PE Week Wire — Friday, August 12

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Mayfield Takes LP Lumps

Lots of big news this morning, including the $600 million acquisition of Flarion by Qualcomm, the ValueClick/FastClick merger and changes at Lightspeed Venture Partners. But since you can read about such things elsewhere, I wanted to elaborate on something you can only find in next Monday’s print edition of PE Week:

Mayfield, one of the earliest and most prestigious venture capital firms, has lost its luster among the crème de la crème of limited partners. The Sand Hill Road firm is about to close its twelfth fund, but without at least seven top-tier limited partners who had invested in prior Mayfield funds. What follows has been independently confirmed with five different sources, who agreed to speak only under the condition that neither they nor their institutions be identified. What I can share, however, is that the seven dissenting LPs are brand names – in some cases household names – from the university endowment, private foundation and fund-of-funds arenas. Also, I made multiple attemps to speak with Mayfield (and offered to hold the story until the fund closed, if Mayfield was concerned about SEC regs), but never received a response.

The roots of Mayfield’s problem lie in its eighth and ninth funds, which were closed in 1995 and 1997, respectively. Each fund featured budget-based management fees, which is an alternative to the status quo of charging LPs an annual percentage (typically 2%) of total committed capital. Budget-based fees require the firm to annually come up with an itemized expense list, and are generally considered LP-friendly measures that also are employed by firms like Greylock and New Enterprise Associates. In Mayfield’s case, the partnership agreement allowed the firm’s annual budgets to equal up to 2.5% of committed capital, but it never came close to doing so. Therefore, LPs were initially happy, particularly because both funds also happened to be wildly profitable.

One problem for firms with profitable funds, however, is that they sometimes can generate “clawback” situations (for those unfamiliar with clawbacks, I’ve posted an explanation). This happened with both Mayfield VIII and Mayfield IX, which theoretically meant that the Mayfield general partners would have to reach into their own pockets to compensate their LPs. Standard operating procedure.

What Mayfield did next, however, was stunning. Rather than taking out its collective checkbook, sources say the firm proposed a partnership amendment whereby much of the clawback would be paid by charging LPs the difference between what they had paid in management fees, and the 2.5% maximum that they could have been charged. Analogy? You buy a loaf of bread on sale at Wal-Mart for $1.50 instead of for $2.00. When you go back to the store the following week, the Wal-Mart greeter asks you for the fifty cents. Even worse, Mayfield was asking for a cumulative payment, based on the “savings” that LPs enjoyed over the life of the funds.

Most LPs, of course, balked at the proposal. It wasn’t the first time that a VC firm had proposed a fee-for-clawback exchange, but LPs tell me that Mayfield was the only one to do so without its metaphorical hat in hand: “It was like they never even considered that we might disagree,” says a fund manager whose institution chose not to re-up for Mayfield XII. “The whole thing could probably have been avoided if they had just shown a little humility and interest in working with us on something that we could all live with.

But Mayfield refused to give up, and the discussions moved quickly through another couple of stages before Mayfield basically offered an ultimatum to the dissenters: Vote to ratify the amendment or we’ll just pay the clawback out of cash on hand (read: committed LP cash on hand, plus future management fees). Two LPs tell me that they consulted attorneys on the matter, but were told that the case was gray enough that either side could prevail in a courtroom. The result was that enough – albeit not all — LPs bit the bullet and signed the amendment this past spring.

;They are arrogant in dealing with LPs, and I’m saying that in the context of most VCs being arrogant,” says a Mayfield investor. That characterization was used by all but one person I spoke with.

The result is that Mayfield was turned down by at least seven of the top (by reputation, at least) limited partners in the business. Most sources add that the decision was largely based on frustration and disappointment with the way Mayfield had conducted itself on the fee/clawback and other issues, but added that recent returns also played a role: “Most everyone probably would have invested in this fund if the Fund X or Fund XI returns had been better,” one source explains. According to The 2005 Private Equity Performance Monitor published by Private Equity Intelligence, both funds are underwater and fall into the bottom quartile in terms of net IRR, as of July 2004 and September 2004, respectively.

But why, you may ask, does this matter if Mayfield is closing on its fund? And if I told you that the fund is oversubscribed (which it is), you may ask the question louder. After all, isn’t everyone’s money green?

Yes and no. Mayfield got its money and some pretty decent terms — it had been looking for a 2.5% percentage fee (no more budgets) and a 30% carried interest structure. It will be able to make deals for years to come. On the other hand, the quality of your investors matters when it comes to recruiting new talent and even sometimes when doing deals. If you don’t believe me, why is everyone so excited that PodShow got funded? Is it because of the money itself, or because the money came from Kleiner Perkins and Sequoia?

    Top Three


Qualcomm Inc. (Nasdaq: QCOM) has agreed to acquire Flarion Technologies Inc. for approximately $600 million in cash and Qualcomm stock. Qualcomm also may pay an additional $205 million in cash and stock, if Flarion is able to meet certain milestones over the next few years. Flarion is a Bedminster, N.J.-based provider of infrastructure technology for mobile broadband Internet protocol services. It has raised approximately $75 million in total VC funding since its 2000 inception, from firms like Bessemer Venture Partners, Charles River Ventures, New Venture Partners, SK Capital, Cisco Systems, Equitek Capital, Lucent Technologies, Nassau Capital, Pequot Capital Management and T-Venture Holding.


Lightspeed Venture Partners announced that it is raising its seventh fund with a $400 million target, but that two of its general partners will spin out to launch their own fund with a separate strategy. Remaining Lightspeed GPs include Barry Eggers, Ravi Mhatre, Peter Nieh and Chris Schaep, while the departing GPs are Gill Cogan and Carl Showalter. Read more in Monday’s print edition of PE Week.

ValueClick Inc. (Nasdaq: VCLK) has agreed to acquire FastClick Inc. (Nasdaq: FSTC) in a $214 million stock swap between the two online advertising companies. FastClick raised $78 million via an IPO earlier this year, after having raised $75 million in Series A funding last September at a post-money valuation of $96.54 million. Shareholders include Highland Capital Partners, Oak Investment Partners and Disney corporate venture arm Steamboat Ventures.

