PE Week Wire, Jan. 22, 2007

James Joaquin and Matthew Cowan first met in 1999, when Joaquin was working at and Cowan was looking to invest on behalf of Bowman Capital. The deal fell apart when Joaquin and his team opted for an acquisition offer from AOL, but the two again crossed paths last year when Joaquin was CEO of Xoom Inc. and Cowan was in his new role as managing partner of Bridgescale Partners. But again no deal, because Xoom was a bit too early in its revenue stage for a later-stage shop like Bridgescale.

Rather than hoping the third time is a charm, Joaquin has switched sides of the table – as a fulltime venture partner with Bridgescale. He began earlier this month, at around the same time that Bridgescale held a $160 million final close on its inaugural fund.

“I think it took Matthew a while to forgive me for turning down that term sheet while I was with When,” jokes Joaquin from Bridgescale’s digs in Menlo Park.

“Yeah,” Bowman replies. “Eight years.”

But now they are one happy family, along with fellow managing partner Rob Chaplinsky (previously with Mohr Davidow Ventures), principal John DeLoche (SVB and Credit Suisse) and associate Lak Anath (3i Group). Not only will the Joaquin’s addition help Bridgescale expand its credibility among entrepreneurs, but also will augment the firm’s post-deal operational expertise. In addition to co-founding and running Xoom, Joaquin is a former Mac programmer who co-founded Clearview Software (acquired by Apple) and was president and CEO of Ofoto (acquired by Eastman Kodak).

He says he has been considering a move to venture capital for a while, and had dipped his tow into the investment waters by doing some angel deals. “I love working with entrepreneurs, and wanted to find a team where I really fit,” he explains.

Cowan and Chaplinsky say that Bridgescale will maintain its mid-to-later-stage focus, but add that Joaquin also might expose the firm to some earlier-stage opportunities with similar risk profiles. Certain Web 2.0 companies, for example, operating with capital efficient business models may be of interest. Bridgescale currently has four companies in its portfolio, including one deal that remains unannounced. The others are: Communications semiconductor company Cortina Systems, mobile game developer Digital Chocolate and messaging security company Proofpoint.

*** I’ve been to lots of private equity conferences, but have never seen quite so bizarre a scene as Tim Draper singing, rapping and playing air guitar at the end of his keynote presentation. It seems that the ubiquitous VC recently won a charity auction item to write song lyrics to a tune that would then be produced by a “major rock star” (who turns out to have been former rock star Don Henley).

Draper’s lyrics are about… well, Draper. It’s called The RiskMaster, and Henley’s version can be heard in all its chart-topping glory.

Top Three

State Street Corp. (NYSE: STT) has agreed to acquire Currenex Inc., a New York–based online foreign-exchange trading platform, for approximately $564 million in cash. Putnam Lovell NBF Securities represented State Street on the deal. Currenex raised around $65 million in VC funding since its 1999 inception, from firms like TH Lee Putman Ventures.

Nimbus Communications Ltd., a Mumbai, India-based media and entertainment production company, has raised approximately $125 million in private equity funding from Cisco Systems, Oman Investment Fund and return backers 3i Group.

Providence Equity Partners announced plans to open new offices in Hong Kong and New Delhi. The Hong Kong office will be run by new managing director Andrew Rickards, current CEO of N.M. Rothschild & Sons in Asia and former co-head of Goldman Sachs’ Asia-Pacific communications, media and entertainment group. He will be joined by Thura Ko, currently an assistant director at Rothschild in Asia and a former member of the CME team at Goldman Sachs in Asia. The New Delhi office will be run by existing Providence managing director Biswajit Subramanian, who will relocate from London.

VC Deals

Cambridge Broadband Ltd., a Cambridge, UK-based developer of wireless transmission equipment for cellular backhaul, has raised $22.5 million in fifth-round funding. Adara Ventures was joined by return backers Amadeus Capital, Accel Partners and TVM Capital. The company has raised around $65 million in total VC funding since its 2000 inception.

Actelis Networks, a Fremont, Calif.-based provider of carrier Ethernet-over-copper solutions, has raised $22 million in Series E funding. Adams Street Partners led the deal, and was joined by return backers ATA Ventures, Global Catalyst Partners, Dupont Capital, The Carlyle Group, Innovacom Venture Capital, Vertex, Walden International New Enterprise Associates and Independent Venture Fund. The company has raised around $150 million in total VC funding since its 1998 inception.

Stoke Inc., a Santa Clara, Calif.-based maker of convergence gateways for fixed and wireless broadband access technologies, has raised $20 million in Series C funding. DAG Ventures led the deal, and was joined by return backers like Kleiner, Perkins, Caufield & Byers and Sequoia Capital.

