PE Week Wire: Wed., May 21, 2008

Lots of startups get turned down for VC funding, but a Web 2.0 wannabe called RateBuilding recently reset the bar by getting denied more than 100 times in less than an hour.

The debacle began Tuesday at around 2pm, when RateBuilding sent out an elevator pitch to a ridiculously wide swath of potential investors. Not only did it hit early-stage VCs like Mayfield and Highland Capital Partners, but also to mid-market buyout firms like GTCR and Parthenon Capital. Its opening salutation was just a generic “good morning,” which was followed by four paragraphs explaining how the company’s ad-supported website would allow tenants to rate their landlords. Not actually a terrible idea, particularly since the site can apparently translate ratings into three different languages. But also not one with the type of ROI potential that would set most VC hearts aflutter.

Many of the email recipients – like Robin Vasan of Mayfield — immediately hit reply with some version of “thanks, but no thanks.” But here’s the problem: The replies went both to RateBuilding and to every other recipient of the initial email. This meant a sudden inbox flood, which was only exacerbated when investors began sending requests to be taken off the list.

Among those firms to receive, and reply to, the blast were: Mayfield, Novak Biddle, OpenView, O’Connor Capital, MCM Capital, Lubert Adler, Megunticook, HLM Venture Partners, MCG Capital, LCP Partners, Madrona, Mesirow Financial, KRG Capital, Morgenthaler, Ironwood Capital, Pinnacle Ventures, GTCR, Parthenon Capital, Kelso & Co., Legg Mason Real Estate Advisors, Opus Capital, ICV Capital, Highland Capital Partners, Lehman Brothers, Lightspeed Venture Partners, Paul Capital, Kidd & Co., Insight Partners and Next Stage Capital.

Even if an investor did want to invest, they had better speak French. The phone number left on the email goes to a French-speaking voicemail without an English translation. Disaster-tacular!

The company’s CEO has since apologied on their site and in a comment over at peHUB, as has his distraught daughter (who apparently was responsible). On the bright side, few cash-seeking startups have received nearly so much investor attention in such a short period of time… Maybe someone will step up for sake of contrarianism.

*** 5 Questions for Jim McGuigan, a partner with Capital International, which earlier this week closed its fifth emerging markets fund with $2.25 billion.

*** Artis Capital, the hedge fund often tethered to Sequoia Capital, is looking to raise $500 million for a MENA fund.

*** Lots of LP/GP debate over at the latest blog post from Chris Douvos, who co-heads the private equity division at The Investment Fund for Foundations.

*** peHUB First Read, including possible Penn Gaming renegotiations and legal trouble for VC-seeking RedLasso.

Top Three

Clearspring Technologies Inc., an Arlington, Va.-based provider of widget syndication services, has raised $18 million in Series C funding. New Enterprise Associates led the round, and was joined by return backers like Novak Biddle Venture Partners and ZG Ventures. The company had closed a $5.5 million Series B round in early 2007.

Jevic Transportation, a Delanco, N.J.-based trucking company owned by Sun Capital Partners, has shut down and filed for Chapter 11 bankruptcy protection. Jevic also asked court permission to borrow up to $60 million from CIT. The move has already resulted in job losses for around 90% of the company’s 1,500 employees. Sun had paid around $40 million to carve the company out of SCS Transportation in 2006.

David Edwards and Jim Woolsey have joined the cleantech team of VantagePoint Venture Partners as a partner and venture partner, respectively. The firm also promoted Marc van den Berg to managing director. Edwards previously was an equity research analyst with Morgan Stanley, covering the cleantech industry. Woolsey is the former Director of the CIA, and has served as a senior advisor to VantagePoint since 2006. Van den Berg joined the firm in 2006.

VC Deals

ECORE International, a Lancaster, Penn.-based maker of environmentally-sustainable products and solutions for the global marketplace, has raised $29 million in funding from Element Partners.

Actelis Networks, a Fremont, Calif.-based provider of carrier Ethernet-over-copper solutions, has raised $15 million in Series F funding, according to a regulatory filing. Return backers include Global Catalyst Partners, Dupont Capital, Carlyle Venture Partners and ATA Ventures. The company has raised around $165 million in total VC funding since its 1998 inception.

Agito Networks Inc., a Sunnyvale, Calif.-based provider of enterprise mobility solutions, has raised $10 million in Series B funding, according to a regulatory filing. Castile Ventures led the round, and was joined by return backer Battery Ventures. The company’s debut product is a platform designed to mobilize “business voice and data applications using RF-based, location-aware technologies and patent-pending algorithms.”

Unitrends, a Columbia, S.C.-based provider of enterprise data protection software and appliances, has raised $9 million in Series C funding. Paladin Capital Group led the round, and was joined by return backers Aurora Funds, Harbert Venture Partners, and the Trelys Funds.

Mocana, a San Francisco-based provider of security software for devices, has raised $7 million in second-round funding. Southern Cross Venture Partners led the round, and was joined by return backer Shasta Ventures. .

Moblyng, a Menlo Park, Calif.-based company that allows users to “mobilize” social media content, has raised $5.7 million in first-round funding from Mohr Davidow Ventures and Deep Fork Capital.

TopSchool Inc., a Denver-based provider of SaaS student information systems, has raised $3.2 million in Series A funding. Backers include Alsop Louie Partners and Sienna Equity Partners.

Knewton, a New York-based online education startup run by former venture capitalist Jose Ferreira, has raised $2.5 million in Series A funding, according to a regulatory filing. Backers include Accel Partners and First Round Capital. Simon Levene of Accel’s London office and Josh Kopelman of First Round have taken board seats. Ferreira is a former partner with New Atlantic Ventures. Before that, he was managing director of new markets for Kaplan

Aster Data, a Redwood City, Calif.-based developer of clustered databases for Web analytics, has raised an undisclosed amount of VC funding. Backers include Cambrian Ventures, First Round Capital, Sequoia Capital and individual angels like Ron Conway, David Cheriton and Rajeev Motwani.

