PE Week Wire: Tues., March 18, 2008

The National Venture Capital Association (NVCA) last week released a study on the nation’s fastest-growing regions for VC investment over the past decade, in an effort to show that the industry isn’t all about Silicon Valley and Route 128. The biggest gainers were New Mexico and Pittsburgh – and mayors, governors and dog-catchers in those regions are certain to tout the results come fall.

Later that day, however, the lesser-known National Association of Seed and Venture Funds (NASV) called the report an obfuscation of an overall decline in capital availability for seed-stage and startup companies, and added that VCs are actually doing a lousy job of spreading the wealth geographically.

Yup, it was a case oftrade group-on-trade group crime.

One big divergence is on the issue of what venture capital really means. NVCA would basically argue that any private company raising capital from self-defined “venture capitalists” would qualify (so long as it doesn’t look like a buyout), while NASV believes that real venture capital is for very young companies that are closer to launch than to exit (or endless stasis).

I typically adopt the NVCA definition, as New Mexico doesn’t value a $10 million Series A round more than a $10 million in Series B round (both should result in the company adding staff and paying more taxes). But let’s use the NASV definition here, for the purposes of an apples-to-apples analysis. After doing so, the verdict appears mixed.

On the one hand, it’s true that the percentage of VC dollars to seed/early-stage companies has decreased from 24.16% in 1997 to 21.18% in 2007, according to MoneyTree. On the other hand, the actual percentage of seed/early-stage deals has actually increased, from 27.2% in 1997 to 36.7% in 2007.

On the geographic issue, NVCA is correct that areas like Pittsburgh are growing faster in terms of VC investment than is Silicon Valley or Greater Boston. The flipside, however, is that the top two state beneficiaries of VC benevolence are actually receiving a higher percentage of disbursements now then they were ten years ago. As NASV correctly points out, California and Massachusetts combined to receive 59.34% of all VC investments in 2007, compared to just 50.09% in 1997. That gap grows narrows a bit if you only look at seed/early-stage — 59.13% in 2007 compared to 51.24% in 1997 — but not by much…

*** We’re entering of the second business day of LAB (Life after Bear), and Bear Stearns Merchant Banking has not yet changed its name. This isn’t a question of if but when, so it might as well do so ASAP. The situation is so toxic that BSMB portfolio company Doral Financial issued a press release stating that the Bear Stearns collapse “does not have an impact on Doral’s operations.

*** peHUB First Read, including video of Jim Cramer saying last week that “Bear Stearns is fine.”

*** Last Friday, I wrote about a proposed California law that would preclude CalPERS and CalSTRS from investing in private equity funds whose management companies are partially owned by certain sovereign wealth funds. The CalPERS board was scheduled to vote yesterday on a staff recommendation that it oppose the bill, but the board kicked the can down the road – deferring a decision until its April meeting. The CalSTRS board has already come out in formal opposition.

*** A reminder that you have two days left to sign up for our March Madness Extravaganza. It’s free to play, and yesterday’s list of prizes didn’t list the most important: Bragging rights. Prior winners have reported being deluged with congratulatory emails (actually, that may not be a good thing…).

Anyway, full details of how to play are in yesterday’s email, or are posted here. Get in the game!

Top Three

Vector Capital has offered to buy data archive services company Captaris Inc. (CAPA) for $4.75 a share, which represents a 36% premium over Friday’s closing price. The deal would be valued at about $126.8 million. Earlier Monday, the Bellevue, Wash.-based company said that it had retained RBC Capital Markets to help it evaluate strategic alternatives, replacing Credit Suisse. Vector, which already holds a 10.2% equity stake in Captaris, suggested that the move was a “delaying tactic.”

Alimera Sciences Inc., an Atlanta-based ophthalmic pharma company, has raised $30 million in Series C funding. Return backers include BA Venture Partners, Domain Associates, Intersouth Partners, Polaris Venture Partners and Venrock. The capital will enable Alimera to acquire a majority stake in its Phase III investigative treatment for diabetic macular edema, from development partner pSivida Ltd. Alimera last year raised a $31.8 million Series B round, and sold its OTC allergy franchise to Bausch & Lomb.