Vertiflex Inc., a Carlsbad, Calif.-based developer of medical devices for spinal surgery, has raised $20 million in Series B funding, according to a regulatory filing. Backers include Alta Partners, Aberdare Ventures and Morgenthaler Ventures.

Entellium Inc., a Seattle-based provider of customer relationship management software for small and mid-sized businesses, has held a $16 million first close on a $20 million Series B round, according to The Seattle Post-Intelligencer. Sigma Partners led the deal, and was joined by return backer Ignition Partners.

Scalent Systems, a Palo Alto, Calif.-based provider of virtual operating environment software, has raised $15 million in Series C funding. Credit Suisse led the deal, and was joined by return backers Hummer Winblad Venture Partners, JK&B Capital and Pequot Capital.

Akustica Inc., a Pittsburgh-based provider of acoustic system-on-chip solutions, has secured $10 million of a $12 million Series B-1 round, according to a regulatory filing. Return backers include Rangos Investments and Mobius Venture Capital. The company had announced a $15 million Series B round in March 2005.

SailPoint Technologies Inc., an Austin, Texas–based provider of enterprise security and compliance software, has raised $10 million in Series B funding. Return backers include Lightspeed Venture Partners, Austin Ventures, Origin Partners and Silverton Partners.

KSR Inc., a San Mateo, Calif.-based managed risk services provider, has raised $9 million in second-round funding. Paladin Capital Group led the deal, and was joined by return backer Trident Capital.

Kiptronic Inc., a San Francisco-based company focused on ad insertion into audio and video podcasts, has raised $4 million in Series A funding co-led by Blueprint Ventures and Prism VentureWorks.

Klastech Karpushko Laser Technology GmbH, a Dortmund, Germany-based laser startup, has raised Euro 2.1 million in Series A funding led by Triangle Venture Capital.

Mobidia Inc., a Vancouver-based provider of service performance management solutions for wireless network operators, has raised Cdn$3.75 million in new Series A funding, for a round total of Cdn$7 million. BDC Venture Capital led the round, and was joined by fellow return backers British Columbia Discovery Fund and B.C. Advantage Funds.

Yoggie Security Systems, an Israel–based developer of network security systems for mobile computers, has raised $750,000 from Silicom Venture Fund.

Glucon Inc., a Boulder, Colo.-based developer of an automated blood glucose measurement system for hospitalized patients, has raised an undisclosed amount of Series D funding. 3i Group led the deal, and was joined by Sequel Venture Partners, Quest Capital Partnership, Hunt Ventures and return backersAurum Ventures, Giza Venture Capital, MKI, Infinity Venture Capital Fund and Ascend Technology Ventures.

Buyout Deals

The Carlyle Group has once again increased its bid for Dallas-based roofing and building products company ElkCorp (NYSE: ELK), due to competition from Building Materials Corporation of America. The latest Carlyle offer is $42 per share, which matches the latest bid from BMCA. Carlyle originally bid $38 per share, and later increased it to $40.50 per share.

Fidelity Investments plans to oppose Bain Capital and Thomas H. Lee Partners’ planned $19 billion buyout of radio broadcaster Clear Channel Communications, according to Bloomberg. Fidelity is Clear Channel’s largest shareholder, with an 11% stake.

TDC AS has agreed to sell Baltic mobile operator Bite Lietuva to Mid Europa Partners for approximately Euro 450 million.

Bertram Capital has acquired AuthorHouse from Gazelle Tech Ventures for an undisclosed amount. AuthorHouse is a Bloomington, Ind.–based provider of publishing and marketing services for authors around the globe.

The Carlyle Group bid approximately $4.7 billion for Tribune Corp.’s broadcasting and entertainment unit, according to The New York Post. Tribune also received bids for the entire company from the Chandler family and from Eli Broad/Ron Burkle.

The Carlyle Group and Providence Equity Partners have agreed received shareholder approval for their proposed $38 per share acquisition of Open Solutions Inc. (Nasdaq: OPEN), a Glastonbury, Conn.–based provider of enabling technologies for financial institutions, for $38 per share. The total deal is valued at over $1.3 billion, including the assumption of debt.

PE-Backed IPOs

CardioMEMS Inc., an Atlanta-based developer of wireless medical pressure sensors, has filed for an $86.25 million IPO. It plans to trade on the Nasdaq under ticker symbol SENS, with Banc of America Securities serving as lead underwriter. The company has raised around $52.6 million in total VC funding from firms like Arcapita, Easton Capital Partners, Boston Millennia Partners, Foundation Medical Partners, Medtronic, Inc. and Johnson and Johnson Development Corp.