Telecom Transport Management Inc., a Seattle–based provider of voice and data transport backhaul solutions for wireless carriers, has raised a $20 million senior debt facility from Columbia Partners Private Capital. The company had previously raised $140 million in equity from firms like SeaPoint Ventures, Ignition Partners, Trilogy Equity Partners, Rally Capital, Columbia Capital, Battery Ventures, DCM, Highside Capital Management and T-Mobile Venture Fund.

Buyout Deals

BC Partners, EQT Partners, Merrill Lynch Private Equity and Montagu Private Equity are the remaining bidders for Eastern European healthcare company Euromedic. Each firm submitted a first-round bid in the range of $1.2 billion. Firms no longer involved include Apax Partners, Bridgepoint, 3i, CVC and Cinven. Rothschild is running the process.

Blackstreet Capital Partners has acquired substantially all the assets of Simplicity Inc., a Reading, Penn.-based maker of juvenile and baby furniture. The deal was done as a UCC Article IX asset sale.

Emerging Capital Partners has made a $47.3 million investment in Societe d’Articles Hygieniques, a Tunisian maker of absorbent hygiene products.

Enterprise Investors of Poland has agreed to buy a 13% stake in drug distributor PharmaSwiss, for €35 million. The deal would lower the ownership position of HBM BioVentures, and PharmaSwiss’ co-founders.

EQT Opportunity, a fund managed by EQT Partners, has agreed to acquire the heavy duty engine cooling division of French automotive group Valeo. No financial terms were disclosed. The division includes 940 employees in Sweden and Jamestown, N.Y., and generated 2007 sales of €176 million.

KSL Capital Partners has acquired Orion Expedition Cruises, a luxury expedition cruise-line serving destinations in Australia, New Zealand, the South Pacific and Antarctica. No financial terms were disclosed.

Lindsay Goldberg has made a $75 million investment in Ambulatory Services of America Inc., a provider of alternate-site healthcare services, in partnership with physicians.

Platinum Equity has received U.S. antitrust approval to acquire the steering business of bankrupt auto parts supplier Delphi Corp.

Tolt Service Group, a Tempe, Ariz.–based provider of outsourced technology field services, has raised an undisclosed amount of private equity funding from Lake Capital.

Warburg Pincus has completed its $100 million PIPE with Nuance Communications Inc. (Nasdaq: NUAN). The firm purchased approximately 5.76 million Nuance shares at $17.36 per share. The transaction closed in conjunction with Nuance’s acquisition of eScription, a provider of computer-aided medical transcription software.

PE-Backed IPOs

KGB (fka Infonxx), a New York-based provider of directory assistance services, has filed for a $250 million IPO. It plans to trade on the NYSE under ticker symbol KGB, with Goldman Sachs, JPMorgan and Banc of America Securities serving as co-lead underwriters. Shareholders include Technology Crossover Ventures.

PE Exits

Nordic Capital has sold a 4.4% stake in Scandinavian IT services company TietoEnator, after having been rebuffed in its attempts to buy the company for €1.08 billion.

Versata Enterprises Inc., an Austin, Texas.-based enterprise software company, has acquired Evolutionary Technologies International Inc., an Austin, Texas–based provider of data integration products. No financial terms were disclosed. EVI has raised over $28 million in VC funding since 2001, including a $6.5 million recap in 2006 from Access Venture Partners, Appian Ventures and Osprey Ventures.

PE-Backed M&A

Adrenaline Family Entertainment Inc., an amusement park operating company, has acquired Alabama Adventure in Bessemer, Alabama, from Southland Entertainment. No financial terms were disclosed. Adrenaline is majority-owned by Angelo, Gordon & Co., and led by a team of former Six Flags executives.

Firms & Funds

PAI Partners of France plans to invest more than €1 billion of its latest fund in listed mid-cap companies.

Canopy Ventures has closed its second fund with $100 million in capital commitments. The firm focuses on early-stage IT and life sciences opportunities in Utah.

CDC Group has committed $650 million to Actis’ third series of emerging markets funds. The series includes a global fund, and four regional pools targeted at Africa, South Asia, China and Latin America.

The Arkansas Development Finance Authority has committed $4.5 million to Petra Growth Fund II, a $150 million-targeted venture capital fund. The deal mans that Nashville-based Petra will seek investment opportunities in Arkansas-based IT and healthcare companies.

Gibson, Dunn & Crutcher LLP announced that it is opening a new office in Singapore. It will be run by Jai Pathak, who previously led Gibson Dunn’s India practice, and three partners from Jones Day’s Singapore office: Emad Khalil, John Viverito and Saptak Santra.

Human Resources

Riccardo Ruggiero, former CEO of Telecom Italia, has joined Permira as a senior advisor.

Timothy Newell has joined Merriman Curhan Ford (Nasdaq: MERR) as head of the firm’s newly-formed cleantech strategy group. He previously was a partner with Element Partners (fka DFJ Element) and, before that, was managing director and head of I-banking for E*Offering. He also served in the Clinton White House from 1993 to 1997, including as deputy director for policy in the Office of Science and Technology Policy.

Gil Ha has joined Greenhill & Co. as a managing director focused on the telecom sector. He previously had been a senior managing director with Evercore Partners.

Hatteras Venture Partners has formed a scientific advisory board. It will be chaired by Genentech co-founder Herb Boyer.

Lehman Brothers is planning to cut another 1,300 jobs, or nearly 5% of its global workforce, according to Reuters. The firm has already laid off more than 5,000 people since the credit crunch hit last summer.