BMC Software (BMC) has agreed to acquire BladeLogic (BLOG), a Lexington, Mass.-based provider of data center automation software. The deal is valued at approximately $800 million, or $28 per share. BladeLogic went public last year with a $440 million market cap, after having raised around $35 million in VC funding from firms like Battery Ventures, Bessemer Venture Partners, Globespan Capital Partners and MK Capital. Each of those firms still has a position. Battery, for example, still holds 2.9 million shares.

VC Deals

Luminous Medical Inc., a Carlsbad, Calif.-based developer of glucose monitors for in-hospital use with critically-ill patients, has raised $23.5 million in Series B funding. Adams Street Partners led the round, and was joined by RiverVest Venture Partners, Finistere Ventures and return backers De Novo Ventures and Latterell Venture Partners. The company had raised a $9 million Series A round in late 2005.

Complinet Group, a UK-based provider of online regulatory solutions for the global financial services industry, has raised £18.5 million from Fidelity Equity Partners. Tulleken Co. advised Complinet on the deal, which gives fidelity a “significant minority” position.

SendMe, a San Francisco-based developer of mobile entertainment applications, has raised $15 million in Series C funding. GrandBanks Capital led the round, and was joined by Amicus Capital, Spark Capital and True Ventures. The company had previously raised $6 million.

Isango, a UK-based travel website, has raised $8 million in new VC funding. Spark Ventures led the round with $4 million, and was joined by Beringea and undisclosed existing shareholders.

enGene Inc., a Vancouver-based biotech company that helps diabetic patients create insulin in a regulated fashion, has raised US$6.4 million in Series A funding. Saad Investments Co. led the round, and was joined by Masa Life Science Ventures and undisclosed angel investors.

Portico Learning Solutions, a Baton Rouge, La.-based provider of custom e-learning solutions, has raised $1 million in VC funding. Backers include Advantage Capital Partners, Enhanced Capital Partners, Louisiana Fund I and the Louisiana Technology Fund.

Pivot Inc., a New York–based provider of a real-time enterprise collaboration network for the capital markets, has raised $3 million in venture debt funding from MMV Financial Inc. Company shareholders include Eze Castle Integration, Softbank Capital, DFJ Gotham Ventures and Hudson Ventures.

Buyout Deals

3i Infrastructure has competition for UK renewable energy company Novera Energy, which 3i is in talks to buy for £112 million. The new suitor is Infinis, a gas landfill operator backed by Terra Firma. No details of Infinis’ approach were disclosed.

The Ontario Teachers’ Pension Plan is in talks to acquire a 50% stake in the Prague Airport, in partnership with France’s state-owned airport operator Aéroports de Paris. No financial terms have been disclosed surrounding the discussions, which were first reported by the Toronto Globe and Mail.

Questor Management has sold AZ Automotive Corp. to AIG Global Investment Corp. and Orix Finance Corp. No financial terms were disclosed. AZ Automotive is a Warren, Mich.-based metal body stamping and assembly supplier. W.Y. Campbell & Co. managed the sale.

Wincove Capital has acquired Connect-Air International Inc., a Seattle-based distributor of low-voltage wire and cable products in the United States. No financial terms were disclosed.

PE-Backed IPOs

Pogo Jet Inc., a Chicopee, Mass.-based on-demand jet charter service focused on the East Coast, has postponed its IPO, due to “market conditions.” The company is in registration to sell 7 million common sharesat between $12.50 and $16.50 per share. It would have an initial market cap of around $175 million, were it to price at the high end of its range. The company plans to trade on the Nasdaq under ticker symbol POGO, with W.R. Hambrecht serving as lead underwriter (via its OpenIPO process). Backers include Tiger Partners (30.82% pre-IPO stake), Village Ventures, Worcester Capital Partners and Long River Capital Partners. Pogo Jet’s service is not expected to launch until 2009.