3SBio Inc., a Shanghai, China-based developer of protein-based drugs, has filed for a $123.97 million IPO. It plans to price 7.7 million American depository shares at between $12 and $14 per ADS, and to trade on the Nasdaq under ticker symbol SSRX. UBS is serving as lead underwriter. Shareholders include Walden International.

Molecular Insight Pharmaceuticals Inc., a Cambridge, Mass.-based developer of molecular imaging pharmaceuticals and targeted radio-therapeutics, has set its proposed IPO terms to five million common shares being offered at between $14 and $16 per share. It plans to trade on the Nasdaq under ticker symbol MIPI, with RBC Capital Markets and Jefferies & Co. serving as co-lead underwriters. The company has raised over $35 million in VC funding from firms like Cerberus Capital Management and Siemens Venture Capital. Inc., a Waltham, Mass.-based provider of on-demand compensation management solutions, has set its proposed IPO terms to five million common shares being offered at between $8 and $10 per share. It plans to trade on the Nasdaq under ticker symbol SLRY, with Thomas Weisel Partners and William Blair & Co. serving as co-lead underwriters. It raised around $4 million in VC funding from groups like Lyric Capital in 2000 and 2001.

PE-Backed M&A

PharmAthene Inc., an Annapolis, Md.-based biotech company focused on biological warfare threats, has agreed to go public via a reverse merger with Healthcare Acquisition Corp. (AMEX: HAQ), a special purpose acquisition company. The deal will provide PharmAthene with up to $70 million in cash, before payment of expenses. PharmAthene has raised over $76 million in VC funding from firms like Teachers’ Private Capital, Canadian Medical Discoveries Fund Inc., MDS Life Sciences Technology Fund US, MPM Capital, Bear Stearns Innoventures and Healthcare Ventures. It had agreed last summer to a reverse merger with SIGA Technologies Inc. (Nasdaq: SIGA), but SIGA terminated the deal due to positive results of its own R&D.

HomeAway Inc., an Austin, Texas-based operator of an online vacation rentals website, has acquired SA, a France-based vacation rental website. No financial terms were disclosed. HomeAway shareholders include Austin Ventures, Redpoint Ventures, American Capital, Institutional Venture Partners and Trident Capital.

PE Exits

Sentinel Capital Partners has agreed to sell Fasloc Inc. to DSI International for an undisclosed amount. Fasloc is a Martinsburg, West Va.-based manufacturer of specialized resin cartridges used in underground mines for roof bolting systems.

Apax Partners is considering a sale of Swedish surgical glove maker Moelnlycke Health Care AB, according to Bloomberg. The deal could be worth up to Euro 3 billion, with suitors reported by include The Blackstone Group and the Wallenberg family. Apax previously had indicated it was considering an IPO.

Google is in talks to acquire Adscape Media Inc., a San Francisco-based in-game advertising company, according to The Wall Street Journal. Adscape shareholders include H.I.G. Ventures.

United Business Media PLC has acquired an additional 2% of the equity of RISI Inc. from Pegasus Capital Advisors for $1 million. UBM now holds a 52% interest in RISI, a –based provider of online and printed pricing and market content for the forest product industry.

Firms & Funds

Brysam Global Partners been formed as a new private equity firm that will has launched as a private equity firm that will invest in financial services with a focus on consumer opportunities in emerging markets. Its two principals are: Robert Willumstad, former president and COO of Citigroup, and Marge Magner, former chairwoman and CEO of Citigroup’s Global Consumer Group. It already has secured around $1 billion in capital commitments, according to the Wall Street Journal.

Angelo, Gordon & Co. has closed its AG Net Lease Realty Fund with $160 million in capital commitments. Including leverage, the fund will seek to purchase as much as $500 million of net leased corporate real estate properties in the U.S. and abroad, with an emphasis on providing sale-leaseback financing to financial sponsors and non-investment grade

Human Resources

Chris Stabler has agreed to join CVC Partners to help to UK firm enter the U.S. market, according to The Times of London. Stabler currently is a senior managing director with Investcorp, and head of its North American private equity team.

Steven Morgenthal has joined Argosy Partners as an operating partner. He previously was a venture partner with SCP Private Equity and CEO of SCP portfolio company Q Group Holdings.

Kenneth Bate, a onetime senior managing director and CEO of MPM Capital, has been named president and CEO of NitroMed Inc. (Nasdaq: NTMD). He had served as the company’s CFO and COO since March 2006.

Ranch Kimball, former Secretary of Economic Development for Massachusetts under former Governor Mitt Romney, has been named CEO and president of the Joslin Diabetes Center. Kimball is a former Bain Capital pro.