PE Week Wire: Wednesday, August 27, 2008

Pete Lattman has a piece in today’s WSJ about how individuals at Insight Venture Partners made a fortune off last year’s $300 million sale of Photobucket to News Corp., while the firm’s limited partners made nothing. I love a good VC scandal, but there is much less here than meets the eye.

The facts are undisputed: Certain IVP employees and acquaintances invested $3 million for 20% of PhotoBucket in 2005, while partner Jeff Lieberman took a seat on the company’s board of directors. They did not include the deal as part of its $675 million fifth fund (it has since raised a $1.25b sixth fund), which means that IVP’s limited partners never paid in nor got paid out on what turned out to be a blockbuster investment.

Someone apparently believes this is a case of IVP partners cherry-picking a sweet deal for themselves, at least judging by the number of media outlets he/she tipped off before WSJ ran with it. Maybe a bitter LP, rival VC, passed-over entrepreneur or jilted girlfriend. I don’t know or care, because it’s a bogus accusation.

IVP says it didn’t put Photobucket into its fund because the company was far too small and early for an investment mandate that focuses on growth-stage, revenue-generating companies. This seems to square with a data search I ran on recent IVP deals, in that I couldn’t find an initial check written for single-millions of dollars. The “tipster” also accused IVP of not telling Photobucket executives that the deal was not being done via the fund – a charge that Jeff Lieberman denied during a phone conversation earlier this morning (that part isn’t in the WSJ story, but PaidContent had it).

Imagine if it had invested and Photobucket had cratered? Then LPs would have a legitimate gripe. As it stands, everyone seems to have acted appropriately. No harm, no foul. Guess we’ll have to wait ‘till next time…

*** Yesterday we broke news at peHUB about $32 million in VC funding for Vanu, which makes software radios and base stations for cellular operators. Tata Capital (India) and Norwest Venture Partners were joined on the round by return backer Charles River Ventures, which led a $9 million Series A round last summer. Pretty stacked board of directors. In addition to the two VCs – Promod Haque of Norwest and Bruce Sachs of CRV – it includes former FEC chairman Reed Hundt and Analog Devices co-founder Ray Stata.

*** Speaking of CRV, the firm has experienced some personnel shuffling. Gone is Susan Wu, a venture partner who had worked on the firm’s QuickStart program and was known for her interest in virtual worlds. Added are Swapnil Shah, founder and former CEO of mValent, and Devdutt Yellurkar, a former venture partner with Rho Ventures.

*** I know Columbia Capital co-founder Mark Warner is a very successful politician, but could his keynote last night have been more Nyquil-like? Made normal C-Span programming look riveting.

*** Speaking of politics, the Obama campaign took some shots yesterday at Mitt Romney’s private equity background. Guess that means he’s the frontrunner for GOP VP. Pretty cheap shots, but Romney’s folks offered a sidestep defense.

peHUB Across America II

Join us for an evening of cocktails and conversation with local VCs, PE pros, entrepreneurs, bankers and assorted hangers-on. Plus yourts truly. Tickets cost just $10, with proceeds going to a local charity that will be voted on by event attendees (you can nominate a charity when signing up). SIgn up today:

• Denver

Tuesday, Sept. 23

The Wynkoop Bewing Co.

• San Francisco

Wednesday, Sept. 24

Pete’s Tavern (across from AT&T Park)

• Seattle

Thursday, Sept. 25

The Chapel Bar

Huge thanks to regional sponsor Square 1 Bank, which is now one of my all-time favorite banks. Also, I encourage you to do some business with our outstanding local sponsors: Headwaters MB and the Rocky Mountain Venture Capital Association in Denver; Goodwin Procter and Gunderson Dettmer in San Francisco; and Cascadia Capital in Seattle.

Top Three

First Reserve Corp. has formed Accord Nuclear Resources, a nuclear fuel supply company that will be run by industry vets Charles Scorer (former CEO of Nufcor International) and David Sloan (former exec VP of Nukem Inc.). No financial terms were disclosed.

