PE Week Wire: Fri., Nov. 30, 2007

Last night I had the privilege to address a group of venture capitalists and entrepreneurs, as part of a “VIP” kick-off dinner for today’s MIT Venture Capital Conference. Speaking in such settings is always preferable to speaking at the actual conference, since everyone laughs at jokes that aren’t terribly funny when heard completely sober.

The crowd wasn’t right for me to simply replay a talk I had given earlier that morning — on why private equity didn’t actually experience a “Golden Age” – so instead I felt it best to talk about me. Not me the individual per se, but people like me (reporters) vis-à-vis people like you (biz folk). For all the schooling that investors and executives receive, there is precious little discussion of how to best interact with the press (in your favor, not in mine).

So I played out three scenarios: (1) Company/Firm has some “good” news it wants to shout from the rooftops. (2) Company/Firm has terrible news it wants no one to hear, but a reporter has it anyway. (3) How VCs and their portfolio companies should handle VC funding announcements. Here’s an overview of my main points:

Good News Scenario: Begin preparing to disseminate good news long before you actually have any. If you wait, it might be too late to generate sustentative coverage in what you consider to be the most advantageous forums. Pick three publications that you would most like to appear in (magazines, blogs, trade newsletters, etc.). Then begin cozying up to a specific reporter at each. Go out to lunch or have a beer with them. Maybe drop them a tip about something else happening in the market. In other words, gain their confidence and, to a certain extent, their friendship. There will never be a formal quid pro quo, but it will go a long way toward getting coverage when the time comes.

Also, pick your reporter wisely. Veteran “name” journalists have the best followings, but it also can be hard to get their attention. Conversely, cub reporters don’t have as much sway, but are eager to find stories and cultivate stories. It’s a coin flip. Consider this all to be the media equivalent of due diligence. Finally, if you are hiring an outside PR firm to do this “due diligence” for you, here is the first question you should ask: What relevant reporters do you know, and how well do you know them? Get specific. Anyone can compile a spreadsheet of contacts.

Bad News Scenario: Rip off the bandage quickly. Your reflexive reaction may be to obfuscate, deny or issue no comment. But such a strategy often leads to drip, drip, drip stories that go one for days or weeks. For Wire readers, think back to VSP Capital or the Ohio Bureau of Workers’ Compensation. I’ve got to write a column each day, so it makes my job easier if I don’t always need to learn a brand new back-story (also makes it easier to read). If you rip off the bandage quickly, you’ll have a VERY bad day. But it’s just one day. If there’s nothing left to add, then there’s no way for me to write that second column.

Also, please note: If a reporter calls you about a scandal at your firm or company, you are probably the reporter’s last call. Don’t think that a “no comment” will just make it go away.

Funding News Scenario: If you’re going to talk about the funding publicly, do it as quickly as possible. Don’t let someone like me find it in a regulatory filing, and then preempt your whole press strategy. It just makes your life difficult for no reason, and doesn’t let you control your own message in the least. If you are an early-stage company that wants to remain stealth, then make sure you really are stealth. Don’t talk about your company on your Facebook or LinkedIn account, or give a talk to your old biz school about what you’re up to. If you want to be stealth, do it for real. If not, get at least a vague announcement out there on your own terms.


Other Stuff

* We’ve now got over 50 firms participating in our 5th Annual Internship Rodeo. Please keep ’em coming. Listings will go up at noon on Monday.

* Facebook raises more venture cash, according to Kara Swisher. This time it’s $60 million from Hong Kong billionaire Li Ka-shing. If the $15 billion valuation held, thenKa-shing now ownsa whopping 0.004%.

* Earlier this week we had a Chinese anti-monopoly law that some folks felt could stifle foreign-led M&A. Now comes a new merger law in India, and we’re seeing the same concerns.

* Fred Wilson lays out his track record. I seem to be linking to him a lot lately, but the man is simply on fire when it comes to examining VC industry performance.

* Google nears FTC approval for its DoubleClick acquisition.

* Fang Fengli is planning to launch a new private equity fund in China, according to WSJ (sub req.).This could really complicate his relationship with Goldman Sachs, with whom Fengli set up a Chinese securities joint venture three years ago.

* Valleywag has an interesting sidenote on the AdBrite funding.

