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    PE Week Wire -- Tuesday, August 16

Tuesday Talkback

The sun is shining, Canadian VC disbursements jumped sharply in Q2 and Iraqi inability to meet constitutional deadline has been termed a “tribute to democracy.” (note to editor: my future inabilities to meet deadline will heretofore be referred to as tributes to journalistic diligence). In other words, it’s time for Tuesday Talkback:

Most inbox comments relate to last Friday’s column on Mayfield, which lost at least seven top-tier limited partners while raising its new fund. Of specific interest was my assertion that VCs justifiably care about the “quality” of their limited partners. D writes: “There is a huge difference in the value of dollars coming from a VC and an LP investor (even a ‘high quality’ one). The talent, resources, contacts, network, input, aura, direction etc. that Kleiner or Sequoia provide to their funded companies truly have the ability to turbo-charge a startup (even an already-promising one like PodShow), and allow it to quickly dominate a sector and suck talent from competitors. I have never heard the same said about any specific LP… From a GP's perspective, what matters most isthe ability of an LP to deliver their capital commitment when capital is called, grow with the fund through time,and otherwise remain a silent partner.”

Michael adds: “When it comes to money being green, I guess I’d say that LP money is more homogenous than the GPs putting it to work. And that is the one disconnect in your logic. To your point, Mayfield will still do well, and they were oversubscribed -- even if arrogant and unprofessional as your article suggests. There is simply oversupply of LP money and a shortage of quality, proven PE shops to put it to work. I’m guessing that the 7 brand name investors have other places they can go, so they cut back their allocations at Mayfield and increase it elsewhere, while the newcomers were happy to have a chance to put money with a quality firm with a reputation for generating returns. While currencies are a commodity, quality investors are not.”

I certainly understand this point of view, and the flood of email helped sway me a bit. But please keep two things in mind: (1) The “quality” LPs Mayfield lost have been in this market for a long time, and will remain there going forward. The same cannot yet be said for the longevity of most public pensions, corporate LPs, European LPs or high-net-worth individuals. (2) Many GPs not only want to make money for LPs, but want to make money for LPs who then use that money for people/causes that the GP cares about. For example, lots of VCs try to get their alma matters (either undergrad of b-school) into their funds, while others are particularly interested in certain charitable foundations or local unions (firefighter, police, etc.).

An LP source for the column left a voice mail that said, in part: “One thing you kind of missed was that firms like NEA and Greylock had budgeted management fees from the late 80’s to mid-90’s et a higher carry… they got the higher carry because they got lower fees. But if you come back and say ‘we’re only kidding’ about the lower fees and keep the higher carry -- like Mayfield did -- it becomes a major issue.”

Finally, a bunch of emails like the following from Rob: “It seems as though Mayfield has forgotten who the customer is (the LP), simply doesn't care, or believes it isn't accountable in any way for poor performance. Thank God the vast majority of GP's don't have this view of their customers.”



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    Top Three


NetDevices Inc., a Sunnyvale, Calif.-based developer of services gateway products for enterprise branch networks, has raised $25 million in Series B funding. Castile Ventures led the deal, and was joined by return backers ComVentures, Columbia Capital, Artiman Ventures and JumpStartUp. The company had raised a $15 million Series A round in August 2003.

General Atlantic has completed a $75 million inv*stment for secondary shares in Net1 U.E.P.S. Technologies Inc. (Nasdaq: UEPS), a South Africa-based provider of electronic payment systems for developing markets. In related news, Florian Wendelstadt, head of General Atlantic’s London office, has joined the Net1 board of directors.

Fred Reynolds is leaving Evercore Partners, just one month after joining as its president and CEO. He will return to his former employer Viacom as CFO of CBS. He previously had served as CFO of Viacom’s television stations group.

    VC Deals

Regado Biosciences Inc., a Morrisville, N.C.-based drug development company focused on antidote-controlled antithrombotics, has raised $20 million in Series B funding. Domain Associates and Quaker BioVentures co-led the deal, and were joined by return backer Aurora Funds. Regado was a spinout from the Duke University Medical Center’s surgery department.

Canada’s Venture Capital & Private Equity Association (CVCA) and Thomson MacDonald & Associates today released Q2 2005 disbursement figures, showing that VCs disbursed Cdn$627 million into Canadian companies. This is up from both the Cdn$326 million raised in Q1 2005, and from the Cdn$409 million raised in Q2 2004.

LifeMed Media, a Westport, Conn.-based healthcare multimedia company focused on chronic disease populations, has raised $6.215 million in Series A funding. Battery Ventures led the deal.

SmartPay Jieyin Ltd., a China-based provider of online payment services, has raised an undisclosed amount of strategic funding from RRE Ventures. The company also received additional capital from return backers Accel Partners, Icon Ventures Asia and Lunar Group.