MIOX Corp., an Albuquerque, N.M.-based provider of water treatment systems, has raised $19 million in Series C funding. DCM led the round, and was joined by return backers Sierra Ventures and Flywheel Ventures.

Lehman Brothers reportedly has asked three private equity firms – Bain Capital, KKR and Hellman & Friedman, to remain in the bidding for its asset management arm, even though it has not yet decided whether or not to sell the unit.

VC Deals

Profex Inc., a Shanghai, China-based dermatology startup, has raised $15.5 million in Series A funding. The round was co-led by Trident Capital and its Chinese affiliate Mustang Ventures.

Expressor Software, a Burlington, Mass.-based provider of semantic data integration, has raised $10 million in Series B funding. Commonwealth Capital Ventures led the round, and was joined by return backers Globespan Capital Partners and Sigma Partners.

Expand Networks Inc., a Roseland, N.J.-based provider of WAN compression and acceleration appliances, has raised $8.5 million in new VC funding. Intel Capital led the round, but Expand did not say which of its existing shareholders also participated. The company had previously raised over $60 million from firms like America Online, Comcast Interactive Capital, DIC, Federated Kaufman Fund, Omninet Capital, RBC Capital Markets, Tamir Fishman Ventures and Robeco Investment Management.

Daptiv Inc. (f.k.a. eProject), a Seattle-based developer of collaborative project and portfolio management software, has raised $6 million in additional Series B funding, according to a regulatory filing. It had held a $12 million first close last year. Backers include Bay Partners, Kennet Partners, King Street Partners (UK) and Wolf Bay Holdings.

Anagran Inc., a Redwood City, Calif.-based provider of high-capacity flow management routers, has secured $8.5 million of an $11.6 million Series D round, according to a regulatory filing. Return backers included Advanced Technology Ventures, Draper Fisher Jurvetson and ArrowPath Venture Capital. It had previously raised around $45

StudioNow, a Nashville, Tenn.–based provider of online video-creation services, has raised $2 million in additional Series A funding. Clayton Associates led the expansion of the round, which now stands at $4.1 million.

Natural Cleaners Colorado LLC. an environmentally-friendly dry cleaning company, has raised $1.9 million from Advantage Capital Partners.

Zapoint, a Brookline, Mass.-based provider of talent management software, has raised an undisclosed amount of Series A funding led by HFF Investments.

Buyout Deals

BC Partners is trying to acquire the remaining shares it does not yet own of Turkish supermarket chain Migros. It acquired a 50.8% stake in February at an enterprise value of around $3.2 billion, and has since upped its position to 78.4 percent. Its plans to offer remaining Migros shareholders TRY 21.95 ($18.45) per share.

JPB Capital Partners has acquired Wythe-Will Distributing LLC from Hunt Private Equity Group, for an undisclosed amount. Bank of America Business Capital provided leveraged financing for the deal, which also included equity participation by company management. Wythe-Will is a Williamsburg, Va.-based specialty food distributor to premium grocers and other retailers.

Osum Oil Sands Corp., a Canadian bitumen extraction company, has raised C$275 million in private equity funding, at a price of C$10.50 per share. Warburg Pincus led the transaction, and was joined by The Blackstone Group.

Provident Energy Trust (NYSE: PVX) has completed the $305 million sale of its 96% interest in BreitBurn Energy Co. to Metalmark Capital Partners, Greenhill Capital Partners and a listed energy partnership. BEC is a Provident subsidiary whose primary assets are non-producing crude reserves in California .

CIVC Partners has bought $50 million of convertible preferred stock in Wintrust Financial Corp. (Nasdaq: WTFC), operator of community banks in Greater Chicago and Milwaukee.

PE-Backed IPOs

Salient Surgical Technologies Inc. (f.k.a. TissueLink), a Dover, N.H.-based developer of technology for sealing blood vessels and other collagen-based structures, has withdrawn registration for an $86.25 million IPO. It had filed for the offering back in March, with Bear Stearns and Piper Jaffray serving as co-lead underwriters.

