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    PE Week Wire -- Wednesday, July 20

The Education of Martin Tobias

There are lots of reasons why I like my job, including the flexibility, people and multi-million dollar salary (in order of veracity). The best part, however, is a regular opportunity to completely immerse myself in the innovative minutia of emerging technologies that I previously was completely ignorant of. Sure, I forget most everything a week or two later (think most college courses), but the joy of learning trumps such petty problems.

Why mention this today? Because I spent some time on the phone yesterday with Martin Tobias, a venture partner with Ignition Partners who yesterday revealed that he has become chairman and CEO of an alternative energy company called Seattle Biodiesel. Before continuing, it is important to make two corrections to yesterday’s blurb on Seattle Biodiesel: (1) Tobias was originally hired as a venture partner at Ignition, and will remain one; (2) All of Seattle Biodiesel’s $2 million Series A round came from individuals, not from institutions. Moving on…

Tobias has absolutely no background in alternative energy, let alone biodiesel. He is a onetime consultant who moved on to Microsoft before making a bigger mark as founder and CEO of Loudeye Technologies. He joined Ignition in 2002, at which point he began making deals in the software/IT space. Understandable career path. Last year, however, Tobias – a typical Seattle-ite in terms of environmental conservation -- began looking for some decent energy-software companies, but didn’t find anything of interest. He then looked into ethanol, before concluding that the market was simply too mature for an early-stage play. Finally, he came upon biodiesel, which can most simply be described as vegetable oil-based fuel (interesting note: first diesel engine ran on peanut oil).

Biodiesel has all of the obvious environmental benefits like cleaner exhaust (apparently smells like a cross of French fries and popcorn) and lack of combustion, plus could certainly reduce U.S. dependence on foreign energy sources. Cost per gallon is comparable to petroleum (depending on the day and retailer), and the two can be mixed in the same tank without trouble.

What most biodiesel companies don’t have, according to Tobias, however, is a good business model. He says that the typical biodiesel company in the U.S. follows a European trend of centralized production, whereby you refine the fuel near the crops (like Iowa), and then ship it across the country (like Seattle). Seattle Biodiesel, on the other hand, features a refinery in Seattle and then sells its product locally (or at least has for the past two months). It still gets most of its soybeans from Iowa, but is negotiating with local farmers to increase their canola and/or mustard seed crops. This is a distributed model, and Seattle Biodiesel hopes to export it throughout the country (first satellite is expected to be launched in around six months, at which point the company will probably look for $12 million to $15 million in institutional VC/project finance funding).

Again, all of this is now being run by Tobias (with the help of existing company founders/management), who is basically a novice. What he has, however, is an obvious fascination with the space and an eagerness to learn. Just take a look at his Deep Green Crystals blog to see how far his attention has drifted from software to fuel.

Normally I’m a cynic who would say something like: “Take a board seat or become an advisor, but don’t become CEO of a company whose business you don’t yet fully understand.” But I’ll play optimist this time, because of Tobias’ obvious passion for what he’s doing. If successful, Tobias could ultimately become the modern version of John D. Rockefeller (ok, maybe a bit hyperbolic). At worst, he’ll become someone who took a risk, failed and learned a lot in the process.


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    Top Three


Maytag Corp. (NYSE: MYG) has one less prospective buyer, as the consortium that includes Bain Capital, Blackstone Group and Chinese appliance company Haier America Trading has dropped out of the process. The group was reported to be considering a $16 per share offer. The only formal bid on the table right now is a $14 per share offer from Ripplewood Holdings, although rival Whirlpool Corp. (NYSE: WHR) has approached Maytag about a $17 per share offer.


Accel Partners has closed its second European venture capital fund – named Accel London II – with $450 million in limited partner commitments, according to a regulatory filing. The news comes one day after Accel announced that it had partnered with IDG to begin fund-raising for a $250 million-targeted VC fund that would focus on China.


Photoways Inc., a France-based operator of an online digital photo lab, has raised 24 million euros in Series A funding from Highland Capital Partners and Index Ventures.

    VC Deals

Westec InterActive, an Irvine, Calif.-based provider of video monitoring services for businesses, has received $17.5 million in venture capital funding from Clarity Partners. In addition, Westec CEO Gerald Vento inv*sted $2.5 million.

Engage Corp., a San Francisco–based online relationship community, has raised an undisclosed amount of first-round VC funding from The Founders Fund and Revolution Ventures.