OncoGenex Technologies Inc., a Vancouver, Canada-based biotech company developing targeted therapeutics for cancer, has raised US$12.8 million in Series B-2 funding. WHI Morula Fund (managed by William Harris Inv*stors) and BC Advantage Funds were joined by return backers include Ventures West, H.I.G. Ventures, the Working Opportunity Fund (managed by GrowthWorks Capital) and the Business Development Bank of Canada.

Intel Capital announced that its $200 million China Technology Fund has added its first three portfolio companies: Chipsbrand Microelectronics Co. Ltd., a fabless semiconductor company; Onewave Technologies Inc., a broadband entertainment technology solutions provider; and Verisilicon Holdings Co. Ltd., an application-specific integrated circuit design foundry.

Sensys Networks Inc., a Berkeley, Calif.-based provider of wireless sensor networking, has raised a Series B funding round led by ComVentures.

Avvenu Inc., a Palo Alto, Calif.-based provider of P2P imaging content solutions, has raised $7.5 million in Series B funding, according to a regulatory filing. Participants include Charles River Ventures, Worldview Technology Partners and Motorola Ventures.

Transera Communications Inc., a Cupertino, Calif.-based provider of virtual call center solutions, has raised $10 million in Series B funding, according to a regulatory filing. Accel Partners and Apax Partners were joined on the deal by return backer Storm Ventures.

Sparkplug Inc. of Chicago has raised venture funding from Ignition Venture Partners, according to a regulatory filing. No additional information was disclosed.

    Buyout Deals

Advent International has acquired a 65% interest in Herlitz, a German manufacturer and supplier of stationery, greeting cards and gift-wrapping paper. No financial terms were disclosed. Advent bought the position from a consortium of banks, which had assumed their position following a 2001 financial restructuring of Herlitz. The remaining 35% is held by free-float shareholders, and is listed on the German stock exchange. Advent today issued a voluntary public tender offer to the free-float shareholders to acquire their interest.

    PE-Backed IPOs

Union Drilling Inc., a Bridgeville, Pa.-based provider of contract land drilling services and equipment to natural gas companies, has filed to raise $150 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol UDRL, with JPMorgan serving as lead book-running manager. The company was formed in 1997 by Morgan Stanley Capital Partners (81% pre-IPO stake) and Somerset Capital Partners.

    PE-Backed M&A

Alliance Medical Corp. of Phoenix has agreed to merge with Vanguard Medical Concepts Inc. for Lakeland, Florida. Both companies are independent third-party re-processors of single-use medical devices. No financial terms were disclosed for the deal, which is expected to close by year-end. Alliance has raised over $38 million in VC funding, from firms like Apax Partners, Delphi Ventures, Coral Ventures, Valley Ventures, Merrill Lynch and Affinity Capital. Vanguard was acquired in 2002 by RoundTable Healthcare Partners.

Pfizer Inc. (NYSE: PFE) has acquired Bioren Inc., a San Carlos, Calif.-based provider of antibody optimization technologies. No financial terms were disclosed. Bioren was founded in 2002 with funding from Bay City Capital, and later raised additional funding from Stone Canyon Venture Partners and unnamed individuals.

Border Media Partners, a Houston-based broadcasting company serving Hispanic listeners in the Southwestern U.S., has completed its $18.6 million acquisition of four Austin, Texas stations from Dynamic Radio Broadcasting. The deal includes KEGL, KFON, KKBL and KTXZ. Border Media Partners has raised over $115 million in private equity funding from Vestar Capital Partners, Goldman Sachs Urban Investment Group, Darby-BBVA Latin America Private Equity Fund and RGC Capital Partners.

    Firm & Fund News

Vivo Ventures of Palo Alto, Calif. has raised $172.97 million for its fifth fund, according to a regulatory filing.

Banco Bilbao Vizcaya Argentaria (BBVA), a top Spanish bank, is expected to receive regulatory approval to launch a pair of publicly-traded venture capital funds.

    Human Resources

Ken Martin has joined Onset Ventures as an associate in the Menlo Park, Calif.-based firm’s medical technology practice. He previously served as vice president of engineering with startup Hansen Medical Inc.

Brian Berliner, creator of open-source code product control CVS, has joined Sevin Rosen Funds as an entrepreneur-in-residence. He most recently served as co-founder, founding CTO and executive vice president of IT automation software company Cassat Corp.

Harry Taylor and Nigel Howard have joined TA Associates as vice presidents. Taylor previously was a senior associate with MMC Capital, while Howard served as an associate with both JPMorgan Partners and Goldman Sachs Capital Partners.

Harris Williams & Co. has made the following promotions: Patrick Crocker to managing director, Bram Hall to director, Chip Meyer to director, John Arendale to vice president, James Clark to vice president, Andrew Spitzer to vice president, Derek Swaim to vice president and Marshall Schutt to associate.


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August 16, 2005


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