PE Week Wire: Wednesday, October 29, 2008

Greetings from the home office, where it’s good to be back after a 30-hour whirlwind to Quebec City, for the North American Venture Capital Summit. Just as beautiful as it was on my last visit – 24 years ago when all I would eat in the French restaurants were bread and cheese (on the upside, I learned to say fromage and pan at a very young age).

My primary role in Quebec was to conduct a pair of keynote interviews: One with Alan Patricof of Greycroft Partners and one with David Rimer of Index Ventures. Both seemed to go well, with Patricof stressing a “back to basics” mentality, and Rimer emphasizing how fast technology trends can shift (Rimer also put together a slideshow that included a wonderfully obscene faux Economist cover).

But this morning I want to briefly discuss the presentation I was not a part of. That would be the lunchtime keynote address by Steve Schwarzman of The Blackstone Group. Suffice to say, it prompted much discussion at the closing cocktails and on the plane-ride back to Boston. I’ve had an evening for reflection since live-blogging the speech yesterday, so here goes:

It was either one of the laziest keynote speeches I have ever seen, or one of the most condescending.

Schwarzman spent more than 90% of the speech giving a chronological history lesson on how the U.S. (and then the world) arrived at its current financial pickle. Beginning back with the CRA, and continuing on through FAS 157, Bear Stearns, Lehman Brothers, TARP, etc. It was as if he’d found a transcript from one of those CNBC primetime specials, and read it verbatim. The only digression was a brief anecdote about how Schwarzman had met with Gordon Brown during UN Week in New York, which came off (unintentionally, I hope) as if that meeting had been the genesis of Brown’s widely-lauded bank rescue plan.

The “lazy” interpretation is that Schwarzman spent basically no time prepping for Quebec, which is perhaps supported by fact that he zipped in and out of the conference without taking a single question (only speaker not to do Q&A). The result was a speech most anyone in the room could have given, particularly after 20 minutes with a pen, paper and access to Google.

The “condescending” interpretation is that Schwarzman assumed that the audience was mostly Canadian (probably 50/50), and somehow believed that none of them had really paid attention to the goings-on down south. Either way, bad form.

None of this, of course, masks the fact that certain media outlets have been hyperventilating over the speech. Not because of the first 90%, but because he concluded with things like:

• “This type of environment is tailor-made for making money in the private equity business.”

• “It’s a wonderful, wonderful time to invest.”

• “I’m close to a raging bull on private equity.”

He even went so far as to say that upcoming deals would be done “with very little risk” and that “you can’t lose.” That last one might really come back to haunt him, even he’s right on the general thesis of better returns from lower valuations.

There was no actual discussion of Blackstone Group, save for a successful Lehman-related real estate deal just prior to the bankruptcy. Nor anything more general about default rates, over-valued deals in 2006/2007, fundraising challenges or falling returns. Certainly no “we’re all to blame” mea culpa like we recently got from Henry Kravis. He said it was supposed to be an “optimistic” speech, so perhaps that stuff was excluded so as not to sully the mood.

Schwarzman also acknowledged what we’ve previously reported at peHUB: That Blackstone is entering the venture capital market with a late-stage cleantech fund. Kind of like what C Change Capital, CMEA Ventures and others are trying to do (an equity substitute for project finance). In doing so, he made an odd comment about how “venture capital is more GDP-driven” than is private equity. I’m pretty sure he got that the wrong way around, although I’d love to hear a supporting argument…

Maybe I’m just being picky because I left my bag sitting outside in the economy lot last night, and didn’t realize it until I drove home (it was still there when I returned near midnight). But I think I’m just dissappointed that a man with so many valuable insights chose not to share them.

Top Three

Salient Surgical Technologies Inc., a Dover, N.H.-based developer of technology for sealing blood vessels and other collagen-based structures, has raised $17.9 million in Series F funding. Arnerich Massena & Associates led the round, and was joined by fellow return backers Medtronic and RiverVest Venture Partners. New investor Piper Jaffray also participated. It is the company’s fir! st new round since canceling an $86.25 million IPO back in August, and brings its total venture capitalization to over $105 million.

Tenaska Capital Management has closed its second fund with $2.4 billion in capital commitments. The Omaha, Neb.-based firm focuses on private equity opportunities in the u.S. energy industry. Greenhill & Co. served as fund placement agent.

George Bilicic has left KKR, just five months after he joined to head up the firm’s new infrastructure group (which is raising its debut fund).

VC Deals

Helium, an Andover, Mass.-based operator of a how-to reference site, has raised $17 million in Series A funding over the past year. Signature Capital led the round, and was joined by Northport Private Equity and other undisclosed backers. The company also laid off 18 staffers, or 30% of its existing organization.

Arcadia Biosciences Inc., a Davis, Calif.-based agricultural biotech company, has raised $15 million in second-round funding. Exeter Life Sciences led the round, and was joined by return backers CMEA Ventures, BASF Venture Capital America and Saints Capital.

