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    PE Week Wire -- Thursday, May 26

Random Ramblings

A few scattered notes as we Bay Staters continue our fruitless wait for the sun to return (so glad I opened my pool a few weeks back):

*** Remember when the term “stealth” was mostly used to describe early-stage companies? Me too, but today, more and more, it’s becoming an qualifier for nascent venture capital firms, like the upcoming efforts from veteran VCs Stewart Alsop and Jeff Drazen. (A quick aside: Alsop was recently referred to in the NY Times as a “tourist” VC, but I think it’s a mischaracterization, since he hasn’t left the market. He simply left New Enterprise Associates. Tourism isn’t about when you arrive, it’s about when you leave).

Anyway, the latest in this burgeoning class of emerging managers is something called Mainspring Capital Partners, which currently is pre-marketing its inaugural fund to prospective LPs. The Boston-based firm will operate as an independent affiliate of I-bank Lane Berry & Co., and plans to make growth equity investments in revenue-stage companies in the technology, communications, media and business services spaces. Ideally, Mainspring portfolio plays will not have received prior institutional funding. Its principals are Mike Balmuth (formerly of Summit Partners and the Summit Accelerator Fund), Pat Curran (formerly of Great Hill Partners) and Fred Lane (Lane Berry co-founder who was the eighth banker hired at DLJ).

Not surprisingly, its structure is kind of a cross between The Sprout Group of the 1970s and 1980s (in terms of its arm's length DLJ affiliation) and the Summit Partners/TA Associates model (in terms of company stage and an intention to integrate cold-calling into its deal-flow strategy). Could be an interesting one to watch…

*** On paper, VSP Capital and AIG Capital Partners don’t seem to have much in common. The former is an early-stage VC firm in Silicon Valley, while the later is a multi-stage private equity firm focused on the emerging markets. Unfortunately, however, their fortunes are beginning to look fairly similar. We went over the most recent AIG CP happenings on Tuesday, and now word comes that the six-member limited partner advisory council of VSP Capital has unanimously agreed to recommend that all VSP LPs discontinue the firm’s third fund. The impetus in this case is the departure of three of the firm’s five general partners (including two in the past month), and some fairly pervasive rumors as to why it’s happened (like the Mercury News’ Matt Marshall wrote, the rumors are of such a personal nature that their publication is probably more destructive than constructive). As with AIG, the VSP situation will involve a bunch of paperwork and arm-twisting before its conclusion.

*** Credit rating agency Standard & Poor’s is apparently planning to launch a private equity fund index. Let the anti-transparency arguments fly…

*** A quick correction to my piece last week on Howard Anderson. It seems that he is no longer launching a consultancy for non-profits, and instead is spending his time as a “consigliare” for CEOs who desire some independent (i.e., not board of directors) advice. Also, worth noting that I recently conducted a Q&A with Howard about his controversial MIT Tech Review piece, which will appear in the July issue of Venture Capital Journal.

*** Finally, a sad note out of Thailand. Caroline Chan, an investment professional with venture capital firm KLM Capital, has officially been pronounced dead, after having gone missing in the December 26 tsunami. Our deepest condolences to her family and colleagues.



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    Top Three


Cylene Pharmaceuticals Inc., a San Diego-based drug discovery and development company focused on oncology, has raised $26.3 million in Series B funding. Coastview Capital led the deal, and was joined by BioVentures Inv*sdtors, Mitsui & Co. Venture Partners, Morningside Venture Investments, TDL Investors, William Harris Investors, Lakeview Capital and the Viterbi Group. Return backers included Sanderling Ventures, Novartis BioVentures, Research Corporation Technologies and IngleWood Ventures.

The Blackstone Group has lost out in its efforts to acquire Enel SpA’s stake in Italian telecom company Wind SpA. Enel announced today that it has accepted a bid from Weather Inv*stments SARL, which is controlled by Egyptian businessman Naguib Sawiris. The total transaction is valued at approximately 12.14 billion euros, with Enel retaining a minority position.

Bay Partners is looking to raise up to $325 million for its eleventh venture capital fund, according to a regulatory filing. The Cupertino, Calif.-based firm already has closed on $174.5 million in commitments from limited partners like Paul Capital, the BP Pension and Horsley Bridge Partners.

    VC Deals

SpikeSource Inc., a Redwood City, Calif.-based open source IT infrastructure company, has closed its Series A funding round with $12.85 million in preferred stock and $1.35 million in convertible securities, according to a regulatory filing. Participants included Fidelity Ventures and Kleiner Perkins Caufield & Byers. The company has been incubated by KPCB since its 2003 inception.

Aran Technologies Ltd., a Dublin, Ireland-based provider of end-to-end mobile customer experience management software for operators, has raised $10 million in second-round funding. Participants included Trident Capital, Cross-Atlantic Capital Partners, Oyster Inv*stment Funds and Enterprise Ireland.

The NAU Group, a Ramsey, Minn.-based provider of crop insurance, has received an undisclosed amount of private funding from The Lightyear Fund.

