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    PE Week Wire -- Wednesday, June 28

Today’s guest columnist is Bart Schachter, a founder and managing partner of Blueprint Ventures in Silicon Valley. He can be reached at

Like the Rocket fielding a call from Boston, it is hard to resist a call from Beantown, even when the call is for relief pitching in Dan’s absence. One could always expect a bit more notice for a 700 word treatise, but then one wouldn’t be living vicariously the life of a high-minded reporter on deadline. The life of a VC is, after all, the life of a VC’s entrepreneur, or more decidedly in this case, the life of a VC’s raconteur.

It was with a deep sigh of collective relief that the VC community should have received the recent news that Bill Gates would shortly be stepping away from his role as Microsoft Übermensch and into a new life of philanthropy. This was, near as I can tell, disaster averted for the venture community. How, you might ask, might the altruistic career shift of this legendary industry architect impact the careers of humble PE Week Wire readers?

Imagine that, instead of taking refuge in the pages the Chronicle of Philanthropy, Bill would have set his sights on becoming (the horror) a venture capitalist. Consider that, in a moment of blissful bridge fantasy, instead of seeking to remedy the injustices of the third world, he might have opted instead to set up shop as a budding VC. Consider the high points of the home page: Operating experience, Value-added Investing, an Eye to Company-Building, Unequaled Access to Global Business Leaders, and in case you missed the first bullet, CEO Experience. [Note to cybersquatters: as of this writing, and are both unclaimed].

Then, just as the Sand Hill Road machine unleashes its protectionist PR machine at the new arriviste, accusing him of, among other things, playing risk capital with his own chips, Bill pulls the first of many competitive upsets. Safely stowing his hard-earned billions in US Treasury Bills (creating a spike in US interest rates and much heartburn for Chinese savers), Bill turns to his old bridge friend Warren Buffet who gleefully underwrites his new venture. Like a true and experienced venture capitalist, Bill starts the game off on the right foot: with Other People’s Money.

The game afoot, venture practitioners might at first relax. Even before Bill, great
CEOs have circulated freely through the turnstiles of the venture industry. There was the spreadsheet-guy commuting to Palo Alto, and there was the browser-CEO-dude, and weren’t there a couple of other great MSFT alums in, eh, famous firms, that are VCs no more? Weren’t they all just accidental tourists in the great Ritz of venture capital? Thanks for coming, enjoy those shampoo bottles, and don’t forget to sign the guest book…

But what if Bill were different? What if this guy brought the same ferocious intensity to his venture firm that he brought to his “operating” career? What if he relentlessly applied himself to reshaping the structure of the technology landscape? Or even more dreadfully: the venture capital landscape? What if he retired from Microsoft not because he was working too hard but he was too bored? Because he had the vision and passion of helping build a slew of other companies and saw in the second half-century of his life the opportunity to get under the hood of a handful of startups and share in their success? To make them even more successful than his own? To manifest the ultimate parental destiny of having his professional “children” succeed beyond even his grandest accomplishments?

This scenario should have kept the loyal readers of PE Week Wire within easy reach of their Ambien. There remain some fierce combatants in the ring of venture capital, but it would be hard to imagine one more strategic and fierce than Bill Gates. We sleep better knowing that his gun sights are trained not on Sand Hill Road or Route 128 but instead on disease and poverty afflicting the third world. Who knew that starvation and lethal diseases would someday have so much in common with WordPerfect, Novell, and Netscape. Phew.

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    Top Three


JPMorgan Partners and Goldman Sachs have cinched a $2.25 billion deal to sell Berry Plastics to private equity groups Apollo Management and Graham Partners. The sellers began looking to unload the company in late March.


News Corp. is said to have joined Macquarie Bank in the Australian firm’s proposal to take over the media and telecoms division of PCCW. The pair is reportedly bidding against Texas Pacific Group.


Clayton, Dubilier & Rice, The Carlyle Group and Merrill Lynch are set to recoup a roughly $1 billion dividend from their investment in Hertz Corp. The investors contributed just $2.3 billion to the roughly $15 billion purchase price when they acquired the former Ford Motor division in December.


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    VC Deals

Cranite Systems, which provides network security services, said it raised $11.5 million in new venture funding led by Warburg Pincus. Previous investors include JK&B Capital, Diamondhead Ventures, BV Capital, Selby Ventures, Industry Ventures and Pacifica Fund. The company plans to use the funding to expand its current product line and its involvement in financial services, government and healthcare sectors. Cranite Systems is based in Los Gatos, Calif.

DVDPlay, a Los Gatos, Calif.-based DVD rental service provider, said it raised more than $20 million in venture funding. El Dorado Ventures, Emergence Capital Partners, Palo Alto Venture Partners and Vanguard Ventures financed the round equally. The new financing, which brings the company’s total venture capital raised to approximately $40 million, will be used to roll out the company’s DVD rental kiosks nationwide.


Hyperic, a San Francisco-based provider of an open source IT management platform, said it closed a $3.8 million Series A investment from Benchmark Capital. Accel Partners previously invested in the round.


JAFCO Asia is aiming to invest in one Chinese company per month. Managing Director Vincent Chan told AFX Asia that he is more focused on media, alternative energy, education and medical devices. JAFCO Asia has invested in six companies so far this year.  