Odysii Inc. (fka TVeez), a Tel Aviv, Israel-based provider of marketing intelligence software for onsite messaging, has raised $15 million in VC funding from Benchmark Capital and Giza Ventures. The round closed back in May.

Access 360 Media (f.k.a. Access Retail Entertainment), a Venice, Calif.-based in-store entertainment network targeting young adult consumers, has raised $8 million in Series B funding from Mission Ventures and return backer Bessemer Venture Partners. The company had previously raised $4.25 million.

AdaptiveBlue, a Livingston, N.J.-based provider of a research and organization plug-in for the Firefox browser, announced that it has raised $4.52 million in Series B funding. RRE Ventures led the round, and was joined by return backer Union Square Ventures. peHUB had previously reported the news based on a regulatory filing.

Pingg, a New York-based online event management site, has signed a commercial partnership with Martha Stewart Living Omnimedia. The deal includes an equity investment that VentureWire pegs at $2.75 million.

Buyout Deals

Blackstone Group has completed its take-private acquisition of home healthcare services company Apria Healthcare Group Inc., for approximately $1.7 billion. Apria stockholders received $21 per share.

Borealis Infrastructure Management has cut its takeover offer for Teranet Income Fund by nearly 7%, from C$11 per unit to C$10.25 per unit.

Graphite Capital has backed the management of existing portfolio company Optimum Care, in a new UK-based elderly care venture called Willowbrook Healthcare. Graphite is investing £23 million, and has helped secure £30 million in leveraged financing.

H.I.G. Capital has acquired Petroform Inc., a Gurnee, Ill.-based specialty chemicals company focused on surfactants, formulations and services for industrial and consumer products. No financial terms were disclosed.

Loring Ward International Ltd. (TSX: LW) announced that its pending buyout by Werba Reinhard Inc. and Lovell Minnick Partners may not be completed, due to a decline in the company’s assets under management.

Ripplewood Holdings was picked as the favored bidder to buy South Korea’s Daewoo Electronics, beating out Russian investors and Diligent Systems.

Sixth Gear Solutions Corp., an independent auto finance company for U.S. car dealerships, said in a court filing that it may be forced to shut down due to the bankruptcy of Lehman Brothers, which underwrites most of its business. It is asking the court to either compel Lehman to continue funding the company, or to cancel the contract. Sixth Gear was formed earlier this year with $250 million in equity commitments led by Warburg Pincus, and $750 million in long-term debt facilities led by Lehman.

PE-Backed IPOs

CyDex Pharmaceuticals Inc., a Lenexa, Kansas-based developer of drugs that “address limitations of current therapies in selected established,” has withdrawn registration of its $50 million IPO. It had planned to trade on the Nasdaq, with Pacific Growth Equities serving as lead underwriter. CyDex has raised over $29 million in VC funding since 2000, from firms like TVM Capital, RiverVest Venture Partners, Life Sciences Opportunities Funds, S.R. One Ltd. and Eastman Chemical Company Investments.

PE Exits

Logitech International (Nasdaq: LOGI) has agreed to acquire SightSpeed Inc., a Berkley, Calif.-based provider of Internet video chat and voice calling solutions. The deal is valued at $30 million in cash, and is expected to close early next month. SightSpeed raised around $1 million from The Roda Group in 2003.

Firms & Funds

Bridgepoint has closed its fourth European buyout fund, with EU 4.8 billion in capital commitments.

Close Brothers has opened a Zurich office. It will be run by Jarg Glesti, who previously was with BNP Paribas.

First Reserve Corp. is expecting to hold a $2 billion close on its twelfth fund this Friday, bringing its capital commitments up to $8 billion, according to LBO Wire. The firm is holding a series of rolling closes as its targets $12 billion.

Human Resources

Victor Westerlind has joined RockPort Capital Partners as a general partner in the firm’s Menlo Park office. He previously was a partner with InterWest Partners. RockPort is a Boston-based cleantech venture capital firm.

Pomona Capital has made three senior hires: Jordan Robinson as a managing director focused on product development, marketing and distribution. He previously was a VP of global private equity with AIG Investments. Gregory Walters as a principal focused on the secondary market. He previously was a managing director with VCFA Group. Haijoung Kim joined as a VP on the firm’s Asian fund-of-funds, and previously was senior investment manager in Samsung Life’s alternative investments d! ivision.

Christian Reitberger has joined Wellington Partners as a venture partner, with a focus on cleantech opportunities. He previously was a partner with Apax Partners, in its tech and telecom group.

Christopher Esqueda has joined Institutional Venture Partners as controller. He previously was controller at PS’Soft, a provider of asset management service management and software license compliance solutions.

Michael Crosby has joined Proskauer Rose as a London-based partner in the firm’s corporate practice, with a focus on acquisition financings, debt restructurings, recapitalizations and leveraged buyouts. He previously was with Addleshaw Goddard LLP.