Top Three

Fresenius Medical Care AG (NYSE: FMS) has acquired Renal Solutions Inc., a Warrendale, Penn.-based provider dialysis products and services. The deal is valued at up to $190 million, including $100 million at closing, $60 million after the first year andup to $30 million in milestone payments over the next three years. RSI had approximately $10 million on outstanding net debt at closing, and had raised around $34 million in VC funding from CID Equity Partners, Blue Chip Venture Co., PA Early Stage, Birchmere Ventures, Draper Triangle Ventures, Gazelle TechVentures, Triathalon Medical Ventures and Amkey Ventures.

Marlin Equity Partners, a Los Angeles-based special situations firm, has closed its second fund with $300 million in capital commitments. Probitas Partners served as placement agent.

Morgan Stanley has fired co-president Zoe Cruz, while fellow co-president Robert Scully has been moved to the newly-created Office of the Chairman. Cruz, a 25-year firm veteran, and Scully will be replaced by James Gorman and Walid Chammah. Gorman runs the global wealth management group, while Chammah was named global head of I-banking in July.

VC Deals

InSightec Ltd., an Israel-based developer of magnetic resonance-guided focused ultrasound systems for the operating room, has raised $30 million in new VC funding. Return backers include Elbit Industries Ltd., GE Capital Equity Holdings and MediTech Advisors. Get more info.

AdBrite, a San Francisco-based online advertising platform, has raised $23 million in Series C funding. DAG Ventures and Mitsui & Co. were joined by return backers Sequoia Capital and Artis Capital Management. The news was first reported yesterday by peHUB.

Fate Therapeutics, a Seattle-based stem cell biotech company focused on cell fate control, has raised $12 million in VC funding. Backers include ARCH Venture Partners, Polaris Venture Partners, Venrock and OVP.

Synchrony Inc., a Roanoke, Va.-based maker of magnetic bearings, power and control systems, has raised $10 million in Series B funding from affiliates of Third Security LLC.

Vericare Management Inc., a San Diego-based provider of behavioral healthcare services to patients in nursing homes, has raised $9.5 million in Series B funding. HLM Venture Partners led the round with $6 million, and was joined by Aetna Ventures and return backers Salix Ventures and Acacia Venture Partners. Get more info.

Avail Media Inc., a Reston, Va.-based provider of IPTV and other media services to broadband operators, has raised $8 million in additional Series B funding. The round total is now $25 million, including a $17 million first tranche announced back in February. Valhalla Partners was joined on the new infusion by existing backers Columbia Capital, Novak Biddle Venture Partners and Pioneer Ventures. Avail also announced that it has secured an additional $5 million in debt financing from a “strategic investor” and Silicon Valley Bank.

Allylix, a San Diego-based maker of chemicals, terpenes and production platforms for the flavor & fragrance, pharma, nutraceutical and agricultural markets, has raised $3.35 million in VC funding. Backers include Tech Coast Angels, Life Science Angels, Blue Grass Angels, Pasadena Angels and Tate & Lyle Ventures.

mGinger, a Bangalore-based provider of a permission-based mobile advertisement service, has raised $2 million in first-round funding. DFJ led the deal with a $1.5 million infusion, while NEA Indo-US provided the remainder. The news was first reported by ContentSutra, based on an interview with DFJ venture partner Sateesh Andra.

Buyout Deals

Cobalt International Energy LP, an oil and gas exploration and production company that focuses on the Deepwater Gulf of Mexico, has received a $350 million private equity commitment from First Reserve. The Houston, Texas-based company’s shareholder group already included Goldman Sachs, Riverstone Holdings, KERN Partners and company management.

J.C. Flowers is willing to increase its offer for embattled UK bank Northern Rock, but also could walk if the government won’t negotiate, according to Reuters. The current preferred bidder is a group put together by Richard Branson’s Virgin Group.

3i India Infrastructure Fund has invested $101 million for a minority stake in Soma Enterprise Ltd., a Hyderabad, India-based engineering and construction firm.

Sprint Nextel Corp. (NYSE: S) has turned down a $5 billion investment proposal from South Korea’s SK Telecom and Providence Equity Partners, according to the Wall Street Journal.

Avado Brands Inc. has sold 83 of its Don Pablo’s Mexican Restaurants and Hops Grillhouse and Brewery restaurants, as part of an agreement with the U.S. bankruptcy court. The primary buyer is DDJ Capital Management, a hedge fund that had led a $67 million bankruptcy loan to Avado.