Tectura Inc., a Redwood City, Calif.-based provider of Microsoft-integrated business solutions to mid-market companies and large enterprise divisions, has raised $10 million in private equity funding from Ritchie Capital Management.

OptiMedica Corp., a Santa Monica, Calif.-based medical device startup, has raised Series A funding from Kleiner Perkins Caufield & Byers, according to a regulatory filing. Brook Byers of KPCB will serve on the company’s board of directors.

    Buyout Deals

Kelso & Co. has completed its acquisition of Insurance Auto Auctions Inc. (Nasdaq: IAAI), a Westchester, Ill.-based provider of auto salvage services to insurance companies. The deal was valued at approximately $400 million, with IAAI shareholders receiving $28.25 per share in cash.

Allied Domecq PLC, a publicly-traded UK liquor company, has given a prospective buyout consortium a June 29 deadline to either make a bid, or go away. In April, the company agreed to a 7.4 billion euros takeover offer from France-based Pernod Picard SA, but subsequently was approached by a group that includes Constellation Brands, Brown-Foreman Corp., Blackstone Group and Lion Capital (f.k.a. Hicks Muse Europe). The Constellation-led group, however, has not yet made a formal offer.

DLJ Merchant Banking is looking to sell Mueller Group Inc. for up to $1 billion, according to The Deal. Mueller is a Decatur, Ill.-based valve and hydrant maker that DLJ acquired in 2000.

Sentinel Capital Partners has acquired Metro Dentalcare, a Minnesota-based dental clinic operator and provider of group dental care to more than 125,000 patients in the Minneapolis and St. Paul metropolitan area. No financial terms were disclosed.

Newbridge Capital and affiliate TPG-Axon Capital have agreed to pay approximately $188 million for a 26% stake in Singapore-based private healthcare company Parkway Holdings Ltd. from founding family shareholders. The deal is expected to close next month.

Repsol YPF, a Spain-based oil and gas company, is planning to bid for Royal Dutch/Shell Group’s liquefied petroleum gas distribution and marketing business. The deal could be worth more than $2 billion, and Repsol already is in negotiations with several potential funding partners, including CVC.

Whitbred PLC, a publicly-traded UK hospitality company, reportedly has received buyout interest from firms that include Apax Partners and CVC. According to The London Evening Standard, prospective buyers want to acquire Whitbred, and then sell off most divisions except for its Premier Travel Inn hotels chain.

CAM Fabrication Inc., a distributor of concrete forms and accessories in the Southeastern U.S., has completed a $24.5 million recapitalization. JMH Capital led the deal, and was assisted by mezzanine firm Praesidian Capital Inv*stors.

    PE-Backed M&A

UTStarcom Inc. (Nasdaq: UTSIE) has acquired Pedestal Networks Inc., a Fremont, Calif.-based broadband access provider, as first reported yesterday by Light Reading. No financial terms were disclosed. Pedestal had raised approximately $30 million in VC funding from firms like Benchmark Capital, DMC-Doll Capital Management, Skymoon Ventures and Duff Ackerman & Goodrich LLC.

    Firm & Fund News

NGEN Partners, a Santa Barbara, Calif.-based VC firm focused on mid-to-late-stage companies in the materials science space, has held a first closing on its second fund, which is targeted at $150 million. Participating limited partners include CalPERS, CalSTRS, The Camille and Henry Dreyfus Foundation, Cycad Group, the Glenn Foundation, Siemens Venture Capital, Asahi Glass Co., Air Products, BASF, Bayer MaterialScience, DuPont, DSM and Henkel.

    Human Resources

Shawn Marcell has joined Science Center Ventures as a senior vice president, after having most recently served as chief operating officer of biotech company Linguagen Corp. Science Center Ventures is a new early-stage venture capital effort from The Science Center, a commercialization engine for science and tech companies in the Greater Philadelphia area.

Michael Murphy has joined FTI Consulting Inc. (NYSE: FCN) as a senior managing director in the corporate finance/restructuring practice. He most recently served as president and CEO of Am-Beo Ltd., an Ireland-based software and services company focused on the telecom and content industries.

Josh Kopelman, founder of, and Richard Forman, founder of (Nasdaq: RCOM), have joined the board of New York Angels Inc.

GE Commercial Finance has named four executives to its Global Media & Communications origination team: Mark Huang was appointed senior vice president of technology lending; Eitan Milstein has been named senior vice president of the special situations team; Kevin Khanna has been named vice president focused on the entertainment sector; and Robert Malone has been named vice president focused on the media sector.

Geoffrey Berger has joined Atlantic-Pacific Capital as a principal in charge of direct placements. He had spent the past seven years as a partner with Equinox Capital, and previously worked with both Bank of Boston and Bessemer Securities Corp.

Roy Merritt has joined Amadeus Capital Partners as a special partner. He most recently served as founder of Orcapital, having previously worked with Providence Equity Partners, DB Capital Ventures, Espirit Telecom Group and Apax Partners.


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May 26, 2005


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