PE Week Wire: Fri., Feb. 8, 2008

*** First Round Capital has closed a new fund with $125 million in capital commitments, from limited partners like Princeton University, The University of Notre Dame and The Investment Fund for Foundations. There had been speculation that this fund’s size was an indication that it was moving toward later-stage investing, but First Round co-founder Josh Kopelman says that the strategy hasn’t changed.

“We still plan to make initial investments of around $500,000 in early-stage and seed-stage companies,” he told me last night. “We’ve been making between 15 and 20 investment per year, and expect to maintain that pace.”

The confusion stems from the fact that First Round has historically raised very small “annual” funds that can be as small as $10 million – plus annex funds of just $5 million. It was an odd system that resulted in four different audits, four different quarterly letters, etcetera. “We decided to rationalize our back office,” Kopelman explains. The new fund is called First Round Capital II, and should last several years.

*** BlueRun Ventures has held a $200 million first close on its second independent fund since spinning out of Nokia. It plans to secure an additional $100 million later this year. We had reported last October that the fund was being marketed with a $350 million target, but BRV partner John Malloy says that figure is a hard cap.

I obviously asked Malloy about Slide, the Facebook widget maker (and BRV portfolio company) that reportedly raised a new round at a whopping $500 million valuation. He didn’t speak directly to the number, but did say “Slide is definitely a hold for us… it’s going to be huge.” To understand Malloy’s concept of huge, remember that he was an early investor in PayPal.

*** Speaking of social networks, there was a rumor printed yesterday that Google is buying Plaxo for around $200 million. It’s just not true… Well, at least not yet.

A source close to the process says that Google is one of a “veritable handful” of suitors, with which Plaxo is in advanced discussions. He acknowledges that Google is in pole position, but it is not yet the prohibitive favorite. But, again, no deal has been signed. Some news could come within days, however…

*** You already know this, but for posterity: Bain Capital founder Mitt Romney dropped out of the presidential race yesterday. So much for all those campaign contributions from the private equity market (at least he lasted longer than Chris Dodd).

*** Arcus Ventures has held a $25 million first close on its debut fund, and expects to wrap up the $50 million target later by the end of Q2. The New York-based firm is specifically focused on opportunities in the oncology space, whether that be therapeutics, devices or services. It is run by a pair of oncologists who were with Memorial Sloan-Kettering, before becoming venture partners with Cross Atlantic Partners in 2003.

*** Can we all agree that GooTube was a better name than MicroHoo?

*** What sector is hot among buyout pros? All of them. Or none of them. It’s simply not about sector.

*** Fortunoff is the latest buyout-backed company to file for Chapter 11 bankruptcy protection, and has agreed to sell its business NRCD Equity Partners (which already owns Lord & Taylor). Trimaran Capital Partners has acquired the company back in 2004. Anyone else think this is fast becoming the PE industry’s most important trend?

Top Three

J.C. Flowers & Co. is nearing an agreement to raise $4 billion from a Chinese sovereign wealth fund, according to The Financial Times. The capital would be used to invest in distressed financial institutions.

Warburg Pincus has bought another $300 million of stock in bond insurer MBIA (NYSE: MBI), as part of a larger offering that MBIA hopes will hold off a credit rating downgrade. The private equity firm had acquired $500 million in MBIA stock earlier this year.

Anand Rathi Securities, a Mumbai-based brokerage, is in advanced talks to raise around $100 million in private equity funding, according to the Business Standard. New Vernon Private Equity and 3i Group would be the investors. Anand Rathi raised around $20 million last year from CVC International.

VC Deals

Fisker Automotive Inc., an Irvine, Calif.-based maker of “green” sports cars, has raised $20 million in second-round funding led by Kleiner Perkins Caufield & Byers, according to a regulatory filing. The company had announced the deal last month, but without a dollar amount. Fisker previously raised a $5.5 million first round led by Palo Alto Investors. Both rounds were placed by ThomasLloyd Capital. It plans to roll out its first cars in Q4 2009.

HeySpace International Ltd., a Hong Kong-based social networking and interactive entertainment portal for the Chinese market, has called down $10.75 million of a $20 million Series A round, according to a regulatory filing. No investor information was disclosed for the deal, which is being placed by Chardan Capital Markets.

BioVascular Inc., a San Diego-based developer of therapies for platelet-mediated diseases, has raised $10.87 million in Series C funding. BB Biotech Ventures led the round, and was joined by return backers Merck KGaA and Domain Associates. The company has now raised $18.87 million in total funding.

PublicEarth Inc., a San Francisco-based startup that is developing a database of location-specific content, has raised $3.05 million in Series A funding, according to a regulatory filing. Polaris Venture Partners led the round, with partner Bob Geiman joining the board of directors. Company founder Duncan McCall serves as CEO.

Tehuti Networks, a Mountain View, Calif.-based maker of 10 gigabit Ethernet single-chip controllers, has raised an undisclosed amount of Series B funding. ProSeed Venture Capital Fund led the round, and was joined by Ron Lachman of Lachman Goldman.

Buyout Deals

Biffa, a listed UK industrial waste disposal company, has accepted a $2.4 billion buyout offer from Montagu Private Equity and Global Infrastructure Partners (joint venture between Credit Suisse and GE). Biffa also noted, however, that third parties continue to work on a possible offer, and that they have been given the same due diligence information as Montagu and GIP.

Industri Kapital has agreed to acquire Groupe Etanco, a French maker of building fastener and fixing systems. No financial terms were disclosed for the deal, which is being done in partnership with company management and its founding family. Groupe Etanco has annual revenue of around €130 million, and employs 600 people at six sites.

Milestone Partners has sponsored a recapitalization of United Road Towing Inc., a Mokena, Ill.–based provider of vehicle towing and storage services to municipalities, commercial customers and private property owners. No total deal terms were disclosed, but Allied Capital said it helped support the deal with $44 million in secured second-lien notes.

PE Exits

Arlington Capital Partners has sold Secor International Inc. to Stantec (NYSE: SXC), for an undisclosed amount. Secor is a Redmond, Wash.-based provider of environmental consulting and engineering services to the private sector.

Investools Inc. (Nasdaq: SWIM) has acquired, an online social networking platform for investors. No financial terms were disclosed. MyTrade had raised VC funding from Knight’s Bridge Capital Partners.

PE-Backed M&A

Spyder Active Sports Inc., a portfolio company of Apax Partners, has acquired Cloudveil Mountain Works Inc., a maker of technical outdoor and mountaineering apparel. No financial terms were disclosed.

uLocate Communications, a Framingham, Mass.–based developer of location-based applications, has acquired Zync, a Boston-based developer of predictive technologies that provide online users with recommendations for local activities based on the preferences of like-minded individuals. No financial terms were disclosed. uLocate has raised around $15 million in VC funding from GrandBanks Capital, Kodiak Venture Partners and Venrock.

Firms & Funds

Inventure has held a €35.4 million first close for its latest fund, which is targeting €50 million. The Finnish venture capital firm focuses on early-stage high-tech opportunities in the Nordic region.

Human Resources

Albert Cantu has joined Waud Capital Partners as an executive partner. He previously was a senior executive with ServiceMaster.

Ronald Hopkinson has joined law firm Cadwalader, Wickersham & Taft LLP as a corporate partner, where he will focus on leveraged buyout and other private equity transactions. He previously was head of the private equity practice at Latham & Watkins LLP.

David Hytha has joined Sofinnova Ventures as an executive-in-residence, focused on mobile telecom opportunities. He previously was with T-Mobile in Europe, as executive vice president of terminals.