PE Week Wire: Tues., March 25, 2008

Has Chinese video-sharing site raised another $53 million in VC funding? That’s what was reported yesterday by SinoCast and, if true, would boost the Shanghai-based company’s total venture capitalization to over $81 million. The problem is that neither Tudou nor its investors are talking, and the report has yet to be substantiated elsewhere.

Part of the problem may be that Tudou was recently penalized by the Chinese government for hosting material deemed inappropriate. no specifics as to the violation or punishment, but the matter stems from a recent Chinese ban on distributing online video that involves pornography, discloses government secrets, disrupts social stability or damages the reputation of China (read: Tibet protest videos). It has ordered 25 websites offline, and issued warnings or worse to another 32 (including Tudou). It’s unclear if YouTube is among either group, although it’s been inaccessible within China for more than a week.

SinoCast’s article suggested that Tudou does not want to announce the round until the company’s undisclosed punishment concludes. That also seems to extend to its investors, who peppered me yesterday with “no comments.”

So, in the meantime, let me present three unfounded hypotheses: (1) This deal involves a strategic investor, because $81 million is way too much for VCs alone to invest in a video-sharing site. It’s also too much dilution for the company to accept, without a rationale that trumps short-term finances. (2) The investors are made a bit nervous about the government action, and are reconsidering. This seems unlikely, but lots of VCs seem to maximize the Chinese market potential while minimizing the prospect of government interference. Perhaps this was a wake-up call. (3) Tudou plans to announce the deal soon, but just hasn’t gotten its PR machinery in gear yet. That would be the Occam’s Razor scenario.

*** Willis Stein is pre-marketing its fourth fund, with a $1 billion target. Let’s do scenarios again: (A) I’ve missed some massive liquidity event. (B) The firm is planning some big liquidity events to coincide with the actual PPM. (C) The firm is fee-strapped, and is taking one last shot at the moon.

*** Cascadia Capital’s Michael Butler on what may emerge from our current fiscal mess.

*** peHUB First Read, including new Wall Street compensation surveys and a pending VC-backed bust.

*** I’m glad the beloved Red Sox won this morning, but I can’t over-emphasize my displeasure with robbing the fandom of a real opening day. One of my annual joys is skipping out of work in early April to watch the season’s first game – which is almost always in the mid-afternoon. Waking up to the second inning just felt wrong.

Top Three

The Carlyle Group has acquired a 37.8% stake in French telecom companies Numericable and Completel, from existing shareholders Altice and Cinven. The 1.1 billion equity investment gave the companies an aggregate enterprise value of €6.5 billion.

Nineyou International Ltd. (9you), a Shanghai-based online gaming company, has raised $100 million in private equity funding from Singapore’s Temasek Holdings. The company last year had planned to raise $174 million via an IPO in Osaka, but bailed after licensing conflicts with a pair of Korean gaming companies.

Demand Media, a Santa Monica, Calif.-based domain name aggregator and registrar, has raised $35 million in additional Series D funding, according to a regulatory filing. The company had held a $100 million first close last year. Shareholders include Goldman Sachs, 3i Group, Generation Partners, Oak Investment Partners and Spectrum Equity Investors. The company has now raised $355 million in total VC funding since its March 2006 founding. A Demand Media spokeswoman confirmed the new round, but declined to comment further.

VC Deals

Modu Ltd., an Israeli cellular startup, has raised $100 million in new VC funding commitments, according to Globes. The deal has a $150 million pre-money valuation, and is expected to close within the next few weeks. Modu was formed 18 months ago by Dov Moran, founder of Msystems (sold to SanDisk for $1.6 billion). It initially raised $20 million from Genesis Partners, Gemini Israel Funds, San Disk and Moran.

BSG Alliance Corp., an Austin, Texas-based provider of on-demand enterprise software, has raised nearly $43 million in Series B funding led by Oak Investment Partners, according to a regulatory filing. The company had previously raised $20 million from Foundation Capital, Hummer Winblad Venture Partners and Powershift Ventures. BSG also has made five acquisitions, the most recent of which was Iconixx Corp.