    VC Deals

Mpex Pharmaceuticals Inc., a San Diego-based drug company focused on antibacterials for life-threatening infections, has raised $32 million in Series B funding. SV Life Sciences led the deal and HBM BioVentures co-led the deal, and were joined by Aberdare Ventures, Adams Street Partners and return backers Western States Inv*stment Group and Charitable Leadership Foundation. The company previously raised $3.7 million in Series A funding.

Kodiak Networks Inc., a San Ramon, Calif.-based provider of wireless voice services, has raised over $14.63 million in Series B funding, according to a regulatory filing. Company shareholders include Kleiner Perkins Caufield & Byers and Redpoint Ventures.

Alteer Corp., an Irvine, CA service company that delivers tech-enabled practice enhancement and workflow solutions to small-and mid-sized physician practices, has completed the first of two closings in a transaction that adds $16.5 Million to the capitalization of the company.MedVenture Associates and return backer Sanderling Ventures are co-leading the deal, and are joined by fellow existing shareholder Skyline Ventures.Triple Tree LLC advised Alteer on the transaction.

99Bill Corp., a Shanghai, China-based developer of an online and wireless payment platform, has raised just over $2 million in Series A funding. The deal was co-led by DCM-Doll Capital Management and Peninsula Capital.

Alder Biopharmaceuticals Inc., a Bothell, Wash.-based developer of a yeast cell-based method for producing antibodies, today will announce $11.1 million in first-round funding, according to The Seattle Times. Sevin Rosen Funds led the deal, and was joined by Ventures West and seed backer WRF Capital.

Progressive Beverages Inc., a Culver City, Calif.-based brand marketing firm specializing in contemporary premium wine and spirits imported from Asia, has raised $1.75 million in Series C funding. Tech Coast Angels led the deal, and was joined by existing backers the Pasadena Angels and Keiretsu Forum members.

Kiala SA, a Belgian provider of collection point networks in Europe that allow consumers to pick up and return parcels, has raised 10 million euros in third-round funding. HarbourVest Partners led the deal with an 8 million euros commitment.

Abound Resources Inc., an Austin, Texas-based provider of tech support solutions for community financial institutions, has raised an undisclosed amount of Series C funding. Total capital infusions now near $2 million.

Alphion Corp., a Princeton Junction, N.J.-based provider of integrated components for photonic regeneration, has raised $1.5 million in additional third-round funding. This closes out the round with $12.1 million (first close was announced in April), and brings Alphion’s total venture capitalization to $44.1 million. Tallwood Venture Capital led the third-round infusion, and was joined by Goldman Sachs, Narra Venture Capital, Axiom Venture Partners, ICCP Venture Partners and unnamed industry executives.

Dune Networks Inc., an Agoura Hills, Calif.–based provider of merchant silicon solutions for traffic management and scalable switching fabrics, has received an undisclosed amount of strategic funding from Siemens Venture Capital. The company previously had raised around $29 million in private funding from firms like Pitango Venture Capital, JVP, Elwin Capital Partners and Alta Berkeley Venture Partners.

    Buyout Deals


Accel-KKR has acquired a majority equity position in Systems & Software Inc., a Colchester, Va.-based provider of integrated software solutions for the utility industry. No financial terms were disclosed.

Cerberus is in advanced talks to acquire German insurer Gerling Allgemeine Versicherung AG, according to a German newspaper report. The deal could be valued at more than 1 billion euros.

Gores Technology Group has acquired the assets of Somero Enterprises LLC from Dover Corp. (NYSE: DOV). No financial terms were disclosed. Somero Enterprises is a Jaffrey, N.H.–based maker of concrete construction tools.

    PE-Backed IPOs

Refco Inc., a New York-based provider of execution and clearing services for exchange-traded derivatives, priced 25 million common shares at $22 per share (above its $19-$21 range), for an IPO take of approximately $583 million. It plans to trade on the NYSE under ticker symbol RFX, while CSFB, Goldman Sachs and Banc of America Securities served as lead underwriters. Thomas H. Lee Partners led a buyout of Refco last August.

Cynosure Inc., a Westford, Mass.-based developer of non-invasive aesthetic treatment systems to do such things as remove hair or treat vascular lesions, has filed to raise $75 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol CYNO, with Citigroup serving as lead underwriter. Cynosure is majority-owned by Italy-based El.En SpA, and also received under $1 million in VC funding in 1998 from the Boston University Community Technology Fund and Venham Ventures.

    PE-Backed M&A

Manhattan Associates Inc. (Nasdaq: MANH) has agreed to acquire Evant Inc., a San Francisco-based provider of supply chain planning and replenishment solutions. The deal is valued at approximately $50 million in cash. Evant has raised over $110 million in total VC funding since its 1994 inception, including a 2000 infusion that valued the company at around $200 million. The company was recapped in late 2002, with current shareholders including 3i Group, Altos Ventures, Crosslink Capital, Kleiner Perkins Caufield & Byers and Global Retail Partners.

Proxicom Inc., a portfolio company of Gores Technology Group LLC, has agreed to acquire all capital stock of healthcare industry consultant Daou Systems Inc. (OTC BB: DAOU) for approximately $21.6 million.

NAL Worldwide LLC, a Westmont, Ill.-based affiliate of Lake Capital Partners, has acquired the SIRVA Logistics assets of North American Van Lines Inc., a subsidiary of SIRVA Inc. (NYSE: SIR). No financial terms were disclosed.

    Firm & Fund News

Hidden Creek Partners, a group formed in 1989 to lead industrial buyouts financed by Onex Corp., has been integrated into Thayer Capital Partners. The move is effective immediately, and results in HCP pros Judy Vijjums, Carl Nelson, Dan Moorse and Kurt Rasmussen all being named managing directors with Thayer. HCP has been assisting Thayer on certain deal opportunities since January 2004, in part due to the relationship formed when HCP co-founder and CEO Scott Reud joined Thayer as a managing partner. In other Thayer personnel news, the firm has promoted Doug McCormick from managing director to managing partner. He joined the firm in 1999, and will continue to lead its aerospace, defense and federal services group.

NeoMed Management of Norway has held a second closing on its fourth venture capital fund focused on the healthcare and life sciences markets. Total capital commitments now total 70 million euros.

    Human Resources

Zhou Hongyi, outgoing CEO of Yahoo China, reportedly has agreed to joined China-focused IDG Technology Venture Inv*stment Inc., effective September 1.

