PE Week Wire: Wed., March 21, 2007

I don’t usually root for VC-backed companies to succeed or fail. It’s not my job and it’s not my money. The only exception comes when I publicly express faith in a company’s prospects, only to get accused of ill-informed pandering by those with more insight into the company’s technology and competitive position. One recent (and rare) example concerns Amp’d Mobile, a Los Angeles-based mobile virtual network operator (MVNO) aimed at the MTV market. I basically got convinced of the company’s promise by CEO Peter Adderton (who previously launched Boost Mobile), and by the validation of around $250 million in VC funding from both financial and strategic investors. Mobile bloggers, however, were none to convinced – insisting that the MVNO model was inherently flawed, and that Amp’d would run into some serious troubles.

So I crossed my fingers, hoped for the best and kept tabs. At the very worst, Amp’d would fail and I’d use it in as self-serving attempt to convey my own humility.

But it seems that the finger calisthenics might be working. Amp’d just raised another $107 million in VC funding (Series E), with hedge fund Old Lane Management joining return backers like Columbia Capital, Highland Capital Partners, Redpoint Ventures, Intel Capital, MTV Networks, Tudor Investments and Universal Music Group. Moreover, Amp’d is currently pondering whether or not to accept additional cash. My bet is that it will end up taking some, given that each of its prior funding rounds was staged-out.

Now I recognize that VC funding does not necessarily lead to corporate success (see: bubble-era CLECs), even though the correlation is a bit stronger for subscriber-based services companies like Amp’d. But I think there is something to be said for the fact that original Amp’d backers – Columbia, Highland and Redpoint – continue to exhibit active faith in a company that has now raised more money than have some of their past funds. Not blind faith, mind you, but faith prompted by Amp’d’s ability to secure nearly 200,000 subscribers. Rumors that it still hasn’t even hit the 100k mark are simply wrong. Moreover, Amp’d also has begun to produce significant secondary revenue through content creation and distribution.

From a more macro level, much of the company’s skeptical press has been more a reflection of its market than of itself. Specifically, a number of respected mobile-tech bloggers disavow the MVNO model as unsustainable. For the uninitiated, MVNOs buy or lease unused mobile carrier spectrum at wholesale prices, and then sell the “minutes of use” to retail consumers with a device that can access specified content. Perhaps the best-known example of an MVNO – although it’s not typically thought of as one – is OnStar, the automotive communications companion that uses extra Verizon capacity. MVNOs also include content companies that provide exclusive audio and video via specialized handsets that double as regular cell phones (which is what Amp’d in doing).

One complaint is that the reseller model makes the margins relatively thin, but the more salient one is that the glut of MVNOs makes it more difficult for each one to distinguish itself – a feat necessary when convincing someone to sign up for an 18-month service contract. And it’s a legit argument, but difficulty does not necessarily presage failure.

Amp’d is not trying to be everything to everyone. Instead, it seems to have successfully aimed its pitch at a large and tech-savvy target market, in large part by taking strategic investments from that market’s most trusted content sources (MTV, Universal). Ditto for a stealthy Cincinnati-based MVNO startup called Genie (backed by Spark Capital), which is teaming with a major supermarket chain to target the Middle America market. Its target demo might make it the anti-Amp’d, but the laser focus is similar.

Again, no promises of success. But today I feel a bit more comfortable with my prior cheerleading…

New at

• Larry Aragon goes Behind the Green Doerr at Kleiner Perkins

• I discuss Letters and Loathing in the messy buyout of freight forwarding company EGL.

• Alex on a new stock picking company backed by Vinod Khosla and Ray Kurzweil. He also discusses a quick first close for DFJ’s new fund.

• Alexis Lakes of RWI Ventures directs us to revealing evidence that the public markets have been gamed for a while.

And, as always, news and analysis throughout the day. Also, be sure to check out our multiple RSS feeds. For example, you can pick the VC Deals feed to get alerts when a new VC deal is entered into the system during mid-day, including stealthy ones based on regulatory filings.