Salient had raised over $85 million in VC funding since 1999, with current shareholders including Americh Massena & Associates (40.5% pre-IPO stake), QuestMark Advisors (16.1%), Medtronic (8.8%), RiverVest Venture Partners (7.6%), Vanguard Ventures (5.9%) and Crescendo Ventures (5.2%).

PE Exits has acquired Shelfari, a Seattle-based online social network for book aficionados. No financial terms were disclosed. Shelfari had raised Series A funding last year from Amazon, Curious Office Partners and individual angels.

EQT Partners has sold its remaining 16.72% stake in Swedish paper maker Duni AB (ST: DUNI) for an undisclosed sum, to undisclosed institutional investors.

Equity Bank, a listed Kenyan bank, has bought Uganda Microfinance Ltd. from shareholders like Aureos Capital’s East Africa Fund and Norfund. The total deal is valued at approximately $25.5 million in Equity Bank stock.

HCL Technologies Ltd., an India-based global IT services provider, has acquired Control Point Solutions Inc., a Rutherford, N.J.-based provider of telecom expense management services. The deal values Control Point at $20.8 million. Control Point has raised VC funding from firms like ABS Capital Partners and JMI Equity. Inc. (Nasdaq: SLRY) has acquired InfoBasis Ltd., a UK-based provider of skills management software, for approximately $5 million. InfoBasis had raised under $2 million in VC funding from Oxford Capital Partners. According to VentureWire, InfoBasis’ most recent infusion from Oxford was at an £8 million valuation.

United Online Inc. has completed its acquisition of floral delivery company FTD for approximately $754 million in cash and stock. The deal has been worth closer to $800 million when originally announced in May. Sellers included minority stakeholder Leonard Green & Partners, which sponsored a $422 million take-private buyout of FTD in February 2004.

PE-Backed M&A

Aptana Inc., a San Mateo, Calif.-based provider of open-source web development software, has acquired Pydev, which is responsible for the Python software language. No financial terms were disclosed. Aptana raised $4 million from Accel Partners last year.

Bushnell Outdoor Products, an Overland Park, Kan.–based provider of sports optics and outdoor accessories, has agreed to acquire Millett Industries, a Huntington Beach, Calif.-based maker of pistol sights and scope mounting systems. No financial terms were disclosed. Bushnell is a portfolio company of MidOcean Partners.

Firms & Funds

Credit Suisse Alternative Investments has acquired a majority interest in New York-based Asset Management Finance Corp. (AMF) from National Bank of Canada. The deal gives Credit Suisse an 80% stake, in exchange for $384 million of newly-issued Credit Suisse stock.

Hercules Technology Growth Capital has secured a $50 million credit facility from Wells Fargo Foothill Lender Finance. Hercules is a Palo Alto, Caif.–based specialty finance company that provides venture debt and equity to VC- and PE-backed tech and life sciences companies.

Guggenheim Investment Management is raising up to $500 million for an Energy Opportunities Fund, which will invest in both debt and equity of U.S. energy companies, according to a regulatory filing. It has already secured around $150 million from LPs like Midland National Life Insurance.

Prudential Capital Partners is raising up to $900 million for its third mid-market mezzanine fund, according to a regulatory filing. It has already secured around $200 million in capital commitments. Its second fund closed in March 2005 with $775 million.

Human Resources

Ed Mathers has joined New Enterprise Associates as a partner, with a focus on biotech and specialty pharma opportunities. He previously was with MedImmune as executive VP of corporate development and venture.

Charles Bridge has been named CFO of Earth Search Sciences (OTC BB: ESSE). He previously was a managing director and CFO of Brooke Private Equity Advisors.

Tommy Wu has left Elevation Partners, where he had been an associate for the past two years. He is now CEO of Tribal Crossing, a stealth-mode gaming startup based in San Francisco . Prior to joining Elevation in 2006, Wu had spent three years in the financial sponsors group of Morgan Stanley.

Elizabeth Bailey Weil and Michael McLean have joined Institutional Venture Partners as a senior associate and associate, respectively. Weil was previously an analyst with Menlo Ventures, and will focus on Internet and digital media opportunities. McLean previously was an I-banker with JPMorgan, and will focus on the communications and wireless sectors.