital Group, L.L.C., and Internet Capital Group, Inc.
3.1*        Restated Certificate of Incorporation
3.2*        Amended and Restated Bylaws
4.1         Specimen Certificate for Internet Capital Group's Common Stock
5.1*        Opinion of Dechert Price & Rhoads as to the legality of the shares
            of Common Stock being registered
10.1        Internet Capital Group, L.L.C. 1998 Equity Compensation Plan
10.1.1      Internet Capital Group, Inc. 1999 Equity Compensation Plan
10.1.2      Internet Capital Group, Inc. 1999 Equity Compensation Plan as
            Amended and Restated May 1, 1999
10.2        Internet Capital Group, L.L.C. Option Plan for Non-Employee Managers
10.2.1      Internet Capital Group, Inc. Directors' Option Plan
10.3        Internet Capital Group, L.L.C. Membership Profit Interest Plan
10.4*       Internet Capital Group, Inc. Long-Term Incentive Plan
10.5        Amended and Restated Limited Liability Company Agreement of Internet
            Capital Group, L.L.C. dated September 30, 1998
10.5.1      Amended and Restated Limited Liability Company Agreement of Internet
            Capital Group, L.L.C. dated January 4, 1999
10.6        Securities Holders Agreement dated February 2, 1999 among Internet
            Capital Group, Inc. and certain securities holders named therein
10.7        Amended and Restated 1996 Equity Compensation Plan of VerticalNet,
            Inc. (incorporated by reference to Exhibit 10.1 to Amendment No. 1
            to the Registration Statement on Form S-1 filed by VerticalNet, Inc.
            on January 22, 1999 (Registration No. 333-68053) ("VerticalNet
            Amendment No. 1"))
10.8        Employment Letter with Mark L. Walsh (incorporated by reference to
            Exhibit 10.2 to Amendment No. 2 to the Registration Statement on
            Form S-1 filed by VerticalNet, Inc. on February 8, 1999
            (Registration No. 333-68053) ("VerticalNet Amendment No. 2"))
10.9        Employment Letter with Bary E. Wynkoop (incorporated by reference to
            Exhibit 10.3 to VerticalNet Amendment No. 2)
10.10       Share Purchase Agreement dated September 1, 1998, between Boulder
            Interactive Technology Services Co. and VerticalNet, Inc.
            (incorporated by reference to Exhibit 10.4 to VerticalNet Amendment
            No. 1)
10.11       Agreement and Plan of Merger dated September 30, 1998, among
            VerticalNet, Inc., Informatrix Acquisition Corp., Informatrix
            Worldwide, Inc. and the Stockholders of Informatrix Worldwide, Inc.
            (incorporated by reference to Exhibit 10.5 to VerticalNet Amendment
            No. 2)
10.12       Sponsorship Agreement dated June 30, 1998, between Excite!, Inc. and
            VerticalNet, Inc. (incorporated by reference to Exhibit 10.6 to
            VerticalNet Amendment No. 1)
10.13       Internet Services Agreement dated as of January 19, 1999 by and
            between Compaq Computer Corporation and VerticalNet, Inc.
            (incorporated by reference to Exhibit 10.7 to Amendment No. 3 to the
            Registration Statement on Form S-1 filed by VerticalNet, Inc. on
            February 10, 1999 (Registration No. 333-68053))
10.14       Asset Purchase Agreement dated January 13, 1999 by and among
            VerticalNet, Inc., Coastal Video Communications Corp., Paul V.
            Michels and Phillip P. Price (incorporated by reference to Exhibit
            10.8 to VerticalNet Amendment No. 1)
10.15       Common Stock Purchase Warrant to purchase 40,000 or 60,000 shares of
            VerticalNet, Inc. Common Stock dated November 25, 1998 issued to
            Progress Capital, Inc. (incorporated by reference to Exhibit 10.9 to
            VerticalNet Amendment No. 1)

                                      II-9
10.16       Form of VerticalNet, Inc. Common Stock Purchase Warrant dated
            November 25, 1998 issued in connection with the Convertible Note
            (incorporated by reference to Exhibit 10.10 to VerticalNet Amendment
            No. 1)
10.17       Form of VerticalNet, Inc. Convertible Note dated November 25, 1998
            (incorporated by reference to Exhibit 10.11 to VerticalNet Amendment
            No. 1)
10.18       Series A Preferred Stock Purchase Agreement dated as of September
            12, 1996 between Internet Capital Group, L.L.C. and Water Online,
            Inc. (incorporated by reference to Exhibit 10.12 to VerticalNet
            Amendment No. 2)
10.19       Series D Investor Rights Agreement dated as of May 8, 1998 by and
            among VerticalNet, Inc. and the Investors (incorporated by reference
            to Exhibit 10.13 to VerticalNet Amendment No. 2)
10.20       Registration Rights Agreement dated as of November 25, 1998 between
            VerticalNet, Inc. and the Convertible Note Holders (incorporated by
            reference to Exhibit 10.14 to VerticalNet Amendment No. 2)
10.21       Form of Internet Capital Group, Inc. Common Stock Purchase Warrant
            dated May , 1999 issued in connection with the Convertible Note
10.22       Form of Internet Capital Group, Inc. Convertible Note dated May 10,
            1999
10.23*      Stock Purchase Agreement between Internet Capital Group and
            Safeguard Scientifics, Inc.
10.24*      Lease between Internet Capital Group and Safeguard Scientifics, Inc.
            for premises located in Wayne, Pennsylvania.
10.25       Office Lease dated July 22, 1996 between State Street Bank and
            Trust, Internet Capital Group, The Access Fund, Hamilton Lane
            Advisors and Martin S. Gans for office space in San Francisco,
            California.
10.26       Credit Agreement dated as of April 30, 1999 by and among Internet
            Capital Group, Inc., Internet Capital Group Operations, Inc., the
            Banks named therein and PNC Bank, N.A.
10.27       Breakaway Solutions, Inc. Option Agreement dated January 6, 1999 by
            and between Gordon Brooks and Internet Capital Group, L.L.C.
10.28       Benchmarking Partners, Inc. Option Agreement dated January 1, 1997
            by and between Christopher H. Greendale and Internet Capital Group,
            L.L.C.
10.29       Syncra Software, Inc. Option Agreement dated August 1, 1998 by and
            between Michael H. Forster and Internet Capital Group, L.L.C.
21.1        Subsidiaries of Internet Capital Group
23.1        Consent of KPMG LLP
23.2*       Consent of Dechert Price & Rhoads, included in Exhibit 5.1
23.3        Consent of Ernst & Young LLP
23.4        Consent of PricewaterhouseCoopers LLP
24.1        Power of Attorney, included on the signature page hereof
27.1        Financial Data Schedule
99.1        Form of Letter from Internet Capital Group, Inc. to Safeguard
            Scientifics, Inc.'s shareholders describing the Directed Share
            Subscription Program
99.2        Form of Letter from Merrill Lynch & Co. to Safeguard Scientifics,
            Inc.'s shareholders to accompany the Internet Capital Group, Inc.
            letter to Safeguard Scientifics, Inc. shareholders
99.3        Form of Letter from Internet Capital Group, Inc. to Brokers
            describing the Directed Share Subscription Program
99.4        Form of Subscription Form for Directed Share Subscription Program
99.5*       Information placed by Wit Capital on its Web site regarding Internet
            Capital Group, Inc.
---------------------- 

* To be filed by amendment.

                                     II-10