Jennifer Tedesko has joined private equity placement agent Atlantic-Pacific Capital as a vice president. She previously worked at Probitas Partners.

Jeffrey Walker, managing partner of JPMorgan Partners, has left the board of AXIS Capital Holdings Ltd. (NYSE: AXS). The resignation coincides with JPMorgan Partners’ bulk sale of 7.8 million shares of AXIS Capital common stock.

    In Memoriam

Stanley F. Alfeld, founder and former chairman of Landmark Partners, has passed away, following a brief illness. He leaves behind wife Marilyn, two sons, a daughter, a daughter-in-law and five grandchildren. A memorial service was held on August 1, and the familay requests that any memorial donations be made to: Saint Francis/Mount Sinai Regional Cancer Center, 114 Woodland Street, Hartford, CT 06105; Attn: Dr. Peter Tutschka.


Just Linking Around

*** It seems that yesterday’s news about PodShow prompted fellow podcasting company Odeo to disclose some details of its own venture funding. By the way, Om Malik suggests that if PodShow can get $8.5 million, BitTorrent is in for a VC windfall: “Let me put it in the old world terms. The podcast start-ups of today are like today, while Bit Torrent is Cisco of the digital content revolution. It has actual technology that will help grow the open media. It has the technology that will help distribute the “video content” next generation bloggers will create or whatever. It is infrastructure – and we know who makes all the money.

*** Jeff Bussgang on how VCs and entrepreneurs view “time” differently.

*** The Financial Times discusses the alleged brain drain caused by corporate executives leaving for private equity pastures.

*** If Rick Munarriz thought Whirlpool made a mistake the first time it raised its bid for Maytag, I can only imagine what he’s thinking now…

    Top Three


Yahoo Inc. (Nasdaq: YHOO) has agreed to acquire a 40% stake (35% voting position) in China-based B2B website operator for $1 billion in cash. The deal is part of a larger strategic transaction that Yahoo values at $4 billion. – which also runs online auction site Taobao — raised $82 million in Series D funding last year at a post-money valuation of approximately $182 million, from firms like Fidelity Investments, Goldman Sachs, Granite Global Ventures, Softbank China VC, Inv*stor AB, Transpac Capital and Venture TDF.


Whirlpool Corp. (NYSE: WHR) has again upped its bid for rival appliance maker Maytag Corp. (NYSE: MYG). The latest offer is $21 per share, which would value the entire buyout at $2.7 billion, including $1.79 billion of equity. Whirlpool originally bid $17 per share, later raised it to $18 and later raised it to $20. A $14 per share offer from Ripplewood Holdings remains on the table.


Michael Powell, former chairman of the Federal Communications Commission, has joined Providence Equity Partners as a senior advisor. 

    VC Deals

Cortina Systems Inc., a Sunnyvale, Calif.-based provider of analog and digital integrated circuits, has raised $30 million in Series C funding. JAFCO Ventures and Canaan Partners co-led the deal, and were joined by return backers like El Dorado Ventures, Kodiak Venture Partners, Morgenthaler Ventures, Redpoint Ventures and Invesco Private Capital.

Avontec GmbH, a German drug company focused on anti-inflammatory candidates, has raised 14.5 million euros in second-round funding. AnGes MG of Japan and DVC Deutsche Venture Capital co-led the deal, and were joined by BioMed Inv*st and InnovationsKapital.

Ziptronix Inc., a Morrisville, N.C.–based developer of 3D IC semiconductor technology, has raised $7.2 million in Series C funding. Return backers include Alliance Technology Ventures, Grotech Capital, Intersouth Partners, Research Technology Ventures, RTI International and NC IDEA.

BrainsGate Ltd., an Israel-based developer of implantable medical devices to treat various CNS-related diseases, has received $7 million in private funding from Elron Electronic Industries Ltd. (Nasdaq: ELRN). The deal gives Elron a 20% ownership stake in BrainsGate, while existing shareholders include Boston Scientific Limited, Pitango Venture Capital, FBR Infinity II Ventures and MB Venture Capital Fund.

Expand Networks Inc., a Roseland, N.J.-based provider of application acceleration solutions, has raised $6.7 million in VC funding, and is expected to add another $2.3 million within the next 90 days. Tamir Fishman led the deal, and was joined by Discount Inv*stment Corp. and The Challenge Fund.

Absolutely Training Ltd., a UK-based provider of regulatory e-learning solutions to the inv*stment and retail banking market, has raised Gbp250,000 from The Capital Fund.

Collax, a Munich-based spinout of Pyramid Computer GmbH, has raised five million euros in first-round funding from Atlas Venture and Wellington Partners. Collax will focus on marketing a preconfigured Linux server, based on Pyramid’s open-source technology.

Simple Star Inc., a San Francisco-based provider of digital imaging software and services, has raised $6.3 million in VC funding from Venrock Associates.

    Buyout Deals


Ironbridge Capital, an Australian private equity firm, has agreed to acquire Barbeques Galore Ltd. (Nasdaq: BBQZ) for approximately US$45 million in cash, or $9.91 per outstanding share. Barbeques Galore operates a Sydney, Australia-based chain of specialty retail stores in the U.S. and Australia, with a focus on barbecues, backyard accents, fireside products and related accessories.

Arcplan, a provider of business intelligence solutions with offices in Düsseldorf, Germany and Wayne, Pa., has completed a 27.5 million euros recapitalization. ViewPoint Capital Partners led the deal and was joined by German bank HypoVereinsbank.

Palladium Equity Partners has completed its acquisition of Dallas-based TB Corp., parent of the Taco Bueno restaurant chain, from Jacobson Partners. No financial terms were disclosed. Palladium also named John Miller as Taco Bueno’s new CEO. He previously served as president of Brinker International‘s Romano’s Macaroni Grill and, earlier in his career, served as a vice president of Operations for Taco Bueno. Miller replaces Stephen Clark, who is remaining with Jacobson Partners, as CEO of the Bertucci’s restaurant chain.

Permira has agreed to acquire a majority ownership stake in Jet Aviation, a Zurich-based provider of business aviation services. No terms were disclosed.

    PE-Backed IPOs

Heartland Payment Systems Inc., a Princeton, N.J.-based provider of bank card-based payment processing services to merchants, priced 6.75 million common shares at $18 per share (above its $14-$16 range), for an IPO take of approximately $121.5 million. Citigroup served as lead underwriter, while Greenhill Capital Partners and LLR Equity Partners were listed as significant shareholders.