PE-Backed IPOs

Broadview Networks Inc., a Rye Brook, N.Y.-based provider of integrated communications and managed security services, has filed for a $287.5 million IPO. It plans to trade on the Nasdaq, with Deutsche Bank Securities and Jefferies & Co. serving as co-lead underwriters. Broadview has raised nearly $300 million in total VC funding since 1997, with current shareholders including Baker Capital, MCG Capital, New Enterprise Associates, ComVentures and Lightspeed Venture Partners.

MedGenics Inc., a Vienna, Va.-based developer of a sustained-action therapeutic protein delivery technology for a variety of drugs, has raised £3.28 million in an IPO on the AIM market of the London Stock Exchange. The offering prices MedGenics shares at 10 pence each, for an initial market cap of approximately £10.4 million (£27.6 million on a fully diluted basis). MedGenics has raised around $15 million in VC funding since 2001, from firms like Alta Berkley Venture Partners, Alta Partners and Koor Corporate Venture Capital.

PE Exits

Coty Inc. is nearing a deal to buy Del Laboratories Inc., a Uniondale, N.Y.-based cosmetics company owned by Kelso & Co., according to LBO Wire. The sale price is believed to be approximately $800 million.

ShoreTel Inc. (Nasdaq: SHOR), a Sunnyvale, Calif.-based provider of IP telecom systems for enterprises, has withdrawn registration for a secondary public offering of 4.4 million common shares. All of the shares were being offered by Lehman Brothers Venture Partners, which had been looking to reduce its ownership stake from 17.8% to 7.4 percent. No explanation for the withdrawal was given.

Terra Firms Capital Partners is planning to sell a 15% stake in recently-acquired music company EMI Group PLC for approximately £250 million, according to The Times of London. No information on the buyer was reported.

Thoma Cressey Bravo has sold Viecore Inc. to Nuance Communications Inc. (Nasdaq: NUAN). No financial terms were disclosed. Viecore is a Mahwah, N.J.-based provider of contact center speech solutions for large enterprises.

PE-Backed M&A

BSG Alliance Corp., an Austin, Texas-based provider of on-demand enterprise software, has acquired New Paradigm, a business innovation consulting firm led by Don Tapscott. No financial terms were disclosed. BSG earlier this year raised $20 million in VC funding from Foundation Capital, Hummer Winblad Venture Partners and Powershift Ventures.

TSI Group Inc., a portfolio company of Arlington Capital Partners, has acquired ADB Industries (dip brazing and machining), CGR Technologies (brazing technologies) and Thompson Industries (machining and vacuum brazing). No financial terms were disclosed.

Xtera Communications, an Allen, Texas-based optical networking and services company, has acquired Azea Networks Ltd., a UK-based provider of optical networking solutions. No financial terms were disclosed. Xtera has raised over $218 million in total VC funding, from firms like The Wellcome Trust, New Enterprise Associates and Arch Venture Partners. Azea had raised over $57 million since 2002, from firms like Atlas Venture, Accel Partners, Quester Capital Management, TVM Capital and Lago Partners.

Firms & Funds

Thoma Bravo is raising up to $1.5 billion for its debut fund, according to a regulatory filing. The Chicago-based middle-market firm is run by two of the three name partners of Thoma Cressey Bravo. The third is out with a $500 million-targeted fund for a firm called Cressey & Company.

Jerusalem Global Ventures announced that it will begin marketing a $200 million-targeted growth equity fund, which will invest in private Israeli tech companies that “are on a trajectory to IPO within three years and have a proven business model.” A first close is scheduled for April.

Human Resources

Dick Kramlich, co-founder and general partner of New Enterprise Associates, is planning to spend the next year deal-sourcing in China. The news was first reported by The Wall Street Journal, with Kramlich saying that he and his wife have rented an apartment in Shanghai.

GE Commercial Finance has named Thomas Regan managing director and group head of sponsor coverage for media, communications and entertainment. He previously ran the group’s large-cap media origination team.

Headwaters MB has promoted Tucker Morrison to managing director, where he will focus on micro-cap transactions.

Frank Douglas has joined The Ewing Marion Kauffman Foundation as a senior fellow in entrepreneurship. He will maintain his position as a partner with PureTech Ventures and as the Chief Scientific Advisor of Bayer Healthcare, AG.