PE Week Wire, Oct. 17, 2006

The midterm elections are just three weeks away, with most polls indicating that the House will go Democratic and that the Senate is a toss-up. So I figured that this was a good time to check in on the check-writing activities of VenturePAC, the political action committee that is voluntarily funded by certain member firms of the National Venture Capital Association.

VenturePAC’s litmus test is twofold: (1) Does a candidate support the NVCA’s position on key issues like R&D spending and “fixing” Sarbanes-Oxley; and (2) Is the candidate likely to win?

It is part two of that equation that best explains why VenturePAC typically supports more Republicans than Democrats. We last discussed the numbers in April of this year, and found that the group had donated $386,500 to GOP candidates and causes from January 2005 through March 2006, compared to $206,000 to Democratic candidates and causes. That’s around 65% vs. 35%. At the time, NVCA president Mark Heesen felt that the Dems had a decent shot of gaining House control, but that the GOP would almost certainly retain Senate control.

Given recent political wind shifts, one might assume that VenturePAC might have narrowed the partisan gap a bit, but it’s actually grown. Between April and August, VenturePAC has contributed around $129,000 to GOP causes and candidates, compared to just $57,000 to Democratic causes and candidates (69% vs. 31%). Moreover, VenturePAC supported just six candidates running for open seats or as challengers – with each one of them wearing red. In terms of the tight Senate races, VenturePAC contributed to both Tom Keane Jr. (NJ) and Jim Talent (MO) during the April-August period.

I asked Heesen about the numbers yesterday, and he told me that “we are not going to turn our back on those who have been our friends.” He also stressed that VenturePAC is far more Democrat-friendly than are most other business PACs, and that the group will be well-positioned to work with whichever party wins whichever house of Congress.

It is worth reemphasizing that the available data is only through Aug. 31, which means that VenturePAC might have changed course a bit as the political wind shift became more apparent. For example, VenturePAC did contribute last month to Tim Mahoney, the vFinance co-founder running for Mark Foley’s old seat (note: VenturePAC did contribute to Foley twice in 2005, but not this year). I also asked Heesen if VenturePAC had contributed to Connecticut Senatorial candidate Ned Lamont, who founded a VC-backed business and who is married to a prominent venture capitalists. He responded that Lamont does not accept PAC contributions.

Once the votes are tallied, I’ll let you know how VenturePAC did overall…

*** It is my regrettable duty to inform you that we lost two venture capitalists last week in separate – albeit both tragic – incidents:

Sam Blyakher, a 33 year-old general partner with Accretive Technology Partners, and his wife Rebecca both died last Monday when their car was struck head-on by an SUV that had careened across a highway median. Their 10 month-old daughter Nava Rose suffered numerous injuries, and was in critical condition following the accident.

Sam had been an associate with General Atlantic before joining Accretive, and also had been a management consultant with McKinsey & Co. Rebecca was a cognitive psychologist. Our thoughts are with the family.

Bill Mercer, 58 year-old founder and principal of Avocent Ventures, passed away last week from unexpected complications from what had begun as minor brain surgery. He is survived by wife Nikki, sons Mike and Mark, brothers Richard and Robert and nephews Christopher and Jon.

A viewing and prayer service will be held this evening from 6-8 at the Sacred Heart Cathedral at 200 Hillsborough Street in Raleigh, North Carolina. A celebration of his life will follow at the Second Empire Restaurant next door. In lieu of flowers, the family has requested that memorial donations be made to either the Bill Mercer Fund at Duke Comprehensive Cancer Center (DUMC 3828; Durham, NC 27710) or in honor of Bill Mercer to Communities in Schools of Wake County (CIS-Wake; 871 Harp Street-Raleigh, NC 27601).

Top Three

Macquarie Bank has won the auction for RWE AG’s Thames Water unit, with a £8 billion bid (£4.8b in equity, £3.2b in assumed debt). It beat out rival bids from Qatar Investment Authority, Terra Firma Capital Partners and Alinta.

Validity Sensors Inc., a San Jose, Calif.-based biometric company that makes fingerprint sensors, has raised $20 million in fourth-round funding. TeleSoft Partners led the deal, and was joined by Qualcomm Ventures, VentureTech Alliance, Ram Shriram, Marc Benioff ( CEO) and Atiq Raza (Taza Microelectronics CEO). The company has now raised $55 million in total VC funding since 2002.

Close Brothers Private Equity has agreed to sell UK-based specialty chemicals company Minova to Orica Ltd. (ASX: ORI). The deal is valued at approximately £357 million. Minova products are used in the coal mining, metal mining and tunneling industries, and was acquired by CBPE in a £32 million management buyout that closed in March 2003.

VC Deals

AirWalk Communications Inc., a Richardson, Texas-based provider of IP radio access network infrastructure, has raised $15 million in second-round VC funding. Sevin Rosen Funds led the deal, and was joined by return backers TLVentures, Alta Berkeley and Duchossois Technology Partners.

WiSpry Inc., an Irvine, Calif.–based fabless semiconductor company that makes RFICs for wireless devices, has raised $13.5 million in Series B funding. L Capital Partners led the deal, and was joined by Hotung Capital Management and return backers American River Ventures, Blueprint Ventures, In-Q-Tel, Tech Coast Angels and Western Technology Investment.

RedMere Technology Ltd., an Ireland-based fabless semiconductor company that specializes in advanced chipsets, has raised $8.2 million in Series A funding. Celtic House Venture Partners led the deal, and was joined by Enterprise Ireland, Fourth Level Ventures, Enterprise Equity and returning seed backers.