Penson Worldwide Inc., a Dallas, Texas-based provider of securities processing infrastructure products to the global securities and inv*stment market, has filed to raise $100 million via an IPO of common stock. The company plans to trade on the Nasdaq under ticker symbol PNSN, and has engaged JPMorgan and Credit Suisse First Boston to serve as co-lead underwriters. Technology Crossover Ventures is listed as a minority shareholder (14.9%), thanks to its August 2004 infusion of $25 million.

Everest Acquisition Corp., a Hong Kong-based blank check acquisition company focused on businesses with primary operating facilities in the Asia-Pacific region, has filed to raise $96 million via an IPO being sole managed by Jesup & Lamont Securities Corp. The company’s top executives and shareholders are GE Asia Capital Technology Fund managing directors Ashock Kothari (chairman and CEO) and Gage McAfee (president).

    PE-Backed M&A

R.R. Donnelley & Sons Co. (NYSE: RRD) has agreed to acquire a 100% interest in Poligrafia SA, a Polish publishing company publicly-traded on the Warsaw Stock Exchange. The deal is valued at approximately 43 million euros, and will include the approximately 56.2% of outstanding Poligrafia shares held by Baring Corilius Private Equity.

Austria Technologie & Systemtechnik, an Austrian printed circuit board (PCB) company, reportedly has acquired an 86% stake ECAD Technologies, a Bangalore, India-based provider of design services for PCB manufacturers. ECAD has raised VC funding from Karnataka Asset Management Co. and SIDBI Venture Capital Ltd.

    Firm & Fund News

Ocean Tomo LLC, a Chicago-based merchant bank focused on intellectual property (IP) assets, has launched a $200 million private equity and mezzanine debt fund focused on companies with undervalued IP rights. The primary limited partner is Perot Inv*stments Inc., a Dallas, Texas-based firm founded by Ross Perot.

    Human Resources

Warren Lee has joined Canaan Partners as a principal. He has spent the past five years with Comcast Interactive Capital.

Leeds Weld & Co. has hired: Scott McLallen, formerly with Monitor Clipper Partners; Carter Harned, formerly a managing director in the financial sponsors and leveraged finance group of CIBC World Markets; and Brad Whitman, formerly of The Carlyle Group.

Headway Capital Partners, a UK-based private equity secondaries firm, has hired David Toon as its chief financial officer. He previously served as financial controller for Granville Baird Capital Partners, and also as group taxation manager for parent company Robert W Baird Group.

Edwin “Ted” Laurenson has joined the corporate department of McDermott Will & Emery as a partner focused on the regulation of public and private inv*stment funds and inv*stment advisory matters.

Bart Greenberg, a partner in the Orange County office of Manatt, Phelps & Phillips LLP, has been elected chairman of the Tech Coast Venture Network, a Tustin, Calif.-based nonprofit group that provides information and advisory services for early-stage companies looking for capital and other ways to grow their businesses.


Random Ramblings

There is little that gets Valley girls and boys as hot and bothered as when an Internet company gets funded by both Sequoia Capital and Kleiner Perkins Caufield & Byers. So it’s worth noting that the iconic venture shops have participated in an $8.85 million Series A round for PodShow Inc., according to a regulatory filing. For an added bonus, both John Doerr and Ray Lane have taken board seats, joining both Jerry Newman of Bear Stearns and omnipresent angel investor Ram Shriram (Google, Plaxo, Zazzle, etc.), who is representing shareholder Harris MyCFO Inc.

PodShow is a Miami Beach-based company focused on the development, management and promotion of online audio programming, with an obvious focus on the podcasting phenomenon. It seems to be the renamed version of Boku Communications, which was launched last year by Ron Bloom and “The Podfather” Adam Curry (who was the MTV VJ with whom I grew up).

I can say with 100% confidence that I have no idea whether or not this is a good inv*stment, in part because of my disinterest in buying an I-pod or having much interest in podcasts in general. After all, don’t I have enough to read without feeling obligated to begin listening to lots of content? (Luddite-related: I also don’t understand the digital camera phenomenon. I only bought my first one before going to Italy, and have been tremendously disappointed with what seems to be a higher-cost, lower-quality alternative to the standard 35-milimeter). Maybe it’s just an East Coast thing and I’m just suffering from tech jetlag. In other words, no basis for deal analysis here, but I figured you’d want to know it happened.

*** Yes, the Charity Auction is still happening. I just received a contract from the online auctioning company that’s going to manage it.

*** Even more possible trouble related to private equity dealings at the Illinois Teachers’ Retirement System, according to The Chicago Tribune. I feel bad for the non-implicated folks I know over there. what a mess.

*** Yesterday I mentioned Amp’d Mobile, a VC-backed mobile virtual network operator that in Q4 will launch a product that will aggregate a wide variety of content aimed at 18-to-34 year-olds. Its competitors are MVNOs from Virgin and (soon) ESPN, but now it looks like HBO also plans to enter the ring.

    Top Three


NIB Capital has confirmed earlier reports that it will be acquired by a consortium led by UK-based buyout firm JC Flowers & Co. for approximately 2.1 billion euros. NIB currently is owned by a pair of Dutch pension systems.

Genoptix Inc., a San Diego-based provider of personalized medicine services for management of hematolymphatic disorders, has raised $17.3 million in Series D-1 funding. Chicago Growth Partners was joined on the deal by return backers Enterprise Partners, Alliance Technology Ventures, Tullis-Dickerson, U.S. Trust’s Excelsior Venture Partners III and Lotus Bioscience Inv*stment Holdings.

Trinity Ventures has raised $300 million for its ninth fund, according to a regulatory filing.  

    VC Deals

Centrify Corp., a Mountain View, Calif.-based network security company focused on integrating non-Microsoft platforms with Microsoft Active Directory management services, has raised $14 million in Series B funding. Invesco Private Capital led the deal, and was joined by return backers Mayfield and Accel Partners. Centrify previously raised $6.8 million in Series A funding at a post-money valuation of approximately $12.5 million.

Veoh Networks Inc., a La Jolla, Calif.-based developer of an Internet television peer-casting network, has raised an undisclosed amount of Series A funding led by Shelter Capital Partners.

