PE Week Wire: Wed., March 19, 2008

My plan for this morning was to pen a feedback column, in order to help prevent my inbox from becoming a sad place where insightful comments go to die. But then I read this screaming headline from the top of VentureWire:

Pat McGovern Says IDG Gave Flybridge The Boot

Flybridge would be the firm formerly known as IDG Ventures Boston, which on Monday announced its name change and closing of its third fund with $280 million. It was originally formed as a captive fund of media company IDG — which Pat McGovern founded and serves as chairman of – but raised most of its $180 million second fund from third parties. IDG came in as a minority LP on that fund (it later sold most of those holdings), and is not part of Fund III. The whole thing sounded relatively amenable when I met with the Flybridge folks at their offices last week (sorry, I was under embargo), so the VentureWire story stuck out like a soundbitten preacher.

If you don’t happen to shell out a grand each year for VentureWire, here are the operative snippets:

[McGovern] said [Flybridge] wanted to keep IDG’s name and money until several weeks ago when IDG said no. McGovern said the technology publishing and research company declined to continue the relationship “because it was damaging to our brand.”

It also quotes McGovern as saying: “They were desperate to get an IDG connection up until two weeks ago.

Tough stuff. It’s also factually false.

IDG Ventures Boston began marketing its third fund late last year, and at the time was telling prospective limited partners that it would be re-branding. One institutional investor – who did not commit – told me this morning: “I met with them in December, and they said that they planned to change the name away from IDG. They didn’t know yet what the new name would be, just that it wouldn’t have IDG in it.”

That information also was in the January subscription agreements sent to participating limited partners, and IDG Ventures Boston had scooped up the domain by February. In other words, McGovern is wrong to asset that Flybridge wanted to keep IDG’s name until “several weeks ago.”

The issue of the money is a bit more nuanced, and perhaps is due more to a misunderstanding than anything else. The new Flybridge fund was oversubscribed without IDG’s money, and the firm was interested in sticking to its $280 million hard cap. That said, it did maintain discussions with IDG up until the last minute, in an effort to work out an agreement whereby IDG could remain a limited partner (albeit at a much smaller percentage than before). Those discussions did not bear fruit, which perhaps explains part of McGovern’s comments and apparent anger.

I spoke this morning with Flybridge partner Jeff Bussgang, who said: “It’s really unfortunate that Pat chose to make inaccurate and inappropriate comments.” I tried getting comment from McGovern and/or IDG corporate, but was unable to do so.

IDG remains the sole limited partner on Flybridge’s first fund, and VentureWire reports that it maintains a 13% stake in its second fund.


New at peHUB

*** peHUB First Read, including threats from Guy Hands and a corporate venture fund from Best Buy.

*** Jeff Rosenkranz has stepped down as head of M&A for middle-market bank Piper Jaffray. He says he wants to spend more time with his family – a typical canard for someone with another job up their sleeve – but he sounded convincing on the phone last night. Here’s the story.

*** Michael Butler, chairman and CEO of investment bank Cascadia Capital, is writing a new book titled Financing the Future and the Next Wave of 21st Century Innovation. He’s agreed to serialize the chapters at peHUB, and the introduction is now available.

*** Less than one day to participate in our Annual March Madness Extravaganza. More than 300 of you playing so far. Get details on how to play.

*** Some video perspective, in the wake of our collective agonizing over how hard Wall Street has been hit by the subprime meltdown: From Wall Street to No Street.

*** Steve Jurvetson likes rockets.

*** VC-backed companies know there’s no shame in failing to go public this year, but that knowledge doesn’t alleviate the need for new strategies once the IPO registration is pulled. What about that planned expansion that was dependent on cash generated by the IPO, or a new project that would be financed via a banking instrument only available to public companies? That’s the situation biotech company Archemix faced last month.