NComputing Inc., an Orange, Calif.–based developer of a shared-computing solution that delivers PC functionality without a PC, has raised $8 million in Series A funding from BA Venture Partners.

Practical Instruments Inc., a Pasadena, Calif.–based provider of concentrating solar panels, has raised $8 million in Series A funding. RockPort Capital Partners and Nth Power co-led the deal, and also were joined by Trinity Ventures and Rincon Venture Partners.

OB10, a UK-based e-invoicing company, has raised £7.3 million in new VC funding from existing shareholder FF&P Private Equity.

Innovative Biosensors Inc., a College Park, Md.-based developer of tests to detect harmful pathogens, has expanded its Series A round to $6.25 million. Chart Venture Partners and CNF Investments came in on the new tranche, while the company held a first close in May 2005 with participation from Harbert Venture Partners, New Markets Growth Fund and the Mayland Venture Fund.

Sugar Publishing, a San Francisco-based blog publisher, has raised around $5 million in VC funding from Sequoia Capital. News of the deal first appeared here, with GigaOm and TechCrunch reporting the specific dollar amount.

eCourier, a UK-based express courier company, has raised £2 million in venture capital funding from Logispring.

Connextions Inc., an Orlando, Fla.-based provider of tech-based consumer-driven healthcare solutions, has raised an undisclosed amount of private equity funding from New Mountain Capital.

GuidePoint Systems, a Pontiac, Mich.-based provider of telematics solutions for the automotive aftermarket, has raised an undisclosed amount of second-round private equity funding from Plymouth Venture Partners. It also secured a new senior credit facility from Comerica Bank.

NextServices Inc., an Ann Arbor, Mich.-based provider of clinical and revenue cycle solutions to specialist physicians, has raised an undisclosed amount of angel funding from people like Gil Omenn (publisher of Science magazine and chairman of the American Association for the Advancement of Science). NextServices also has an office in Mumbai, India.

Buyout Deals

The Carlyle Group is scaling back its proposed private equity investment in Chinese construction equipment maker Xugong Group Construction Machinery Co., according to Bloomberg. The report says that Carlyle will offer around $220 million for a 50% stake, compared to an original offer of $375 million for an 85% position. Talks have been ongoing for nearly a year.

CapMan has offered to acquire Polimoon ASA (Oslo: POLI), a Norway-based producer of rigid plastic products and applications. The bid is NOK 27.50 per share, for a total equity valuation of NOK 1.082 billion (approx. $160 million). Leverage would be provided by DnB NOR Bank SA and CapMan’s mezzanine fund.

Golden Gate Capital has agreed to acquire Sierra Systems Group Inc. (TSX: SSG) for Cnd$9.25 per share, or approximately Cnd$93.2 million. Sierra Systems is a Vancouver–based provider of IT and business consulting services to public and private organizations in North America.

KKR had agreed to help finance a Willis Group attempt to acquire Marsh & McLennan three months ago, according to MarketWatch. The bid reportedly was rejected.

Marlin Equity Partners has closed on its acquisition of XKO Software Ltd, a unit of XKO Group PLC that provides ERP software to SMEs in the building supply chain, wholesale distribution and other specialist product markets. The deal was valued at up to £15 million.

Garnett & Helfrich Capital has acquired a majority interest in Celunite Inc., a Sunnyvale, Calif.–based provider of open-mobile platform software. No financial terms were disclosed.

PE Exits

DynTek Inc. (OTC BB: DYNK) has acquired the operating assets of TekConnect Corp., a Cherry Hill, N.J.-based tech integration and consulting firm focused on the K-12 education market. No financial terms were disclosed, except that TekConnect has 12-month trailing revenue of approximately $7.1 million. TekConnect had raised around $5 million in VC funding, including a $2 million round from Greenlight Private Equity Partners.

Doughty Hanson & Co. has refinanced the four remaining properties in its Finnish real estate portfolio, which will help return €35 million to limited partners. To date, the portfolio has returned a total of €51.1 million, on a €36.5 million initial investment.

Bad News

Jack K. Elrod Co., a Mooresville, Ind.-based stadium bleachers manufacturer, filed for chapter 7 bankruptcy protection yesterday. Champlain Capital Partners is the company’s majority shareholder.

Firms & Funds

Citigroup’s South Korean offices were raided by South Korean prosecutors today, as part of an ongoing investigation into Lone Star Funds. Citigroup had been involved in Lone Star’s controversial 2003 acquisition of a control stake in Korea Exchange Bank.

Garnett & Helfrich Capital is opening an office in Mumbai, India.

3i Group has formed a venture capital advisory board.

Human Resources

Keyur Patel has joined ComVentures as a partner. He previously served as head of consumer products and chief strategy officer with Maxtor Corp. (NYSE: MXO), and also is a serial entrepreneur whose companies have included Brience, Metrius, Webvibe and Phoenix Software.

Barry Fougere and Elizabeth Komachi have joined executive search firm Heidrick & Struggles as Boston-based consultants. Fougere will be a partner and member of the technology and private equity/venture capital practices. He previously was president and CEO of wireless networking company Colubris Networks. Komachi will be a principal in the financial services practice, and previously was a director with financial services boutique The Whitney Group.

Ron Labrum has been named tapped to run the Tranfusion Therapies business that Baxter International is selling to Texas Pacific Group and Maverick Capital. The deal is expected to close in Q1 2007. Labrum most recently served as chairman and CEO of Supply Chain Services for Cardinal Health.