Tentoe Inc., a Pleasanton, Calif.-based provider of product information management software, has raised $7.2 million in Series B funding from Menlo Ventures.

OpTier Ltd., a New York-based provider of transaction workload management solutions, has raised $9.5 million in third-round funding. Return backers include Carmel Ventures, Lightspeed Venture Partners and Pitango Venture Capital. The company has raised $25 million in total VC funding since 2003.

Aperto Networks Inc., a Milpitas, Calif.-based provider of multi-service broadband wireless access systems, has raised over $16.25 million of a $20 million Series E funding round, according to a regulatory filing. Company shareholders include Canaan Partners, Alliance Ventures, Tyco, JK&B Capital, Sawtik Ventures and Innovacom.

Navini Networks Inc., a Richardson, Texas-based provider of plug-and-play broadband wireless access solutions, has raised $13.42 million in Series E funding, according to a regulatory filing. Company shareholders include Austin Ventures, Lehman Brothers, Granite Ventures, Sternhill Partners, Sequoia Capital and Motorola.

AMR Inv*stments, a subsidiary of American Airlines parent company AMR Corp., is raising its second third-party, private equity fund-of-funds (American Private Equity Partners II). The vehicle is being marketed with a $200 million cap, and already has secured over $53 million in capital commitments, according to a regulatory filing.

Ivrea Pharmaceuticals Inc., a Quincy, Mass.-based maker of skin care products, has raised $5.1 million in Series A funding, according to a regulatory filing. Participants include Atlas Venture and Easton Hunt Capital Partners.

TotalMove Inc., a Shelton, Conn.-based online provider of real estate-related services, has raised around $1.74 million in Series A funding (including $898,000 in debt), according to a regulatory filing. Equity participants included General Catalyst Partners.

Avigenics Inc., an Athens, Ga.-based biotech company developing therapeutic proteins, has raised $13.1 million in Series D-1 funding, according to a regulatory filing. Company shareholders include Fuqua Ventures, Kitty Hawk Capital, Cordova Ventures, FBB Associates, Four Partners, Tullis-Dickerson and Baker Brothers Inv*stments.

    Buyout Deals


Lovell Minnick Partners has agreed to acquire a control stake in ALPS Financial Services Inc., a Denver-based provider of outsourced back-office administration and distribution services to the fund management industry. The deal also includes ALPS subsidiary ALPS Mutual Fund Services Inc. No terms were disclosed for the deal, which is expected to close next month.

Beacon Roofing Supply Inc. (Nasdaq: BECN) has agreed to acquire Shelter Distribution Inc., a McKinney, Texas-based roofing products distributor owned since July 2002 by Brazos Private Equity Partners. The deal is valued at approximately $152.5 million in cash, and is expected to close apby the end of September.

Phillips & Temro, a portfolio company of Morgenthaler Partners, has acquired Truflo Air Movements, a Tipton, UK-based manufacturer of steel engine cooling fans for the heavy duty off-road vehicle market. No financial terms were disclosed.

Ripplewood Holdings reportedly may raise its bid for Maytag Corp. (NYSE: MYG) to $15.65 per share, from its initial offer of $14 per share. A rival $20 per share bid remains on the table from Whirlpool Corp. (NYSE: WHR).

Gap Inc. (NYSE: GPS) has seen its stock price rise over the past few days, based on rumors of a possible leveraged buyout offer.

The Carlyle Group has received European Union approval for its pending acquisition of France-based corrugated paper and packaging materials company Otor Finance.

    PE-Backed IPOs

RBC Bearings Inc., an Oxford, Conn.-based maker and marketer of plain, roller and ball bearings, priced nearly 9.29 million common shares at $14.50 per share, for an IPO take of approximately $134.68 million. It originally had filed to sell 8.17 million shares at between $14 and $16 per share. Merrill Lynch & Co. served as lead underwriter, while Whitney & Co. had been the company’s primary equity backer.

Reddy Ice Holdings Inc., a Dallas-based manufacturer and distributor of packaged ice, priced 10.2 million common shares at $18.50 per share (above its $16-$18 range), for an IPO take of approximately $188.7 million. Bear Stearns, Lehman Brothers and Credit Suisse First Boston served as co-lead underwriters, while selling shareholders included both Trimaran Capital Partners and Bear Stearns Merchant Banking.

Coley Pharmaceutical Group Inc., a Wellesley, Mass.-based drug company, priced 6 million common shares at $16 per share (top of $14-$16 range), for an IPO take of approximately $84 million. Merrill Lynch and JPMorgan served as lead underwriters. Coley had raised around $139 million in VC funding from shareholders like Thomas, McNerney & Partners, Techno Venture Management, Venrock Associates, Global Life Science Ventures and AlpInv*st.

Brookdale Senior Living Inc., a Chicago-based operator of senior living facilities throughout the United States, has filed to raise $200 million via an IPO of common stock. The company plans to trade on the NYSE under ticker symbol BKD, with Goldman Sachs and Lehman Brothers serving as lead underwriters. Fortress Investment Holdings LLC is Brookdale’s majority shareholder, while Capital Z Partners also has an equity position.

    PE-Backed M&A

Ross Aviation, an acquisition platform sponsored by Centre Partners, has acquired Scottsdale AirCenter, a fixed base operation (FBO) at Scottsdale Airport in Scottsdale, Arizona. No financial terms were disclosed.

    Other Deals

Conceptus Inc. (Nasdaq: CPTS), a San Carlos, Calif.-based developer of a non-surgical permanent birth control system, has priced 3.2 million common shares via a PIPE deal. VantagePoint Venture Partners led the deal, and was joined by existing shareholder Federated Inv*stment Management Co. and certain officers and directors of Conceptus. The purchase price was $7.20 per share for VantagePoint and Federated, and $8 per share for company officers and directors.

Eastern Drilling ASA, a Norway-based offshore drilling company, has received $45 million in convertible bond funding from private equity firm Lime Rock Partners. Eastern Drilling is publicly-traded, having recently completed a $200 million IPO on the Oslo Bors.

    Firm & Fund News

Morgan Stanley has raised $515 million for its first Asia-focused private equity fund, according to Reuters. According to an earlier regulatory filing, limited partners include Federal Insurance Co. and Sun Hung Kai Properties Group.