Lifeblood Medical, a Freehold, N.J.-based cell culture and biotech company that focuses on cell and tissue preservation, raised $1.2 million in Series B financing.


Oberon Media, a New York-based provider of a game services platform, said it received mezzanine funding from Goldman Sachs, Morgan Stanley and Oak Investment Partners as well as previous investor Capricorn Management. The company plans to use the funding for growth and acquisitions.


SANRAD, a San Mateo, Calif.-based provider of enterprise iSCSI platforms, says it raised $10 million from Foundation Capital and other investors. Foundation’s Ashmeet Sidana has joined SANRAD’s board of directors. The company will use the funding to expand its sales, marketing and support capabilities and for research and development.


The Cleantech Venture Network reports that $513 million in venture capital was raised by clean technology companies in Q1, a quarterly record. The sector placed fifth overall in VC investments for Q1 and exhibited its seventh quarterly gain.


Tzero Technologies, a Sunnyvale, Calif.-based wideband chip developer, said it closed on $25.5 million in venture funding. New investors OVP Venture Partners and Quilvest and existing investors August Capital, Lightspeed Venture Partners, U.S. Venture Partners and VentureTech Alliance funded the round.


    Buyout Deals


Allied Capital backed the management buyout of MHF Logistic Solutions, a third-party environmental logistics company. The $66.5 million investment from Allied consists of second-lien notes, senior subordinated debt and non-voting common equity. Separately, Allied portfolio company CR Brands completed a refinancing, with GE Antares Capital and AC Finance underwriting a $63.5 million debt facility. CR Brands was formed this past February, when Allied merged ChemPro with Redox Brands.


FTVentures backed the formation of Daylight Forensic & Advisory, a new fraud-risk management firm launched by Ellen Zimiles and Joseph Spinelli. The New York-based agency will focus on forensic investigations and advisory work related to regulatory compliance. Terms of the deal were not disclosed.


Hispania Capital Partners portfolio company Hispanic Yellow Pages of America has acquired a Milwaukee-based competitor, Hispanic Yellow Pages and Resource Guide. Terms of the deal were not disclosed.


Oaktree Capital Management is backing the $575 million acquisition of Sara Lee Corp.'s European meats business by Smithfield Foods. Smithfield, to accommodate the purchase, is creating a stand-alone joint venture that will be 50% owned by Oaktree. The company is also contributing its Jean Caby private label meats operations into the joint venture. The deal is expected to close by the end of September.


Rock Island Capital, based in Chicago and Kansas City, has completed an acquisition of Wisconsin’s Baker Manufacturing Co., according to the Kansas City Star. Baker manufactures equipment for the water-well industry.



    PE-Backed IPOs

Southern Cross Healthcare Group set a price range of between 225 pence to 280 pence for its initial public offering, which is expected to occur by July 10, according to Dow Jones Newswires. The IPO will reportedly value the England-based care provider at around £550 million ($1 billion).  The stock is being listed on the London Stock Exchange. The Blackstone Group acquired Southern Cross in a £162 million deal in September 2004. Morgan Stanley and UBS AG are the joint bookrunners of the deal.


Bauer AG, a German construction and engineering group has set a €16.50 ($20.77) to €21.50 ($27.07) per-share price range for its planned IPO. The company, which does business on a global basis, will sell up to 8,880,160 shares. Bauer is largely owned by German private equity firm Deutsche Beteiligungs AG, which will sell all of its shares via the IPO, while the Bauer family will reduce its stake to approximately 48.2% from its current 56 percent. 

    Firm & Fund News

Houston-based Haddington Ventures has held a final close on Haddington Energy Partners III, a private equity fund with committed capital of $182 million. Fund III focuses on deals in the North American midstream energy industry with equity opportunities in the $20 million to $50 million range and total enterprise values of between $100 million and $200 million.


The International Finance Corporation, the private sector arm of the World Bank Group, has signed an agreement to invest 15 million in the Maghreb Private Equity Fund II LP, which is managed by the Tuninvest Finance Group. This fund targets companies in Morocco, Algeria, Tunisia and Libya.

The venture capital division of Siemens has set up shop in Beijing to expand deeper into China’s technology sector.

    Human Resources

Oklahoma-based Argonaut Private Equity has appointed Anil Khatod as managing director in order to increase the private equity firm’s activity in India. Argonaut plans to invest up to $500 million in the country.


The Greater Philadelphia Venture Group (GPVG) said Tom Balderston, the president of Balderston Capital, will join GPVG staff as President and CEO.

AGF Private Equity, a subsidiary of Allianz Group’s AGF insurance company, has tapped Matthieu Baret as a VC partner to specialize in telecommunications, IT and electronics. AGF, which now has an investment portfolio of €1.5 billion, now has nine investment specialists in VC.

A.R. "Buck" Haberkorn III, who founded Boston health care firm HLM Venture Partners, has died, the firm said yesterday. Haberkorn, who had been diagnosed with cancer, started HLM in 1983 with now-retired partners Judy Lawrie and Jim Mahoney. He was 59 years old.


National Bank of Dubai (NBD) has appointed Shahzad Shahbaz as CEO of NBD Investment Bank. He will be responsible for setting up an investment banking, asset management arm and private equity business for the bank.


Ithmar Capital, the GCC-based and Dubai-headquartered private equity firm, has appointed a new partner, Khaled Wasfi Jaouni.


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June 28, 2006

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