PE Week Wire: Thurs., March 20, 2008

Jawed Karim, the often overlooked co-founder of YouTube, has launched an early stage venture investment group called Youniversity Ventures.

Details about the size of the fund were not available. Karim and the firm’s co-founders were not immediately reachable via telephone or email.

One venture capitalist familiar with the new fund says it bills itself as being very “founder friendly.”

Youniversity has posted a single page on its website ( with brief bios about its founders. In addition to Karim, the team includes Kevin Hartz, a co-founder of international money transfer company Xoom Corp. and event registration service company Eventbrite, and Keith Rabois, vice president of business development for Slide, a startup that makes Web widgets, such as an application to display photo slideshows on websites.

The website doesn’t indicate the fund’s focus, other than to say that it is “focused on former and current students at Stanford University and at the University of Illinois at Urbana-Champaign.” Both Hartz and Rabois have undergraduate degrees from Stanford and Karim is currently working on a graduate degree in computer science at Stanford after getting a bachelor’s in computer science from the University of Illinois.

Karim met YouTube co-founders Chad Hurley and Steven Chen while at PayPal. The trio launched YouTube in 2005. Karim uploaded the first video to the site in April 2005, but then stepped aside to go back to school. When YouTube sold to Google in October, 2006, Karim walked away with shares worth nearly $65 million.

Youniversity has neither registered with the Securities and Exchange commission nor the California Secretary of State, at least not under the Youniversity name, suggesting it may be little more than private money.

Both Rabois and Hartz have some experience with early stage investing. Rabois was an early investor in YouTube and netted more than $4 million in Google stock when the company was bought. Hartz invested in social networking company Friendster, RSS search company Feedster and video communications company TokBox, among others.

So far the three have made at least one disclosed investment together. They backed prediction marketplace BluBet, which allows users to make non-monetary bets on a variety of off-the-wall subjects. The three, along with Flixster CEO Joe Greenstein, collectively invested $225,000 in the company.

The three partners are no strangers to venture capital. The Youniversity website states that all three men are limited partners in Sequoia Capital, although it doesn’t specify a particular fund. Hartz’ personal website at says that he is also a limited partner in Clarium, Outlook Ventures and The Founders Fund. Hartz was also once an associate at Outlook Ventures, according to Thomson Financial (publisher of PE Week Wire).

Top Three

Alliance Data Systems Corp. (NYSE: ADS) has notified Blackstone Group that two of its affiliates have breached an agreement to acquire the provider of transaction-based loyalty and marketing services. Dallas-based Alliance Data Systems signed a merger agreement with Aladdin Solutions Inc. and Aladdin Merger Sub Inc. in May 2007. The notice demands that the Blackstone affiliates cure the breaches and consummate the transaction. In January 2008 Blackstone notified Alliance Data that it believed the regulatory approval condition to completing the transaction would not be satisfied and later confirmed that they did not intend to pursue the matter further with the Office of the Comptroller of the Currency. Blackstone denied that it has violated terms of the agreement, according to The Dallas Morning News.

3Com Corp. (Nasdaq: COMS) intends to proceed with its shareholder meeting this Friday, and Bain Capital and Huawei Technologies Co.’s $2.2 billion buyout offer is on the agenda. The acquirers previously revised their offer to limit Huawei’s access to some 3Com technologies that were considered sensitive to homeland security interests in the U.S. The board of 3Com, which is a networking equipment company, is in favor of the deal, which would make 3Com a private

Fremont General Corp. has decided to delay $6.6 million in interest payment as it attempts to refinance some debt. The move led to S&P cutting its long-term counterparty credit rating and senior debt rating to ‘D’ from ‘CC’. Kelly Capital Investments LLC, a San Diego-based private equity firm, previously lowered its Fremont General stake to less than 5 percent from 7.2 percent.

VC Deals

Environmental Operating Solutions Inc. has completed an initial tranche of $2.5 million in institutional financing. Environmental Operating Solutions is a Bourne, Mass.-based environmental technology company. The round was led by Stuart Mill Venture Partners. A second tranche is expected to close in the second quarter.

Advanced Power Projects Inc. has received funds from several venture capital firms. The Fremont, Calif.-based company has secured the support of investors to apply the Simplified Combined Cycle process to existing power plants and new alternative energy facilities. Bay Partners, Redpoint Ventures and Sequoia Capital are funding the new company.

Disqus, a San Francisco-based blog system, has raised $500,000 in a series A financing. Union Square Ventures led the funding. Other participants include Knight’s Bridge Capital Partners and angel investors Naval Ravikant and Aydin Senkut.