    Human Resources

Oliver Thomas has joined Summit Partners as a London-based vice president. He previously worked at ManyFutures Inc., and before that was an analyst with Goldman Sachs IBD.

Dave Ament has been promoted to the position of partner at Parthenon Capital. He joined the firm’s Boston office in 2003 as a principal.

Fred Conforti and Paul Coughlin have joined the advisory board of WHI Capital Partners, a Chicago-based private equity firm focused on the lower middle-markets. Conforti is a founder of residential smoke detector company First Alert, while Coughlin is the former president and CEO of Eastmet Corp.

Correction: Meda AB is a pharmaceutical company based in Sweden, not in Switzerland. It has agreed to buy German  drug company Viatris GmbH & Co. from Advent International for around 750 million euros.


Random Ramblings

Square 1 Bank announced its launch today as a “venture bank” catering to VC firms and startup companies throughout the United States. It considers itself to be a smaller (read: more nimble) version of Silicon Valley Bank or Comerica, and has offices in Austin, Boston, Research Triangle Park, Palo Alto, San Diego and Seattle.

Most interesting from this space’s perspective, however, is that the effort is venture-backed. It closed on a $105 million all-equity round in Q2 that included 70% participation by institutions (mostly financial, no traditional VCs) and the remainder from high-net-worth folks. This makes Square 1 the sixth-highest venture grosser in 2005, and has helped push Q2 2005 venture disbursements past the $5.9 billion mark.

*** In regards to the Bob’s Discount Furniture ad I cited yesterday, it’s worth noting that I received a call back from Scott Schoen of Thomas H. Lee Partners, which controls Simmons. Messages left with individuals at KKR (Sealy) and SKM/Apax (Bob’s) went unanswered. Maybe it’s time to update that ad.

*** I really hope there is more to this Google vs. CNET snit that just the publishing of some personal info about Google’s Eric Schmidt. No company is obligated to speak with any particular news outlet, but the reported impetus here embarrassingly thin-skinned. Hopefully Google will make a statement about its decision, which will involve something beyond: “They used our free public service to discover free public information about our CEO, and published it.”

*** Interesting conversation yesterday with Peter Adderton of Amp’d Mobile (mobile virtual network operator that just raised $67m in Series A funding, including about $7m in debt). I’ll have a piece about the company/deal in Monday’s print edition of PE Week, but it’s worth saying that he’s one heck of an evangelist. I went into the call firmly skeptical about the company’s prospects, due to what would appear to be razor-thin margins. By the end, however, I was nearly ready to mortgage my house and grab some equity (I’d also sell the Once-Trusty Pontiac, but the Blue Book value is now well below $1,000). That feeling has subsided with a good night’s sleep, but it’s still a very interesting twist on the stale reseller model.

    Top Three


Vector Capital has agreed to acquire Internet domain name registration company Inc. (Nasdaq: RCOM) for approximately $200 million, or $7.81 per share. The move follows’s decision to reject a $7.10 per share bid from RCM Acquisition Co.


MAKO Surgical Corp., a Hollywood, Fla.-based medical device company focused on knee replacement solutions, has raised $20 million in Series B funding. Participants included MDS Capital, The Exxel Group, Aperture Venture Partners, MediTech Advisors, Ivy Capital Partners, Sycamore Ventures and unnamed return backers.

Ruth’s Chris Steak House Inc., a Metairie, La.-based restaurant operator, priced 13 million common shares at $18 per share, for an IPO take of approximately $234 million. It originally filed to sell 11.43 million common shares at between $15 and $17 per share, but early yesterday raised its number of offered shares to 13 million. Banc of America Securities and Wachovia Securities served as lead underwriters. Significant shareholders include Madison Dearborn (79.3% pre-IPO position), Wachovia and Goldman Sachs.

    VC Deals

Intercasting Corp. (a.k.a. Rabble), a San Diego-based location-aware media networking operator, has raised $5.5 million in first-round funding. Avalon Ventures and Masthead Venture Partners co-led the deal.

S2 Security Corp., a Wellesley, Mass.-based provider of network-based physical security systems, has raised $7 million in second-round funding. As with its initial funding round, the company only accepted commitments from individual inv*stors, not from institutions. www.s2sys.,com

GigaSpaces Technologies Ltd., a provider of grid-based application servers for transaction-intensive applications, has raised $6 million in Series B funding. BRM Capital led the deal, and was joined by Intel Capital and return backer Formula Ventures. GigaSpaces has offices in New York, Israel and London.

Intellon Corp., an Ocala, Fla.-based provider of integrated circuits for high-speed powerline networking, has received an undisclosed amount of VC funding from Motorola Ventures. The company has raised over $130 million in total VC funding since its 1989 inception, including a recap deal in 2003.

Rave Wireless Inc., a New York-based wireless startup, has secured over $2.95 million in Series A funding from Sigma Partners and Bain Capital Ventures, according to a regulatory filing. An earlier filing put the deal at $2.1 million.

Indeed Inc., a Stamford, Conn.-based search startup focused on online job listings, has raised $5 million in funding from The New York Times Co., Union Square Ventures and Allen & Co.

    Buyout Deals

Roark Capital Group has acquired McAlister’s Corp. (a.k.a. McAlister’s Deli), a Ridgeland, Miss.-based restaurant chain owner and operator. No financial terms were disclosed. McAlister’s has 170 franchised and company-owned locations across 19 states, with system-wide annual sales of approximately $200 million.

Whirlpool Corp. (NYSE: WHR) has once again sweetened its offer for rival appliance maker Maytag Corp. (NYSE: MYG). The new bid is $20 per share, following an earlier increase from $17 per share to $18 per share. A $14 per share offer from Ripplewood Holdings remains on the table.

Advent International has agreed to sell German drug company Viatris GmbH & Co. to Meda AB of Switzerland. The total deal is valued at around 750 million euros, including 583 million in cash and 167 million euros of assumed debt.

American Industrial Partners reportedly has sponsored a management buyout of Enviro-Chem Systems Inc. from parent company Monsanto Corp. (NYSE: MON). No financial terms were disclosed. Enviro-Chem focuses on the production of sulfuric acid and industrial air pollution control.

Apax Partners has agreed to sell German fish restaurant company Nordsee Holding GmbH to BHVG for an undisclosed amount, according to Handelsblatt. BHVG is already a minority shareholder in Nordsee.