Elevance Renewable Sciences Inc., a specialty chemical startup, has raised more than $40 million from TPG Star and TPG Biotechnology Partners. Elevance was recently formed as the outgrowth of an existing partnership between Cargill and catalyst technology company Materia., a Mountain View, Calif.-based online comparison shopping site, has raised $17.5 million in Series C funding from TPG Growth. The company had raised a $7.2 million Series B round in 2005 led by Trans Cosmos.

Fidelis Security Systems, a Bethesda, Md.-based provider of enterprise network security, has called down $17 million of a $22 million Series B round, according to a regulatory filing. Tudor Ventures led the round, and was joined by return backers like Ascent Venture Partners, Inflection Point Ventures and the Maryland Department of Business and Economic Development.

Scynexis, a Durham, N.C.-based provider of outsourced pharmaceutical R&D, has raised $13.5 million in Series C-2 funding, according to a regulatory filing. Return backers include Alta Partners, Burrill & Co., SGAM and Ventech.

RealPage Inc., a provider of Web-based property management systems for the multi-family housing market, has raised $13.6 million in what it terms a “Series A” funding, according to a regulatory filing. The Carrolton, Texas-based company had previously raised over $27 million since 2003. Listed shareholders include Camden Partners and Advance Capital Partners. Prior backers also have included Apax Partners and Leeds Equity Partners, with each firm still maintaining a board seat.

Kleer Corp. (f.k.a. ENQ Semiconductor), a Cupertino, Calif.-based fabless maker of wireless audio ICs, has called down $7 million of a $13 million Series B round, according to a regulatory filing. Return backers include TL Ventures and US Venture Partners. The company had previously raised around $30 million.

EnterpriseDB Corp., an Edison, N.J.-based developer of open-source enterprise database products, has raised $10 million in Series C funding. IBM was joined by return backers Charles River Ventures, Fidelity Ventures and Valhalla Partners. The company had previously raised $26.5 million.

WebCollage Inc., a New York-based provider of online merchandising networks to manufacturers, has raised $10 million in new VC funding. Greylock Partners Israel led the round, and was joined by return backers Sierra Ventures, Cedar Ventures and Gilde Investment Management. The company has raised over $46 million in total VC funding since its 2000 inception.

Tapioca Mobile, a San Diego-based enabler of video and rich media delivery via mobile phones, has raised $5 million in Series A funding led by return backer Venrock, according to a regulatory filing.

Viva Vision, a Los Angeles-based provider of content and applications for mobile entertainment, has raised $2 million in new VC funding from Medical Capital Corp.

FinAnalytica Inc., a Seattle-based provider of risk management and portfolio construction analytics, has raised $5 million from New Europe Venture Equity.

Horticultural Asset Management Inc., Cary, N.C.-based provider of replacement cost valuations and inspections of the condition of trees and shrubs, has raised $3.2 million from private equity firm Rockbrook Advisors. Collective IQ advised HMI on the deal.

WePlay Inc., a New York-based online community for youth sports, has raised $1.87 million in Series A-1 funding, according to a regulatory filing. Backers include Pequot Private Equity, Creative Artists Agency and Major League Baseball.

4DK Technologies Inc., a Herndon, Va.-based wireless connectivity startup, has called down $1 million of a $3 million Series A round, according to a regulatory filing. No investor information was listed.

Adimab Inc., a Lebanon, N.H.-based developer of a human antibody discovery platform in yeast, has raised an undisclosed amount of Series B funding. Return backers include Polaris Venture Partners and SV Life Sciences.

Action Engine Corp., a Bellevue, Wash.-based developer of a software platform for use with Web-enabled mobile devices, has raised around $6.22 million in bridge financing, according to a regulatory filing. The company had previously raised $65 million in VC funding, including a $20 million Series E round last year from Baker Capital, Northwest Venture Associates and Spangler Group.

Buyout Deals

Advent International has acquired Romanian generic drug company LaborMed Pharma from its founders. No financial terms were disclosed. LaborMed was formed in 1991, and has 2007 revenue of approximately €29 million.

FishNet Security Inc., a Kansas City–based provider of enterprise IT security solutions, has raised an undisclosed amount of private equity funding from Lake Capital. FishNet was founded in 1996, and last year generated over $200 million in revenue.

LMS Capital confirmed that it is in talks to sell UK-based offshore crane supplier Energy Cranes. The statement followed a recent Daily Telegraph report that Close Brothers Private Equity was in talks to buy Energy Cranes for over Gbp100 million.