Retrevo Inc., a Sunnyvale, Calif.-based matchmaking service between consumers and electronics, has secured $8 million in a second round of institutional funding. This round was led by Alloy Ventures and Norwest Venture Partners and will be used for product development, partnership expansion and consumer marketing.

Meebo is trying to raise $25 million to $30 million at a nose-bleed valuation of between $200 million and $250 million, according to VentureBeat. This is quadruple its valuation from its previous round of between $60 million to $70 million last year. The Mountain View, Calif.- based Meebo has hired a San Francisco bank Montgomery & Co. to shop the deal.

VoloMedia, a provider of advertising, metrics, and reporting solutions for downloadable media, has received $3.5 million in venture financing from investment firm Leader Ventures.

Life Science Intelligence has said another new group of 48 privately-held medtech companies has recently been added to the Emerging Medical Technologies, or EMT, database. According to the Huntington Beach, Calif.-based company this latest round of companies is collectively seeking more than $238 million in financing. It added that many of the companies are also actively pursuing strategic partnerships and licensing deals with large medtech companies.

Small World Labs, an Austin, Texas-based provider of enterprise social media solutions and online community building expertise, has received more than $1 million toward a Series A funding round which it will closeout in the next 60 days. Jordan Rohan, of Clearmeadow Partners, is one of the participating investors.

Retention Education Inc., an Aliso Viejo, Calif.-based educational company, has completed its Series B funding round from Ascend Venture Group, Ironwood Equity Fund, MK Capital, and OCA Ventures.

LigoCyte Pharmaceuticals Inc., a vaccine company in Bozeman, Montana, has finalized an agreement for a $28 million venture capital financing round to further the clinical development of its two lead vaccines against norovirus and influenza. The investment is being led by Forward Ventures, JAFCO, and Novartis Venture Fund with significant participation from Fidelity Biosciences and MedImmune Ventures. Additional investors include Athenian Venture Partners and MC Life Sciences Ventures.

GlucoLight Corp., a development-stage company focused on non-invasive, continuous blood glucose monitoring, has closed the third tranche of its “C” round financing. The amount of the third tranche was not disclosed. In addition to the second tranche of financing announced in February, GlucoLight of Bethlehem, Pa., is nearing the close of its “C” round. The financing was provided by Life Sciences Greenhouse, Robin Hood Ventures and individual investors, including both current and new investors.

CafeMom has raised $12 million more in funding. The latest round includes previous investors, Draper Fisher Jurvetson and Highland Capital Partners. CafeMom is a New York-based social networking Web site for mothers.

Alimera Sciences has closed a series C financing round of $30 million with all five of the company’s existing venture capital firms exercising the right to participate at their full pro rata share. The proceeds from the series C financing will enable the Atlanta-based company to, as previously announced, acquire a majority stake in MedidurFA, the company’s Phase III investigative treatment for diabetic macular edema from development partner pSivida Ltd. (Nasdaq: PSDV) and fund the remaining development obligations for the product.

Buyout Deals

Chicago-based private equity firm Wynnchurch Capital has acquired a majority interest in The Surepoint Group, an Alberta, Canada-based provider of industrial instrumentation and electrical services to the oil and gas, forestry, pulp and paper, and chemical manufacturing industries. No financial terms were disclosed for the deal, which included financing from Scotiabank.

PE-Backed IPOs

CardioNet Inc., a San Diego-based provider of wireless mobile cardiac outpatient monitoring solutions, raised $81 million in its IPO. The company priced 4.5 million common shares at $18 per share. It closed its first day of trading down at $17.70 per share. CardioNet plans to trade on Nasdaq under ticker symbol BEAT. Citi served as lead underwriter. CardioNet has raised around $163 million in total VC funding, including a $110 million infusion last year. Shareholders include Foundation Medical Partners, Guidant Corp., H&Q Healthcare Investors, IngleWood Ventures and Sanderling Venture.

PE Exits

Industri Kapital, a European private equity firm, agreed to sell its portfolio company ELFA to Swiss-based Daetwyler Group for €222 million ($347.5 million). ELFA markets, sells and distributes electronic components and other technical products to business customers in Northern and Eastern Europe.

Lone Star Fund wants to renegotiate its deal with HSBC Holdings concerning the sale of a controlling 51 percent interest in a South Korean-based bank. Lone Star had agreed on August to sell its 51 percent stake in Korea Exchange Bank to UK-based HSBC for $6.43 billion. The current contract is slated to expire on April 30.