OpenGate Capital of Beverley Hills, Calif. has acquired IT consultancy Morse France SAS from Morse PLC. No financial terms were disclosed.

Resilience Capital Partners of Cleveland has acquired Air Enterprises Inc. out of Chapter 11 bankruptcy protection. Air Enterprises is a provider of custom air handling systems design, engineering, manufacturing and support. No financial terms were disclosed.

    PE-Backed IPOs

K&F Industries Holdings Inc., a New York-based maker of aircraft wheels, brakes, brake control systems and flexible bladder fuel tanks, priced 18 million common shares at $17.50 per share (upper end of $16-$18 range), for an IPO take of approximately $315 million. Goldman Sachs and Lehman Brothers served as lead underwriters. Significant shareholders include Aurora Capital, GE Pension Trust and CalPERS.

James River Group Inc., a Chapel Hill, N.C.-based insurance holding company, priced 4.44 million common shares at $18 per share (high end of $16-$18 range(, for an IPO take of approximately $79.92 million. Keefe, Bruyette & Woods served as lead underwriter, while Trident Capital held a 28.9% pre-IPO ownership position.

Bill Barrett Corp. (NYSE: BBG), a Denver-based oil and gas exploration company, reported that shareholders Goldman Sachs & Co. and JPMorgan Partners are planning to sell a combined 5 million common shares via a secondary offering. Each share will sell for a maximum of $31.58 per share, with Goldman Sachs and JPMorgan serving as lead underwriters. Warburg Pincus is not selling any shares as part of the deal, and remains the company’s largest single shareholder with a 23.2% ownership position.

JPMorgan Partners has agreed to sell approximately 7.8 million shares of common stock in AXIS Capital Holdings Ltd. (NYSE: AXS), via a block trade to Morgan Stanley & Co.

    PE-Backed M&A

America Online Inc. has acquired WildSeed Ltd., a Kirkland, Wash.-based wireless technology company. No financial terms were disclosed. WilSeed has raised VC funding from Ignition Partners.

Yahoo Inc. is negotiating to acquire a 35% in China-based B2B website operator for approximately $1 billion, according to – which also runs online auction site Taobao — raised $82 million in Series D funding last year at a post-money valuation of approximately $182 million, from firms like Fidelity Investments, Goldman Sachs, Granite Global Ventures, Softbank China VC, Inv*stor AB, Transpac Capital and Venture TDF.

United Devices Inc., an Austin, Texas-based provider of computing infrastructure software and services, has agreed to acquire GridXpert SA, a France-based provider of meta-scheduling solutions. No financial terms were disclosed. United Devices has raised over $30 million in VC funding from such firms as Mobius Venture Capital, Oak Inv*stment Partners, Intel Capital, GE Equity, Constellation Venturs, 550 Digital Media Ventures and AOL Time Warner Ventures. GridXpert has raised VC funding from firms like AXA Private Equity, CDC Enterprises, ETF Group, Fondinv*st Capital, Innovacom and SGAM Private Equity.

Packaging Holdings Inc., a specialty printing and packaging portfolio company of Bear Sterns Merchant Bank, has completed its add-on acquisition of Hamilton Printing Inc., a Louisville, Ky.-based provider of multimedia and commercial print solutions. No financial terms were disclosed.

    Firm & Fund News

The L.S. Power Group has closed its inaugural private equity fund with $1.2 billion in capital commitments. The vehicle will focus on the power industry, with a particular emphasis on acquiring power generation and related assets in the United States.

New Leaf Venture Partners has raised $310 million for its inaugural fund. The firm is managed by the former healthcare team of The Sprout Group, which announced in late 2003 that it would only focus on healthcare deals going forward (i.e., no more new IT portfolio companies). The healthcare team initially called itself Ceres Venture Partners – and called its fund Sprout Healthcare Ventures I — but later renamed itself New Leaf.

    Human Resources

Peter Linthwaite has been named CEO of the British Venture Capital Association, effective September 1. He most recently served as a founding director of Royal London Private Equity Ltd., and before that as executive director of Murray Johnstone Ltd. Linthwaite succeeds John Mackie, who is stepping down after five years on the job.

Neil Shen, founder of China-based online travel company, has joined Sequoia Capital, according to Pacific Epoch.

Brown Rudnick has added three private equity-focused attorneys to its London office. They are: Kieran O’Connor, partner, who previously co-led the private equity group at Speechly Bircham; Matthew Sillett, partner, who co-led the private equity group at Speechly Bircham; and Adrian Yeandle, senior associate, who previously worked as a senior associate with Osborne Clarke. All three lawyers worked at Osborne Clarke in the late 1990s.

William Dietz has been promoted to the position of principal with Norwest Mezzanine Partners, after having joined as an associate in January 2001.

David Pottruck has been named non-executive chairman of startup airline carrier Eos. He currently serves as managing director of San Francisco-based private equity firm The Pottruck Group, after resigning last July from his post as president and CEO of Charles Schwab Corp.


Who Made My Mattress?

*** Most furniture store commercials are annoying, particularly those which require company founders to double as folksy mascots. On Friday, however, I heard the first one that played on the public’s understandable lack of private equity market knowledge.

The radio ad was for Bob’s Discount Furniture, a Manchester, N.H.-based chain whose commercials typically feature company founder Bob Kaufman and an unidentified female sidekick. This one was no different, and focused on how Bob’s mattresses were better priced than Sealy or Simmons-brand mattresses from higher-end competitors. It sounded something like this (apologies for the paraphrasing):

Bob: What if you have a problem with your Sealy or Simmons mattress, who are you going to call?
Sidekick: Who even knows who owns those companies?
Bob: You know me.

Perhaps this is being picky, but I know who owns Sealy and Simmons: Sealy is controlled by KKR, while Sealy is controlled by Thomas H. Lee. Perhaps I have an unfair advantage, but it’s not as if Bob shouldn’t know the answer. After all, his company also has private equity ownership, after being recapped earlier this year by Saunders Karp & Megrue, which since has merged with Apax Partners.

For what it’s worth, I tried calling the relevant folks at KKR, TH Lee and Apax at 9:30 this morning, but was unable to get any on the phone on such short notice (people were either out or on conference calls). Any Internet-savvy person also can find names and contact info for the CEOs or Sealy or Simmons by going to the company websites.