Marathon Acquisition Corp., a blank check acquisition company, has agreed to acquire a 66% stake in UK-based Global Ship Lease Inc. from a subsidiary of French shipping container company CMA CGM SA.

PE-Backed M&A

Kinetics Group, a UK-based social housing services company, has acquired The Lord Group, a provider of fabric maintenance services to the Greater Manchester social housing sector. No financial terms were disclosed. Kinetics Group was acquired in March 2007 by Sovereign Capital. Get more info.

Lab21, a UK-based provider of health and environmental diagnostics, has acquired NPTech Ltd., a provider of diagnostic testing services for the British NHS and private healthcare providers in the UK and parts of Europe. No financial terms were disclosed. Lab21 has raised VC funding from firms like Merlin Biosciences and Kreos Capital.

Lovejuice, a UK-based smoothie and juice bar operator, has acquired Barefoot Juice, a juice bar chain operating in Northern England. No financial terms were disclosed. Lovejuice is a portfolio company of Smedvig Capital.

Multi Packaging Solutions, a portfolio company of Bear Stearns Merchant Banking, has acquired Innovative Folding Carton from ICV Capital Partners and the 21st Century Group. No financial terms were disclosed, except that the sale represented a 2x equity return for the sellers. Innovative Folding Carton is a South Plainfield, N.J.-based provider of custom, specialty and high-end packaging.

Senior Care Centers of America, a portfolio company of Clearview Capital, has acquired Preston House Adult Day Care, a provider of care to elderly and disabled adults in the Hartford, Conn. area. No financial terms were disclosed.

Firms & Funds

Charterhouse Group is planning to raise its ninth fund with a target in excess of EUR 5 billion, according to Dow Jones. The UK-based buyout firm had raised 4 billion for its fourth fund, which hit the 75% invested threshold earlier this month by agreeing to buy both Giles Insurance Brokers and Tunstall Group.

Asia Alternatives of San Francisco has held a $138 million first close for its second fund-of-funds targeting the Asia market, according to a regulatory filing. No target information was disclosed. C.P. Eaton Partners is serving as placement agent. The firm last year closed its debut fund-of-funds with $515 million. Limited partners included CalTech, CalPERS, Comprehensive Financial Management, Mass Mutual Asia, Mass Mutual Japan, Massachusetts Mutual Life Insurance Company, OHIM Asia Investors (affiliate of Oak Hill Investment Management), OMERS, PSERS, Warren Hellman and Arthur Rock. C.P. Eaton Partners served as placement agent.

BioStar Ventures, a Petoskey, Mich.-based VC firm focused on early-stage medical device companies, is raising up to $75 million for its second fund, according to a regulatory filing. It already has closed on $24 million.

Early Stage Partners, a Cleveland-based venture capital fund focused on Midwestern technology companies, is raising $60 million for its second fund, according to a regulatory filing. So far it has closed on nearly $27 million. Limited partners include National City Equity Partners, Key Capital, The Ohio Capital Fund and The George Gund Foundation.

AccessTurkey Capital Group is targeting EUR 250 million for its inaugural buyout fund, according to Private Equity International. The Istanbul-based firm began as a hedge fund in 1999, and later expanded into venture capital.

Nixon Peabody LLP has opened an office in Shanghai, which is the law firm’s first office in Asia. The office will be initially staffed on a rotational basis by two U.S. attorneys from Nixon Peabody’s China practice: James Chapman and Daniel Deshon. It plans to soon hire a permanent Shanghai staff.

Fortress Investment Group LLC today reported a Q4 loss, after paying $240 million in principal compensation.

Human Resources

Robert Millman and Elizabeth Stoner have joined MPM Capital as executive partners. Millman previously was chief IP council for Alnylam Pharmaceuticals Inc., while Stoner spent the past 22 years with Merck Research Labs.

Joseph Stecher has agreed to join Morgan Stanley Alternative Investment Partners as a managing director and chief investment officer for the firm’s real estate fund-of-funds business. He previously was with Goldman Sachs and, before that, GM Asset Management.

James Mallak has joined turnaround advisor Alvarez & Marsal as a managing director. He will be based in Detroit, and previously was CFO of Tower Automotive Inc.