Renewable Energy Group Inc., a Ralston, Iowa-based biodiesel producer, has canceled its IPO, citing “current market conditions.” Thecompany had filed last July to raise $150 million, with Credit Suisse serving as lead underwriter. Natural Gas Partners led a $100 million Series A round for REG in 2006, with Bunge North America, ED&F Man Holdings and West Central Cooperative also participating.

PE Exits

LiveWire Mobile Inc., a subsidiary of NMS Communications Corp. (NMSS), has acquired Groove Mobile Inc., a Bedford, Mass.-based provider of mobile music solutions. The deal is valued at $14.5 million. Groove Mobile had raised around $32.5 million in VC funding since 2001, from firms like Charles River Ventures, Kodiak Venture Partners and Egan-Managed Capital.

Widearea Systems, a Frederick, Md.-based, has acquired the operating assets of Magicsoft, including the multipoint video conferencing product VC Wizard. No financial terms were disclosed. Widearea has raised startup funding from the Maryland Technology Development Corp., while MagicSoft has raised around $3.25 million in VC funding led by NexGen Capital.

Firms & Funds

Joe Lewis, a UK billionaire who invests through Tavistock Group, reportedly is working to block JPMorgan Chase’s $236 million takeover of Bear Stearns. Tavistock is Bear Stearns’ second-largest outside investor with a 9.4% stake, and The Daily Telegraph reports that Lewis is trying to rustle up a rival bid. He also may work with other investors to vote against JPMorgan’s offer at the upcoming shareholders’ meeting.

Avista Capital is planning to raise $3 billion for its second fund, according to LBO Wire. The Credit Suisse spinout closed its debut fund just last summer with $2 billion.

Caltius of Los Angeles is raising $400 million for its fourth mezzanine fund, according to a regulatory filing. Credit Suisse is serving as placement agent.

Candover PLC, a UK private equity firm focused on the European market, is raising EUR 5 billion for its latest fund, according to a regulatory filing. The firm’s prior fund closed in November 2005 with EUR 3.5 billion, and so far has made nine investments. Approximately 45% of that fund’s limited partners were from the U.S., while 25% was from the UK and another 24% was from other European nations.

The Carlyle Group is raising up to $1 billion for its second mezzanine fund, according to a regulatory filing. It has already secured $209.5 million in commitments. The firm raised around $436 million for its debut mezz fund in 2005.

Ferd Private Equity has changed its name to Herkules, and moving its headquarters to downtown Oslo. The move was made to differentiate between the private equity firm and Ferd AS, its largest limited partner.

Guardian Capital Partners has held a $37 million first close for its debut fund, according to Buyouts Magazine. The fund has an $80 million target, and counts MassMutual among its limited partners. The Wayne, Pa.-based firm plans to make control plays in the lower-middle-market companies. It is led by Scott Evans (formerly of Cerberus), Peter Haabestad (Susquehanna Financial) and Hugh Kenworthy (Brynavon Group).

Gulf Capital and Credit Suisse have formed a long-term strategic alliance to make private equity investments in the Gulf and Middle East regions. No financial terms of the arrangement were disclosed, save that each institution was committing “a significant amount of investment capital.”

Renaissance Partners, an affiliate of Moscow-based investment bank Renaissance Capital, has raised $660 million for its inaugural private equity fund. It will focus on buyouts of Russian companies.

Human Resources

Lauren Liang has joined Peacock Equity Fund as a Singapore-based executive director focused on the Asia-Pacific region. She previously held numerous positions inside NBC Universal and GE Capital, including her most recent role as director of business development for NBC Universal Local Media.

Michael Giaquinto has joined investment bank Greenhill & Co. as a managing director, with a focus on medical devices. He previously was co-head of the U.S. healthcare group at Citigroup Global Markets.