*** I don’t know what can be added to the flood of stories about the IPO, except that I’d like to be Draper, Fisher or Jurvetson right now. I’d also settle for being an LP in their ePlanet Ventures fund. According to’s SEC filings document, DFJ ePlanet invested approximately $12.5 million into the company during its Series B and Series C funding rounds ($1.04 and $6.67 per share, respectively). That stake ended up being worth $221 million after the IPO priced, and just over $1 billion by the end of trading on Friday. It didn’t sell any as part of the offering. Just a modest gain of 7926 percent. (Note: SEC docs show a slight discrepency between the number of shares DFJ bought during the two funding rounds, and its total number of shares prior to the IPO. No footnote explanation.)

*** Thomson Venture Economics and the National Venture Capital Association released Q2 2005 VC-backed M&A data, which show a slight drop in transactional volume, but a rise in disclosed deal value, but nothing severe enough to get worked up over. 

*** The latest issue of Venture Capital Journal is now online for paid subscribers, but we’ve also put a few goodies up there gratis for the rest of you.

    Top Three


Amp’d Mobile, a Los Angeles-based mobile entertainment company focused on 18-to-35 year-olds, has raised $67 million in Series A funding. Participants include Universal Music Group, Highland Capital Partners, Columbia Capital and Redpoint Ventures.


Nimbus Communications Ltd., a Mumbai, India-based media company with television, sports, motion picture and digital media divisions, has received $45 million in private equity funding from 3i Group. The deal represents 3i’s first inv*stment in an Indian company.

Lexington Partners has closed its Middle-Market Inv*stors fund with $550 million in capital commitments, according to a regulatory filing. The vehicle will purchase secondary interests in middle-market buyout funds, and had been marketed with a $500 million target capitalization. Limited partners include the New York State Teachers’ Retirement System ($150m), the California Public Employees’ Retirement System ($50m) and the San Bernadino County Employees’ Retirement Association ($25m).

    VC Deals

Persystent Technologies Corp., a Tampa, Fla.-based provider of desktop auto-depair and configuration management solutions, has raised $7 million in Series B funding. Valhalla Partners led the deal, and was joined by return backers Inflexion Partners, Tall Oaks Capital and Village Ventures.

Cedar Point Communications Inc., a Derry, N.H.-based provider of packet-based voice switching technologies for the cable industry, has raised $15 million in fourth-round funding. Focus Ventures led the deal, and was joined by return backers Ascent Venture Partners, Battery Ventures, Charles River Ventures, Comcast Interactive Capital, JP Morgan Partners, Motorola Ventures and STAR Ventures. Cedar Point has raised nearly $80 million in total VC funding since its 2000 inception.

PacketHop Inc., a provider of mobile mesh networking and multimedia applications for instant wireless group communications, has raised $10 million in third-round funding. GF Private Equity Group led the deal, and was joined by return backers U.S. Venture Partners, Mayfield and ComVentures. The company has now raised $25 million in total VC funding since its 2003 inception, and also announced that it has moved its headquarters from Belmont, Calif. to Redwood City, Calif.

Funambol, a Redwood City, Calif.-based commercial provider of mobile open-source software, has raised $5 million in Series A funding. Walden International and H.I.G. Ventures co-led the deal.

Gather, a Boston-based company that aggregates and organizes online content, will soon announce its first round of VC funding, according to The Boston Globe.

    Buyout Deals


Primedia Inc. (NYSE: PRM) has agreed to sell its Business Information unit to a holding company formed by U.S. Equity Partners II, a private equity partnership managed by Wasserstein & Co. The deal is valued at $385 million in cash, and is expected to close in the fourth quarter. CSFB advised Primedia on the transaction.

Bridgepoint has sold WT Foods Group, parent company of Noon Products, to Ireland-based Kerry Group for Gbp124 million. Noon Products is a producer of ethnic, chilled prepared meals, and was acquired in 2001 by Bridgepoint for Gbp102 million.

The St. Paul Travelers Cos. Inc. (NYSE: STA) has agreed to sell its CATRisk operation to private equity firms Friedman Fleischer & Lowe and Hellman & Friedman. No financial terms were disclosed for the deal, which is expected to close in the fourth quarter. CATRisk is a specialty casualty insurer providing coverage for clients with significant catastrophic exposure, and has offices in both Fairfield, Calif. and Baltimore, Md.

Clarity Partners and ZelnickMedia Corp. have partnered to buy Naylor Publications Inc., a provider of B2B media and advertising solutions to trade and professional associations. Naylor has primary offices in Gainesville, Fla. and in Winnipeg, Canada. No financial terms were disclosed.

The Riverside Co. has acquired Veritext LLC, a Florham Park, N.J.-based provider of court reporting services that is expecting 2005 revenue of approximately $70 million. No financial terms were disclosed.

    PE-Backed IPOs

ReNeuron Group PLC, a Guildford, UK-based adult stem cell company, has raised Gbp9.5 million via a public flotation on the AIM. The company has received venture capital funding from Merlin Biosciences Ltd.

Memec Group Holdings Ltd., a San Diego-based semiconductor distributor, withdrew registration for its $100 million IPO. The move was expected, following last month’s news that the company had been acquired for $663 million by Avnet Inc. (NYSE: AVT). Prior to the acquisition, Memec had been majority-owned by private equity firm Permira.

    PE-Backed M&A

Qantum Communications Corp., a Nautic Partners portfolio company based in Stamford, Conn., has acquired four FM radio stations in Cape Cod from Boch Broadcasting LP for $21.3 million. The stations all focus on the Cape Cod market, and include WCIB, WRZE, WXTK and WCOD.

    Firm & Fund News

New Leaf Venture Partners announced its launch today, featuring the former members of Sprout Group‘s healthcare technology team. It will continue to manage Sprout’s healthcare tech portfolio, which is valued at over $800 million.

    Human Resources

David Uri has joined GarMark Advisors LLC as a principal, after previously serving as a partner with Pegasus Capital Advisors. GarMark is a Stamford, Conn.-based firm in the midst of raising its second fund focused on mezzanine and corporate opportunities.

Ravi Chiruvolu has left the general partnership of Charter Venture Capital. He says that he plans to begin inv*sting in PIPE deals.

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