Top Three

Apollo Management has agreed to acquire costume jewelry and accessories retailer Claire’s Stores Inc. (NYSE: CLE) for $33 per share. The total transaction is valued at approximately $3.1 billion. Goldman Sachs is serving as financial advisor to Claire’s.

Real D, a Los Angeles-based provider of 3-D technologies to movie theaters, has raised $50 million in private equity funding from the Shamrock Capital Growth Fund. No additional deal terms were disclosed.

Integra Telecom Inc., a Portland, Ore.–based CLEC, has agreed to acquire Eschelon Telecom Inc. (Nasdaq: ESCH), a Minneapolis–based provider of integrated communications services to SMEs in the western United States. The offer is worth $30 per share, for a total equity value of around $566 million. Deutsche Bank Securities will help finance the deal via a senior credit facility. Integra shareholders include Nautic Partners, BA Capital Investors, Boston Ventures and GE Equity. Eschelon shareholders include Bain Capital and Wind Point Partners.

VC Deals

Eyeblaster Inc., a New York-based provider of digital marketing services and technology, has raised $30 million in second-round funding. The deal was co-led by individuals Eli Barkat (managing director of BRM Capital), Jonathan Kolber and board member Guy Gamzu. Insight Venture Partners had led the company’s Series A round in 2003, but did not participate on this deal. It retains a minority position.

Genband Inc., a Plano, Texas provider of VoIP infrastructure solutions, has raised around $15 million in Series C funding at a post-money valuation of around $130 million. Return backers include Sevin Rosen Funds, Venrock Associates, Oak Investment Partners, Granite Global Ventures, Alcatel, Siemens Venture Capital and Telesoft Partners. GenBand has raised over $205 million in total VC funding since its 1999 inception, including a VC recap in 2005.

Oodle Inc., a San Mateo, Calif.-based provider of online search for local classifieds, has raised $11 million in second-round funding. Jafco Ventures was joined by return backers Greylock Partners and Redpoint Ventures. The company raised a $5 million Series A round last May.

Inge AG, a Greifenberg, Germany-based provider of water ultrafiltration modules, has raised €6 million in second-round funding. Belgian Stonefund and the Dutch Entrepreneurs Fund were joined by return backers Siemens Venture Capital, Emerald Technology Ventures, SPG Private Investments and Taprogge Watertech.

Pulse Entertainment Inc., a San Francisco-based provider of digital media delivery solutions for Web and wireless platforms, has secured around $5.8 million of an $8.5 million Series 2 round. Return backers include Anthem Venture Partners and Draper Associates. Past backer Mobius Venture Capital is no longer a shareholder. Pulse has raised approximately $60 million in total VC funding since its 1994 inception.

Artimi Ltd., a Santa Clara, Calif.-based fabless semiconductor company developing single-chip solutions for high bandwidth wireless connectivity based on UWB, has raised $5 million in additional Series B funding from new backer Khosla Ventures. This brings its Series B total to $31.5 million, including a first close in December from Accel Partners, Amadeus Capital Partners, Index Ventures, Oak Investment Partners and Bank of Scotland Growth Equity. The company has raised over $50 million in total VC funding since its 2002 inception.

Numira Biosciences, an Irvine, Calif.–based provider of R&D tools for drug development, has raised $2.5 million in Series A funding. vSpring Capital led the deal, and was joined by the Tech Coast Angels and the Pasadena Angels. Inc., a Los Angeles-based provider of online legal document preparation services, has raised an undisclosed amount of VC funding from Polaris Venture Partners.

Buyout Deals

Spire Capital Partners has agreed to acquire a majority stake in Professional Bull Riders Inc., a Colorado Springs, Colo.-based professional bull riding organization. No financial terms were disclosed. Bear Stearns is advising PBR on the deal.

General Atlantic has completed its acquisition of a majority stake in AKQA Inc., a San Francisco-based interactive marketing company, from Francisco Partners. No financial terms were disclosed, although The Wall Street Journal had previously reported that the asking price had been between $200 million and $250 million.

Veronis Suhler Stevenson has acquired a control position in MediZine LLC, a publisher of health and fitness magazines like Healthy Living. No financial terms were disclosed.

