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    PE Week Wire -- Friday, July 14

Friday FeedBack: Goodbye to a Once-Trusty Friend

The sun is shining, geopolitical diplomacy is failing and the Big Dig debacle is playing havoc with my Framingham-to-South Boston commute. In other words, it’s time for some Friday Feedback.

First up were responses to Thursday’s note about In-Q-Tel, in which I suggested that organizational troubles have, at least partially, caused three high-profile defections in less than one year. Wilson asks: “I’m just guessing that the troubles have been related to compensation, since there is no way that government employees can make traditional VC salaries. It’s kind of like why so many public pension fund managers go to private firms.” Good try Wilson, but no. In-Q-Tel is structured as an independent nonprofit, which means that it can actually pay non-civil servant wages. Founding CEO Gilman Louie, for example, made nearly $800,000 in total annual compensation, according to In-Q-Tel tax returns for 2004.

Casey: “Even if In-Q-Tel has experienced lots of top management turnover, it still doesn’t seem possible to determine whether or not the program is succeeding. The real test is whether the technologies are significantly benefiting the CIA, and that would be impossible to measure without reams of classified information. Got any access to that?” No Casey, but I’ll even go one step further and actually assume that In-Q-Tel has been beneficial to the national intelligence agencies that serve as its limited partners (it’s not just the CIA anymore). But the turnover and its drivers – including conflicts of interest between In-Q-Tel management and In-Q-Tel trustees (who have final investment decision-making power) – have precluded it from being as successful as it should be.

I’ve got more in Monday’s print edition of PE Week, and my colleague Alex Haislip adds that you shouldn’t be surprised if former In-Q-Tel CEO Amit Yoran ends up with Mark Frantz at RedShift Ventures.

*** Greg responds to Paul Kedrosky’s guest column, in which he suggested that there are no best practices in venture capital: “I couldn’t agree more…There are as many different styles for being successful in the venture business as there are successful venture capitalists. There are legendary a**holes who have done quite well, legendary glad-handers who have also done well, the occassional whiz-kid and even an aw-shucks guy or two. I would argue that not a single spreadsheet-jockey has ever been successful over the long-haul, but that’s another discussion. What all the VCs who have been successful over an extended period have in common is a good gut and some Teflon coating that keeps them from getting jaded. They maintain the capacity to fall in love with new deals, people or technology -- even after having had their heart broken a time or two.

*** Christopher disagrees with my assertion that New Enterprise Associates’ $2.5 billion fund is the largest VC fund ever raised: “Correct me if I am wrong, but I believe that Oak Investment Partners recently closed a $2.56 billion fund, which would be the largest fund ever raised.” No correction needed for you Chris, but it seems I could use one.

*** Answer to yesterday’s quiz: Jack Harrington of Advanced Technology Ventures.

*** Finally there is Mike, who asks: “How’s the Pontiac doing?” It is perhaps the most common reader question, and usually is how people greet me at industry events (yup, more often than asking how I myself am doing). For the first time, however, I cannot provide an answer.

It is my displeasure to inform you that the Once-Trusty Pontiac was traded in two weeks ago, as part of my wife’s purchase of a Toyota Prius (I get a hand-me-down VW). It garnered a very generous $500, and I assume that its working parts (all five of them) are being sold at a scrap-yard near Danvers, Massachusetts. This was not a decision I made lightly, and I have not yet gotten used to driving an automobile whose dashboard lights go on without first being hit with a closed fist. Quite remarkable technology.

Anyway, I’m no good at eulogies, so let me just leave it at this: It was the best of (cheap) cars, and then it was the worst of (most) cars. And I loved it all the while…


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    Top Three

Leonard Green & Partners and Texas Pacific Group have agreed to acquire retailer Petco Animal Supplies Inc. (Nasdaq: PETC) for $29 per share, or $1.8 billion including assumed debt. Petco stock closed trading yesterday at $19.45 per share.

Kronos Inc. (Nasdaq: KRON) has agreed to acquire Unicru Inc., a Beaverton, Ore.–based provider of talent management solutions. The deal is valued at approximately $150 million in cash. Unicru had raised around $19 million in VC funding, including a $16 million infusion in 2000 at a post-money valuation of around $76 million. Shareholders include Benchmark Capital, Greylock and Venrock Associates.

Hertz Corp. is in the final stages of prepping an IPO, according to The Wall Street Journal. The automobile and equipment rental company was acquired late last year for around $15 billion by Clayton, Dubilier & Rice, Carlyle Group and Merrill Lynch Global Private Equity.

    VC Deals

Alert Logic Inc., a Houston-based provider of on-demand IT network security solutions, has raised $5 million in Series B funding. Hunt Ventures led the deal, and was joined by return backers DFJ Mercury, Access Venture Partners and OCA Ventures.