Solicore Inc., a Lakeland, Fla.-based provider of lithium polymer batteries for the smart card, RFID and medical device markets, has raised $12.7 million in the first tranche of its Series C funding round. The company plans to close on an additional $2.3 million within the next 25 days, at which point it will have raised around $40 million in total VC funding since its 2001 inception. Rho Ventures led the latest infusion, and was joined by return backers Draper Fisher Jurvetson, Braemar Energy Ventures, Firelake Capital, OPG Ventures, Air Products & Chemical and several unnamed individuals.

JasperSoft Corp., a San Francisco-based provider of commercial open-source reporting solutions, has raised $8 million in Series C funding at a post-money valuation of approximately $23.2 million. Partech International led the deal, and was joined by return backers DCM-Doll Capital Management and Morgenthaler Ventures.

    Buyout Deals

Advent International has agreed to sell its majority stake in Moeller Group to Doughty Hanson & Co. for 1.1 billion euros (including pension liabilities and financial debt). The deal’s equity tranche is 192 million euros, and also includes a debt facility of around 650 million euros underwritten by Mizohu and Morgan Stanley. Moeller Group is a Germany-based supplier of low-voltage electrical distribution and automation components.

Arcapita has acquired the majority equity interest in Falcon Gas Storage Company Inc., a Houston, Texas-based natural gas storage company. The deal is valued at approximately 4100 million, with current Falcon management remaining in place and retaining and equity position.

KRG Capital Partners has sold portfolio company HMS Healthcare Inc., a preferred provider organization (PPO) to Aetna (NYSE: AET) for $390 million. HMS was formed by KRG a little over a year ago, and serves 1.6 million people throughout Michigan, Colorado, Ohio, Kentucky, Wisconsin and parts of Indiana.

Urban Radio Communications LLC, a Mobile, Ala.-based radio broadcasting company, has received $17 million in combined equity and mezzanine debt financing from The Goldman Sachs Urban Inv*stment Group and 21st Century Group. The capital will be used to acquire selected radio broadcasting stations and to finance capital expenditures and general working capital needs.

3i Group has put London-based environmental consultancy Environmental Resources Management PLC on the block for approximately $500 million, according to The Times of London. Interested bidders reportedly include Bridgepoint, ABN Amro, Cinven and Exponent Private Equity. ERM advised the City of London on its successful bid for the 2012 Olympic Games.

    PE-Backed IPOs

NxStage Medical Inc., a Lawrence, Mass.-based medical device company focused on renal disease and acute kidney failure, has filed to raise $75 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol NXTM, with Merrill Lynch & Co. serving as lead underwriter. NxStage has raised around $75 million in total VC funding since its 1998 inception, from firms like Sprout Group (36.5% pre-IPO stake), Atlas Venture (17.3%), Lightspeed Venture Partners (5.3%) and Adams Street Partners (5.3%).

Caribou Coffee Company Inc., a Brooklyn Center, Minn.-based operator of 322 gourmet coffeehouses, has filed to raise $90 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol CBOU, with Merrill Lynch & Co. and Thomas Weisel Partners serving as lead underwriters. Caribou Coffee is controlled by Arcapita.

PRN Corp., a San Francisco-based operator of an in-store television network, has withdrawn its proposed $126.5 million IPO, due to public interest and the protection of inv*stors.” Significant shareholders include the Shamrock Capital Growth Fund, Moore Macro Fund, GE Capital, Allen & Co. and the State of Michigan.

Eschelon Telecom Inc., a Minneapolis-based provider of voice and data services and business telephone systems, has set its proposed IPO terms to around 4.68 million common shares being offered at between $15 and $17 per share. The company hopes to trade on the Nasdaq under ticker symbol ESCH, with Lehman Brothers and Jefferies & Co. serving as lead underwriters. Shareholders include Bain Capital (40.72% pre-IPO position), Wind Point Partners (32.54%) and Stolberg Partners (15.30%).

Republic Companies Group Inc., a Wilmington, Del.-based personal and commercial property and casualty insurance provider, has set its proposed IPO terms to 6 million common shares being offered at between $15 and 417 per share. It plans to trade on the Nasdaq under ticker symbol RUTX, with JPMorgan and Banc of America Securities serving as lead underwriters. Shareholders include Greenhill Capital Partners (46.7% pre-IPO stake), Brazos Private Equity (17.5%), Banc of America Capital Inv*stors (8.9%), 21st Century Group (7.6%), Norwest Equity Partners (5.8%) and Wand Partners.