PE-Backed M&A

H&R Block Inc. (NYSE: HRB) has signed a definitive agreement to sell the mortgage loan servicing business of its Option One Mortgage Corp. unit to an entity sponsored by WL Ross & Co. The sale is subject to the satisfaction of specified conditions, including a financing contingency limiting the buyer’s obligations. H&R Block said the transaction’s formula purchase price would generate proceeds of about $1.1 billion based on Jan. 31 values. The Kansas City, Mo., company previously shut down Option One’s mortgage origination activities after exiting an earlier sale agreement with Cerberus Capital Management LP in December.

Bad News

Shares in publicly traded Xerium Technologies Inc. plunged 74% after the manufacturer of products used in making paper warned it was at risk of defaulting on a financial covenant, prompting it to cancel its dividend and warn it may have to file for bankruptcy protection. LBO Wire reported that the Youngsville, N.C.-based company delayed filing its Form 10-K to the Securities and Exchange Commission, saying the company’s new chief executive, Stephen R. Light, and other managers have had to spend most of their time trying to solve the problems with the financial covenant. As of Sept. 30, Apax Partners owned 54% of the Xerium’s stock.

Firms & Funds

France’s largest bank, BNP Paribas finally confirmed to the market that it is not going to bid for Societe Generale, which almost collapsed at the beginning of the year. Societe Generale ultimately lost €4.9 billion ($7.2 billion) thanks to a scandal that saw trader Jerome Kerviel bet €50 billion of the bank’s money. Kerviel is currently in Paris on bail. “Given the persistent rumours,” BNP Paribas said in a statement, “BNP Paribas clarifies that it has ceased to consider a potential tie-up with Societe Generale.”

Vantia Therapeutics, a U.K.-based research and development company focusing on novel first-in-class therapies for unmet medical needs, has been launched with backing from an investor syndicate led by MVM Life Science Partners, along with Novo A/S and SV Life Sciences. Vantia Therapeutics, a spin-out of small molecule assets from Ferring Pharmaceuticals, has raised up to £19 million ($37.7 million) in investment for the development of its pipeline.

New York-based Lindsay Goldberg LLC has begun knocking on investors’ doors as it seeks $4 billion for Lindsay Goldberg III LP, two people familiar with the effort told LBO Wire. Lindsay Goldberg’s buy-and-build strategy uses more capital for follow-on investments in existing companies in order to further their growth. This strategy is used so that multiple avenues exist for exiting the companies, sources said.

Oculir Inc., which raised $7.5 million in venture capital to take glucose measurements from the whites of diabetic patients’ eyes, has shut down and is returning capital to its venture backers. Venture Wire reported that the San Diego company raised the capital through a seed round in 2003 and a Series A in 2005. Arch Partners, Canaan Partners, CHL Medical Partners, Onset Ventures, Three Shepherd Ventures and Windamere Venture Partners were investors. Oculir, which sought to develop an alternative to needles for measuring blood sugar, was developing a glucose meter that would have used middle-infrared light to take readings from the conjunctiva of the eye. Some animal and human data suggested the approach could work, said Chief Executive John Burd. As work progressed, Oculir found the technical hurdles to be too high.

Dillard’s Inc. (NYSE: DDS) has received notice from Barington Capital Group LP and Clinton Group Inc. that the two New York-based investment firms are seeking to nominate four people for election to the Dillard’s board. Little Rock, Ark.-based Dillard’s is an apparel and home furnishing retailers.

Human Resources

John Wu has joined Northern Light Venture Capital as a venture partner. He will be based in Shanghai, and will focus on new investment opportunities in consumer and tech-enabled businesses. He previously was chief technology officer of Alibaba Group.

Greenhill & Co. (NYSE: GHL) named Richard J. Lieb chief financial officer to replace John D. Liu, resigned to take a position with a client of the firm. The New York-based investment bank also promoted three managing directors to new roles. Harold J. Rodriguez Jr. was named chief administrative officer. Ulrika Ekman was appointed co-head of U.S. Mergers & Acquisitions alongside Jeffrey F. Buckalew. Jodi Ganz was named acting general counsel.

EQT Partners said Peter Korsholm will take over the role as office head in the Copenhagen office and become head of EQT Partners Equity business in Denmark. Korsholm joined the firm in 1999 and was named partner 2006. Separately, EQT Partners named Thomas Ramsay a partner within its equity business line and head of the firm in Finland.

Dirk Boogmans plans to resign as President-CEO and Director of GIMV for personal reasons, and the firm’s board accepted his decision but asked him remain until July 1, 2008. If a successor cannot be found by this deadline, Chairman Herman Daems will assume these responsibilities on a temporary basis for the Belgium-based venture capital firm.