Lion Cells Inc., a Woodside, Calif.-based developer of lithium ion battery technologies, has raised $3.6 million in Series A funding. Backers include Battery Ventures and Nth Power.

Feedster Inc., a San Francisco-based provider of online content search and syndication, has raised an undisclosed amount of new VC funding. Returning shareholders include Selby Venture Partners, Omidyar Network, Mitsui & Co. and Midas Capital. New backer Felicis Ventures also participated.

    Buyout Deals

CIVC Partners has completed its acquisition of Thermo Fluids Inc. from H.I.G. Capital, for an undisclosed amount. Thermo Fluids is a Phoenix, Ariz.-based producer of commercial fuel oil from recovered used oil in the western United States. It was acquired by H.I.G. in 2001, in partnership with company management.

Candover Investments has agreed to buy German optical equipment maker Linos AG for around €80 million, or €16 per share.

Warburg Pincus and Cinven have won the auction for Dutch cable television company Casema, according to Dow Jones. The deal is valued at between €1.8 billion and €2.2 billion.

Greentown China Holdings, a Chinese property developer, has raised approximately $47.58 million in funding from Standard Charter Private Equity.

Century Park Capital Partners has acquired Eckler’s Enterprises Inc., a Titusville, Fla.–based provider of multi-title catalog and Internet marketing of auto-aftermarket parts for Corvettes and other classic Chevy automobiles. No financial terms were disclosed. Goldsmith Agio Helms represented Eckler’s on the transaction.

Spirit Airlines, a Ft. Lauderdale commercial airline operator, has raised an undisclosed amount of private equity funding led by Indigo Partners. Return backer Oaktree Capital Management also participated.

    PE-Backed IPOs

Metabolix Inc., a Cambridge, Mass.-based developer of sustainable technologies for the production of plastics, has filed to raise $86.25 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol MBLX, with Piper Jaffray serving as lead underwriter. The company has raised VC funding from both The Vertical Group and Westfield Capital.

Alien Technology Corp., a Morgan Hill, Calif.-based provider of radio frequency identification products and services, has set its proposed IPO terms to nine million common shares being offered at between $10 and $12 per share. It plans to trade on the Nasdaq under ticker symbol RFID, with Bear Stearns serving as lead underwriter. Alien Technology has raised around $229 million in total VC funding since its 1999 inception, from firms like Advanced Equities, Sevin Rosen Funds, New Enterprise Associates, Rho Ventures and CMEA Ventures.

    PE Exits

CVS Corp. (NYSE: CVS) has agreed to acquire MinuteClinic Inc., a Minneapolis-based provider of retail-based health clinics throughout the United States. No financial terms were disclosed for the deal, which is expected to close later this summer. Evercore Partners and Lehman Brothers served as financial advisors to CVS. MinuteClinic has raised around $21 million in VC funding from firms like Affinity Capital Management, Bain Capital Ventures, TGap Ventures and Perkins Capital Management.

    PE-Backed M&A

Synarc Inc., a San Francisco-based provider of centralized imaging and molecular marker services to the pharma and biotech industries, has agreed to acquire the Center for Clinical and Basic Research AS, a Denmark-based company focused on implementing clinical research studies. No financial terms were disclosed. Synarc has raised over $17 million in VC funding from firms like US Venture Partners and SV Life Sciences.

XOS Technologies Inc., a Sanford, Fla.-based provider of multimedia sports technologies to pro and collegiate teams, has acquired Sagio Software Inc., a South Bend, Ind.–based provider of software for football teams. No financial terms were disclosed. XOS has raised over $42 million in VC funding from firms like Beechtree Capital, Blue Chip Venture Co., Comcast Interactive Capital and Liberty Associated Partners.

    Firm & Fund News

Apex BioVentures Acquisition Corp., a Calif.-based blank check acquisition company focused on the healthcare industry, has filed to raise $75 million via an IPO. The company’s management team includes executive vice president and CFO Darrell Elliott, who spent seven years as a managing director with MDS Capital.

    Human Resources

Charlie O’Donnell is leaving Union Square Ventures, in order to join USV portfolio company Oddcast in the newly-created position of director of consumer products.

Alex Morey and Julian Masters have joined European Capital Financial Services as a director and investment director, respectively, in its UK buyouts group. Both previously were directors with Credit Suisse Private Equity. ECFS also added associates Athesan Guna (Merrill Lynch) and Ivan Stoyanov (McKinsey & Co.).

Daniel Eisner and Nigel Austin have joined the private equity practice of Proskauer Rose LLP, as a New York-based partner and senior counsel, respectively. They previously were with Akin, Gump, Strauss, Hauer & Feld LLP, where Eisner was a partner and Austin was counsel.

James Seymour has joined EMP Global as a managing director. He previously was with Commonfund.

Correction: Index Holdings, not Index Ventures, was part of a $20.3 million Series E round for CinemaNow Inc.

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July 14, 2006

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