PE Week Wire: Monday, June 16, 2008

TheFunded today introduced a new service that allows its members to post business plans, in order to (A) Get feedback from other members, and (B) Get referred by other members to potential funding sources. Company founder – and sole employee – Adeo Ressi refers to it as his stool’s third leg, which already had included subjective/anonymous opinions on specific VCs, and a section devoted to prevailing deal terms.

Now there are lots of entrepreneur-investor matching services out there, and most of them have a winning percentage that rivals Yankees “phenom” Phil Hughes. The reason this one should do better, Ressi argues, is that VCs will be receiving pitches from their own portfolio company CEOs (i.e., TheFunded members). “A venture capitalist is always going to read a portfolio company CEO’s email. That doesn’t mean you’re necessarily going to get funded, but it does give you a good shot at an introduction, which is very difficult for a lot of entrepreneurs to get.”

The service opened in a sort of beta last week, and already has secured a small handful of introductions. Ressi is personally “publishing” a select group of plans for the first few weeks, until he can develop a reasonable set of automated metrics. Skeptics are already abounding – Matt Marshall among them – and I’d agree that there are two legitimate concerns: (A) Spam. Entrepreneurs can identify up to 30 firms they’d like introductions to, and I’d imagine that almost all of them will include top-tier firms like Sequoia (Ressi says this won’t happen – I respectfully disagree). (B) Reputational damage: It’s hard to position yourself as a “hot” startup at the same time that you’re putting out an elevator pitch for public consumption. I had a similar concern with, and it remains.

That said, this is a smart move by TheFunded – which is fast becoming a free info clearinghouse for entrepreneurs in need of capital. Build the pageviews, which leads to increased advertising and ultimately an exit to some media company that values an engaged group of entrepreneurial readers (Dow Jones, Forbes, Thomson Reuters, TechCrunch, etc.).

As for whether or not it will actually help entrepreneurs attract institutional funding, I’m not sure. VCs don’t lack for deal-flow, and a lot of egos shy away from investing in a company “everyone” already knows about. On the other hand, the system may inadvertently create a virtual angel network — with TheFunded members investing in one another. So long as the money’s green…

*** A lot of you wrote in last Friday, wondering how I could have avoided all mention of the beloved Celtics. I actually wrote something, but it got cut-off in an email glitch. So I posted it here: Giving Doc His Due.

*** Last week it was reported that Tom Connolly, head of U.S. leveraged finance for Goldman Sachs, was moving over to the firm’s private equity group. His new charge would be to launch a new fund investing in debt.

This raises an important semantic question that’s been buzzing in my brain for months: Can a private equity group actually raise a dedicated debt fund? No. The definition of private equity – even the term itself – has evolved over the years to exclude venture capital (albeit not here) but this is one step too far. So what should we call this new class of asset management? Private Dequity? All suggestions welcome.

*** I’m finally back in the home office, after a week of peHUB Across America and an ill-timed weekend wedding in the Finger Lakes. A huge thanks to everyone who came out last week. We raised over $11,000 for charity, including more than $3,400 on Friday night for The Jimmy Fund (an appropriate pick, being that we were at Fenway Park).

Many of you have asked if/when we’ll do it again, and the answer is most likely yes. If you were there and have suggestions on how we could do it better, let me know. If you weren’t there, I hope to catch you the next time.

A final thanks to our sponsors, who made it all possible: Dechert LLP, Grant Thornton, Atlas Venture, BDO Seidman, NYPPEX, Polachi & Co. and Standish Management. If you didn’t sponsor this time but are interested going forward, just let me know.

*** Personal item: J and I are planning a trip to Peru for either this September or next May. Got any advice on what we should see, and what we should skip?

Top Three

DemandWare Inc. has won an auction for the assets of N2N Commerce, a Cambridge, Mass-based maker of on-demand commerce management software for multichannel retailers. No financial terms were disclosed. DemandWare has raised around $44 million in VC funding from General Catalyst Partners, North Bridge Venture Partners and T-Venture Holding. N2N had raised $30 million in January 2007 from General Catalyst and Limited Brands, but ceased operations just one year later.

The Carlyle Group, Candover and TPG Capital are expected to make second-round bids for Italian fashion house Roberto Cavalli, according to Reuters. The shortlist may also end up including Lion Capital and Doughty Hanson. Cavalli is asking for around €1.4 billion, but Reuters cites sources who are skeptical it can get that much.

Bernard Liautaud, founder and former CEO of Business Objects, has joined European VC firm Balderton Capital as a general partner.

VC Deals

Meritage Pharma Inc., a San Diego-based drug development company, has raised $22.5 million in Series A funding. Backers include Domain Associates, Latterell Venture Partners and The Vertical Group. The company’s initial candidate was acquired by Verus Pharmaceuticals, and is focused on treating allergic inflammation of the gastrointestinal tract.