    PE-Backed M&A

Aptuit Inc., a Greenwich, Conn.-based portfolio company of Welsh, Carson, Anderson & Stowe, has agreed to acquire three divisions of Durham, N.C.-based Quintiles Transnational for $125 million. The divisions focus on early-stage drug screening and packaging for drugs and testing supplies.

XSYS Print Solutions of Germany has agreed to merge with Flint Ink Corp. of Ann Arbor, Mich. No financial terms were disclosed for the deal, which would result in a company with combined 2004 revenue of approximately $2.6 billion. XSYS was formed late last year by CVC Capital Partners, following its acquisition of both BASF Printing Systems and ANI Printing Systems. The combined company will be jointly owned by CVC and management of both companies.

Broadcom Corp. (Nasdaq: BRCM) has agreed to acquire Siliquent Technologies Inc., a Mountain View, Calif.–based developer of 10GbE network interface controllers with Ethernet processing technology. The deal is valued at $76 million in cash. Siliquent has raised around $35 million in total VC funding since its 2000 inception, from firms like Greylock, Benchmark Capital, Thomas Weisel Partners and Alta Berkeley Venture Partners.

IBM has agreed to acquire PureEdge Solutions Inc., a Canadian provider of electronic forms-based business process management software and services. No financial terms were disclosed for the deal, which is expected to close on Friday. PureEdge has raised VC funding from Bank of Montreal, GrowthWorks, RoyNat Capital and Business Development Bank of Canada.

BEA Systems Inc. (Nasdaq: BEAS) has acquired Compoze Software Inc., a Wayne, Pa.-based provider of collaborative software for enterprise portals and enterprise applications.. No financial terms were disclosed. Compoze software has raised a small amount of VC funding from SeaCap Ventures, bHive and Robin Hood Ventures.

PartMiner Inc., a Melville, N.Y.-based provider of electronic components and information services to the electronics industry, has acquired PartLogic Software, a provider of validation and reporting for obsolescence risk and environmental compliance analysis. No financial terms were disclosed. PartMiner has raised approximately $110 million in VC funding from firms like Seacoast Capital, Cahners Business Information, Boston Ventures, Onex Corp. and Vulcan Capital.

    Firm & Fund News

Gerry Robinson, former chairman of Allied Domecq PLC, Granada Group and British Sky Broadcasting Group PLC, reportedly is launching a UK-based corporate turnaround firm called Raphoe Management. Robinson is the firm’s controlling shareholder, although Europa Partners Ltd. also has a sizable position.

    Human Resources

Laura Friedrich has been named a partner in the private equity group of law firm Chadbourne & Park LLP. She previously had been a member of Simpson Thacher & Bartlett’s private funds group since 1996.

Tim Haines has agreed to join Abingworth Management as a London-based partner, effective in September. He currently is CEO of Abingworth portfolio company Astex Therapeutics.

Robin Dvorak has been named marketing director of Reston, Va.-based Updata Capital and its Updata Partners venture capital affiliate. Dvorak previously served as managing director of programs at Industrial Research Institute, a professional association of senior research and development executives.

Emergence Capital Partners, a San Mateo, Calif.-based VC firm focused on tech-enabled startups, has formed a strategic advisory board that includes: Board chairman John Dillon, former CEO of and current CEO of Navis; Gerry Mooney, IBM's vice president of global strategy; Peggy Taylor, former COO of PeopleSoft; and Timothy Chou, former president of Oracle On Demand.

Rich Ford has joined health-care focused merchant bank Galen Capital Group as a senior advisor. Ford is the former president of The Sage Group, a Nashville, Tenn.-based provider of workforce training to Fortune 500 companies.

America’s Growth Capital said that firm co-founder Maria Lewis Kussmaul will now lead its information security and data center I-banking practice, after previously having served as head of capital markets and senior information security and IT infrastructure analyst. In other America’s Growth Capital news, Rudy Minar has joined as a principal focused on the software and digital media infrastructure sectors. He previously was an executive director in the technology I-banking group of CIBC World Markets.

Corrections: Solexa Inc. is based in the UK, not in Hayward, Calif. Also, the name of Versatel Telecom International was misspelled.  


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July 20, 2005


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