*** David Toll has some Blackstone risk factors worth revisiting.

Publishing Note: Tomorrow is Buyouts Madness in New York, and I’m moderating a 9am panel. That means that Alex Haislip and Eamon Beltan will be filling in on the column and news, respectively. Thanks to them, and I’ll be back on Friday (hopefully with that Feedback column).

Top Three

Ziff Davis Enterprise has raised $20 million from Bessemer Venture Partners. The funding will be used for both acquisitions and working capital. Insight Venture Partners acquired Ziff Davis Enterprise last July for $150 million from Ziff Davis Media. Ziff Davis Enterprise produces online content, lead generation services, events and publications serving the tech industry. Its assets include, but are not limited to,,,, eWEEK magazine, CIO magazine and a database of 3.5 million business and technology users.

Dynamic Offshore Resources LLC has acquired a 75% interest in SPN Resources LLC, the oil and gas subsidiary of Superior Energy Services Inc. (SPN), for $165 million. SPN will retain the other 25 percent. Dynamic was formed earlier this year to acquire and develop oil and gas producing properties in the Gulf of Mexico. It was backed by $50 million from company management and $450 million from The Carlyle Group and Riverstone Holdings

Qatalyst Group has launched as a San Francisco-based tech-focused merchant bank. The firm’s investment banking arm will provide M&A advisory services, while its Qatalyst Capital Partners unit will make principal investments alongside venture capital and private equity firms. No word yet on Qatalyst’s capitalization. Qatalyst was founded by former CSFB tech banker Frank Quattrone, who last summer had obstruction of justice charges dismissed against him.

VC Deals

LigoCyte Pharmaceuticals Inc., a Bozeman, Montana-based developer of vaccines for the gastrointestinal and respiratory markets, has raised $28 million in Series C funding. Forward Ventures, Jafco and Novartis Venture Fund co-led the round, and were joined by Fidelity Biosciences, MedImmune Ventures and return backers Athenian Venture Partners and MC Life Sciences Ventures. Seaview Securities served as placement agent. Get more info.

Norstel AB, a Swedish maker of silicon carbide wafers and materials, has raised €15 million in new VC funding. Backers include Northzone Ventures, Eqvitec and Creandum.

Stentys, a Paris-based developer of dedicated stents for treatment of blocked coronary artery bifurcations, has raised $18 million in Series B funding. Scottish Equity Partners led the round, and was joined by return backers Sofinnova Partners. Aelios Finance served as placement agent.

Vovici, a Dulles, Va.-based provider of enterprise feedback management solutions, has raised $10 million in Series B funding. Mayfield Fund led the round, and was joined by return backer Austin Ventures.

FixYa, an San Mateo, Calif.-based online technical support startup, has raised $6 million in Series B funding. Mayfield Fund led the round, and was joined by fellow return backer Pitango Venture Capital.

Advanced Power Projects Inc. has raised an undisclosed amount of Series A funding. Bay Partners and Sequoia Capital co-led the round, with Redpoint Ventures and Aubrey McClendon (CEO of Chesapeake Energy Corp.) also participating. The Fremont, Calif.-based company plans to acquire and commercialize new technologies to reduce the cost of power generation with green results. Advanced Power Projects is run by former Calpine founder and CEO Pete Cartwright.

Aspect Software Inc., a Chelmsford, Mass.-based maker of call center customer interaction management software, has formed a strategic alliance with Microsoft that includes an equity investment. No financial terms were disclosed. Aspect is majority-owned by Golden Gate Capital.

FRiENDi Mobile, a Dubai-based mobile virtual network operator (MVNO) for the MENA region, has raised an undisclosed amount of VC funding from ePlanet Ventures.

Buyout Deals

Baring Private Equity has acquired a 12% stake in Mumbai-based brokerage Sharekhan, according to The Economic Times. The deal is valued at around $59 million, and includes both new equity and shares being sold by CVC, which at last check held a 75% stake.