Jivox, a San Mateo, Calif.-based online video advertising platform for local businesses, has raised $10.7 million in Series A funding. Opus Capital led the round, and was joined by Helion Venture Partners and returning angels. Jivox had previously raised $2.7 million in seed funding from Opus and company founder Diaz Nesamoney.

PlantSense Inc., a San Francisco-based provider of Internet-enabled gardening tools, has raised $3.5 million in Series A funding. Gabriel Ventures led the round, and was joined by individual angels.

Buyout Deals

Austin Ventures has led a buyout of Entrepreneur Media, an Irvine, Calif.-based media company focused on small business owners, according to paidcontent. The deal is believed to be worth less than $200 million, with a Boston-based private equity firm providing a minority equity co-investment.

The Carlyle Group has agreed to buy the cash systems unit of banknote printer De La Rue, for £360 million. Other suitors had included KKR, Bain Capital and Wincor Nixdorf.

ClearLight Partners has acquired Gold Canyon Mining and Construction, a provider of construction and contract mining services in the western U.S. No financial terms were disclosed for the deal, which includes a “significant” equity stake for Gold Canyon management.

Friedman Fleischer & Lowe has agreed to buy fund services firm Loring Ward International (TSX: LO) for US$16.50 per share, for a total equity value of around $127.6 million. That represents a 45% premium to where Loring Ward stock was trading prior to news broke of an alternate buyout approach.

Wayzata Investment Partners has received court approval to buy Pope & Talbot’s last remaining pulp mill, which closed back in May. The deal is for $31.15 million, and trumps a rival offers from a Cerberus-backed group and Ableco Finance. A labor union representing the millworkers is on record as preferring the Ableco bid.

PE-Backed IPOs

Metropark USA Inc., a City of Industry-based specialty retailer whose mall-based stores are focused on fashion-oriented 20-30 year-olds, has filed for a $100 million IPO. It plans to trade on the Nasdaq under ticker symbol MTPK, with Goldman Sachs serving as lead underwriter. The company raised a small amount of expansion capital last year from Claritas Capital.

Varolli Corp., a Seattle-based provider of SaaS interactive customer communications solutions, has withdrawn its IPO registration, due to “difficult market conditions.” The company had filed last September to raise $86.25 million, with Lehman Brothers and JPMorgan serving as co-lead underwriters. Varolli was founded in 1999 as AlertOnline, and later was renamed Par3 Communications. It has raised around $33 million in VC funding from firms like Draper Fisher Jurvetson (30.1% pre-IPO stake), BlueRun Ventures (21.7% pre-IPO stake), InterWest Partners (19.3%), Timberline Venture Partners (5.5%) and Staenberg Venture Partners.

PE Exits

Express Scripts Inc. (Nasdaq: ESRX) has agreed to acquire the workers’ compensation pharmacy benefit management unit of Medical Services Co., a portfolio company of Monitor Clipper Partners. No financial terms were disclosed.

KKR and DLJ Merchant Banking Partners have filed to sell 10 million shares in specialty chemical company Rockwood Holdings (NYSE: ROC). The proposed price of $41.74 per share would generate around $417 million in proceeds for the sellers, which would rise to nearly $480 million if a 1.5 million overallotment option were exercised. Assuming just the initial 10 million share sale, KKR’s position in Rockwood would drop from 41% to 30.8%, while DLJ’s would drop from 30.8% to 8.8 percent.

MidMark Capital and Summer Street Capital Partners have sold Innovative Concepts in Entertainment Inc. back to the company’s founder and management team. No financial terms were disclosed, except that F.N.B. Capital supported the buyers with $5 million in mezzanine funding. ICE is a Clarence, N.Y.-based maker of coin-operated arcade games.

Polaris Acquisition Corp., a listed special purpose acquisition vehicle, has agreed to buy Hughes Telematics for around $700 million in cash, according to The Wall Street Journal. Hughes Telematics is an Atlanta-based maker of car navigation, diagnostics, and Internet access products. It was formed in 2006 with capital from Apollo Management.

Human Resources

Sunil Kaul has joined Carlyle Asia Partners as a senior director focused on financial services. He previously served as president of Citibank Japan.

A.C. Moore Arts & Crafts (Nasdaq: ACMR) said that executive vice president Marc Katz has resigned to “pursue a career opportunity in the private equity sector.”

AIG has fired CEO Martin Sullivan, after suffering consecutive quarters of record losses related to subprime mortgage loans. He has been replaced by AIG chairman, and former Citigroup banker, Robert Willlumstad.