Random Ramblings

*** I’ve wondered for a while if the direct secondaries movement would slow down once most of the bubble-era VC groups (i.e., Dell Ventures, Tyco Ventures, etc.) were flushed from the system. It seems that it will not.

Case in point: Lake Street Capital is about to begin raising its third fund with a target capitalization of $150 million. Lake Street is a San Francisco-based firm founded in 2003 to acquire portfolio company positions from venture capital, buyout and other private equity firms (a.k.a. direct secondaries). Its first fund was a $5 million single-acquisition vehicle, followed up by a $35 million second fund that made news late last year for scooping up nearly all of Dell Ventures’ portfolio companies. It also grabbed a handful of Intel Capital plays, and has had four exits: NetScaler Inc. (acquired by Citrix), RAINfinity (acquired by EMC), Gyration Inc. (acquired by Thomson) and PacketVideo Corp. (VC stake acquired by NextWave Wireless).

Lake Street declined comment due to those pesky and misunderstood SEC restrictions, but some LPs I spoke with are very interested in the space, and are looking forward to seeing the Lake Street book (it should be sent out next month). They say that direct secondaries be great portfolio additions, since they often can cherry-pick their deals from desperate sellers (i.e., discounted prices). The deciding factor appears not to be declining market opportunity – a supposition of mine that no one else seems to agree with – but rather track record. The question now will be if Lake Street has enough of one to get its fund done.

*** The VSP Capital saga appears to be over. Now it’s understandable if you thought it was over several months ago, when the VC firm disbanded its third fund. Or maybe you thought it was over when the small handful of Fund III portfolio companies were auctioned off. Or maybe when former VSP’ers finally began to join other firms? But all of that would skip over the blingering question of who gets to manage Fund II.

According to someone involved in the negotiations, the LP advisory board of VSP Capital has agreed to let Joanna Rees-Gallanter and John Hamm manage Fund II, and to pay them a total of $1 million per year for their trouble. Rumors that former VSP partners like Matt Crisp or Tony Conrad would make a play for the assets never materialized. More on this in Monday’s print edition of PE Week.

*** Eos Airlines has received its air carrier certification from the FAA. This means that, beginning Nov. 1, the startup will begin flying business travelers from JFK in New York to London. Eos has raised $85 million in private equity funding from Golden Gate Capital, Sutter Hill Ventures and Maveron.

*** Finally, I know I’m late to the bashing of Gillette chief Jim Kilts, but I’d be remiss in not joining the chorus of outrage (petty disclaimer: Gillette headquarters is near my office, and it commandeered my free dirt parking lot last year). For the uninitiated, Kilts oversaw the sale agreement of Gillette to P&G, which likely will result in thousands of local layoffs and a $165 million parachute for Kilts (plus lots of P&G options). In other words, he made a decision that made himself rich and others poor. Even worse, he’s had the gall to complain about media coverage of his greed (he called himself a piñata).

My humble hope is that Kilts does not get hired to a plum private equity job once he formally leaves Gillette. I know that PE is the final refuge for many former CEOs, but hopefully some sense of morality will prevail.

Cellerant Therapeutics Inc. of San Carlos, Calif. has raised $9 million in additional Series B funding, bringing the round total to $25 million. Second-tranche participants included Camelot Ventures, Amgen founder George Rathmann and Eminent Venture Capital Corp. Novel Bioventures led the initial tranche, and was joined by CX Venture Group, Rathmann and Series A shareholders MPM Capital, Allen & Co. and BD Ventures. Cellerant blood-forming stem cell-based therapies for cancer, genetic blood disorders and autoimmune diseases. www.cellerant.com

Blue Vector Systems Inc., a Mountain View, Calif.-based RFID company, has raised $3.63 million in Series B funding. Draper Richards and Onset Ventures co-led the deal, and were joined by Blacksmith Capital. www.bluevectorsystems.com

Digital5 Inc., a Lawrenceville, N.J.-based provider of software for streaming multimedia content, has raised an undisclosed amount of venture capital funding from Blue Chip Venture Co. www.digital5.com

Election Services Corp., a Garden City, N.Y.-based provider of global election software and services, has raised $5 million in VC funding from Trillium Group and North Atlantic Capital. www.electionservicescorp.com

Colibria AS, a Norway–based provider of instant messaging and presence service technology platforms, has raised 8.5 million euros in new VC funding. Ferd Ventures was joined on the deal by return backers Northzone Ventures and Four Seasons Venture. www.colibria.com

Kestrelink Corp., a Boise, Idaho-based provider of software platforms for integrating wireless networking into media-centric devices, has raised around $1.99 million in Series B funding, according to a regulatory filing. Backers include Highway 12 Ventures and Village Ventures. www.kestrelink.com