Clear Channel Communications (CCU) has extended the deadline for pricing notes related to its $19.5 billion buyout by Bain Capital and Thomas H. Lee Partners. The original tender deadline was yesterday, but has now been extended to tomorrow. It also has extended the consent payment deadline from tomorrow to March 24.

Pangaea Asset Management, a Chicago-based asset management firm focused on leveraged loans, has raised an undisclosed amount of private equity funding from Norwest Equity Partners.

PE-Backed IPOs

CardioNet Inc., a San Diego-based provider of wireless mobile cardiac outpatient monitoring solutions, has reduced its IPO terms to 3.4 million common shares being offered at between $18 and $20 per share.It had previously filed to pricesix million shares being at between $22 and $24 per share.The company stillplans to trade on the Nasdaq under ticker symbol BEAT, with Citi serving as lead underwriter. CardioNet has raised around $163 million in total VC funding, including a $110 million infusion last year. Shareholders include H&Q Healthcare Investors, Sanderling Ventures, Guidant Corp., Foundation Medical Partners and IngleWood Ventures.

PE Exits

Industri Kapital has agreed to sell Swiss electronic components company ELFA to Daetwyler for SEK 2.1 billion ($348m). ELFA generated 2007 net sales of €105 million, and €19 million in EBITDA.

PE-Backed M&A

Clearview Capital has acquired Berthoud, Colo.-based Mayo Welding Services Inc. as its third add-on acquisition for Hettinger Welding LLC, a provider of facilities construction, pipelining and welding services for customers building natural gas infrastructure in the Rocky Mountain region. No financial terms were disclosed.

ViaWest, a Denver-based provider of colocation and managed hosting solutions, has acquired Dataside, a Dallas-based provider of data center infrastructure space and managed network services. No pricing terms were disclosed. Existing ViaWest backer Cowen Capital Partners led an equity tranche to help finance the acquisition, and was joined by Goldman Sachs and Quilvest. Goldman Sachsand WellsFargo Foothill provided debt financing. Dataside had raised over $19 million in VC funding between 2000 and 2002 from firms like Hunt Capital Group, BG Media, Koch Ventures and Markpoint Venture Partners.

Firms & Funds

BNP Paribas said today that it will not make a takeover bid for Société Générale, despite persistent rumors that it would.

Kohlberg & Co. has closed its sixth private equity fund with $1.5 billion in capital commitments. Lazard served as placement agent. The Mt. Kisco, N.Y.-based firm focuses on buyouts of middle-market companies, and raised $1.1 billion for its prior fund back in 2004.

Beecken Petty O’ Keefe & Co. is nearing the $650 million target for its third fundraising effort, according to LBO Wire. The Chicago-based firm focuses on private equity opportunities in the healthcare space, and raised $325 million in 2005 for its second fund.

Atlantic-Pacific Capital, a private equity placement agency, has opened a an office in New York City. It is the firm’s sixth location, including its Greenwich, Conn.-based headquarters.

Human Resources

Dirk Boogmans is resigning as president and CEO of Belgium-based GIMV, effective July 1. The firm said that the decision was being made for “personal reasons.” No successor has yet been named.

Michael Bauer has been named Foundation Capital’s first participant in the US Department of Energy Entrepreneur-in-Residence (EIR) program. He is a former vice president of product management for smart grid technology company BPL Global, and will now serve as a bridge between Foundation’s partners and the DOE’s Oak Ridge National Laboratory.

Thomas Ramsey has joined EQT Partners as a partner and head of the firm’s Finland office. He had been a partner with Industri Kapital between 2003 and 2006. Udo Philipp, interim head of EQT Finland, will return to his position as a partner in Germany.

Greenhill & Co. has named Richard Lieb as its new chief financial officer. He had joined Greenhill in 2005 as a managing director, after having run the real estate investment banking group at Goldman Sachs. Former Greenhill CFO John Liu has resigned “to take a position with a client of the firm.”