Archer Daniels Midland (NYSE: ADM) stock rose nearly 3% yesterday on vague rumors of a possible buyout offer, but no specific suitors were named. The food processing company is currently valued at around $23 billion.

Diamond Castle Holdings has agreed to pump another $100 million of equity into Catamount Energy Corp., a Rutland, Vt.-based operator of wind power generation projects, according to LBO Wire. Earlier this month, Catamount acquired 50% of EPG Fuel Cell LLC, a developer of power projects based on fuel cell technologies.

AIG Capital Partners has acquired an undisclosed stake in Falcon Farms, an importer and distributor of flowers from Latin America to the U.S. and Canadian markets. No financial terms were disclosed.

Wildlands Inc., a Rocklin, Calif.-based company focused on wetlands mitigation and conservation banking, has raised an undisclosed amount of private equity funding from Parthenon Capital. Wildlands creates environmental credits, which it then sells and trades on the open market to public agencies, private developers and financial institutions to mitigate for environmental impacts and enable developers to complete projects in a timely manner.

PE-Backed IPOs

Aegerion Pharmaceuticals Inc., a Bridgewater, N.J.-based drug company being incubated by life sciences advisory Scheer & Co., has filed to raise $86.25 million via an IPO. It plans to trade on the Nasdaq under ticker symbol AEGR, with Lehman Brothers serving as lead underwriter. The company raised around $22.5 million in Series A funding in 2005 from firms like Alta Partners, Advent International, Index Ventures, MVM Life Science Partners and Scheer & Co.

PE-Backed M&A

InnerWireless Inc. of Richardson, Texas and PanGo Networks Inc. of Framingham, Mass. have merged, in order to create a single provider of broadband coverage and real-time location systems. No financial terms were disclosed. InnerWireless has raised around $62 million in VC funding since 1998, from firms like Sevin Rosen Funds, Centennial Ventures, HO2 Partners, Johnson Controls Inc., Massey Burch Capital, Rho Ventures, StarTech Early Ventures and Technology Associates Management. PanGo has raised nearly $15 million since 2003, from firms like IDG Ventures Boston, Columbia Capital and Investcorp.

Cetero Research, a Cary, N.C.-based provider of early clinical and bioanalytical research services for the pharma industry, has acquired Allied Research International Inc., a Toronto-based contract research organization. No financial terms were disclosed. Cetero was formed last October by the merger of Summit Partners portfolio company Ba Research International, with PRACS Institute and Gateway Medical Research.

PE Exits

CBS Corp. (NYSE: CBS) has acquired MaxPreps, a Cameron Park, Calif.–based provider of high school sports information and media services. No financial terms were disclosed. MaxPreps had raised around $12 million in VC funding from firms like Dolphin Equity Partners, BEV Capital and DFJ Frontier.

Lake Pacific Partners of Chicago has sold meat processor Teepak Europe to VT Holdings of Finland. Lake Pacific previously had sold Teepak North America to Viscofan of Spain. No financial terms of either deal were disclosed.

Wink, a Mountain View, Calif.-based provider of a people search engine for online profiles, has repurchased some of its stock from existing VC backers. Greylock Partners is among those that have reduced their stakes, but it remains the company’s largest outside shareholder.

Firms & Funds

Bertelsmann AG is forming a €1 billion fund that would focus on media-related private equity opportunities, according to The Financial Times. Bertelsmann would contribute €500 million, while partners Citigroup Private Equity and Morgan Stanley Principal Investments would commit the remainder.

F&C Investments has held a €112 million first close on a new private equity fund-of-funds focused on the European middle-markets. A final close on over €200 million in expected later this year.

Providential Holdings Inc. (OTC BB: PRVH) has formed a $100 million private equity fund focused on Vietnamese companies seeking to go public in either Vietnam or the United States. This would include state-owned enterprises that are being privatized. The fund will be called Providential Capital.

Human Resources

Matthew Blevins has joined Clearview Capital as an analyst. He previously was a senior consultant with Deloitte & Touche USA.