peHUB Wire: Friday, April 17, 2009

Greetings from Chapel Hill, where I’m helping to judge the VCIC Finals. Per tradition, today’s column was written by the winner of our March Madness Extravaganza: Dan Doman, an associate with seed-stage firm G-51 Capital in Austin, Texas.

Below he describes his winning strategy. Also want to note that Dan has posted a companion piece about how picking NCAA tourney winners is a lot like picking successful seed-stage investments. You can read that by going here:

Thanks for the opportunity peHUB readers, and hopefully you’ll laugh instead of grimace at my attempts at comedy. A bit of background on my selection strategy:

Luck (91%): Sorry if you won your office pool and are still wearing the Burger King crown with “Nostradamus” scrawled across the front in black sharpie. You were just lucky, which is actually better than Nostradamus, who was just vague.

College B-Ball Junkie (2%): I have an insatiable appetite for watching lousy late-night college basketball games on ESPN 8 (I’m such a fun guy) while plugging away on models for early-morning deadlines. I would like to think that this knowledge warrants a higher percentage, but I have been an addict for 20 years and while my results have been top quartile, I have also had several orderly shut downs.

Tom Izzo & Michigan State Spartans (6.998%): I grew up bleeding green in the Northwest suburbs of Detroit, so it was an absolute blast traveling home to watch the Final Four. Detroit forgot it was Detroit for a handful of days and threw one hell of a party. I knew this team had the right CEO (Lucas), CTO (Suton), and Directors of Dunkology and Defense (respectively Summers and Walton). I watched every game this season, to my wife’s dismay.

As a side note, I actually learned there are three phases of dismay – saying I was pathetic, actively rooting against my team (futile) and finally rooting for the Spartans. Her eventual support was the product of tying certain promises, which I now regret, to State victories. Most importantly, though, State has one of the best tourney coaches ever in Tom Izzo… but could they put it all together at the right time? The road to Detroit was an exciting path and the UConn win was an incredible sporting event – 74,000 fans at a college basketball game? Awesome, definitely one for my memory book.

My Tournament Model (.002%): Yes, I purposely waited until the end of the article to disclose that I am really that big a dork (hopefully all of my friends have stopped reading by now). So, I was bored (no, not on company time) and I threw every D1 game into a database and determined that there were 6 statistics that stood out more than the rest as highly significant (email me for the answers, plus send me $19.95 or $250 in old gold jewelry for my iron-clad lock of the week).

Overall, I give the model a B-. It did have UConn #1 and UNC a very close #2 and Missouri beating Memphis. My model said that Utah State would beat Marquette straight up (so I cautiously put money on the potent Aggies to cover the spread). They lost outright by just a point and the model paid for itself that day. On the flip side, I also applied the model to all D1 teams (not just tourney-bound squads) and it said that Notre Dame was the fifth best team in the nation and my beloved Spartans were in the mid-teens. Outliers… I hoped.

Note: Like a good associate, I built a model that shot out the answer I was looking for – “State wins it all” based on 1.) Mascot coolness – rating based on model builder’s wife’s discretion under intense pressure from model builder to say the correct answer and 2.) Number of alums nicknamed “Magic.”

The original model also said that my alma mater, Northwestern, was better than three other tourney-bound teams from the Big Ten, despite a (1-6) record against those teams in the regular season. Okay, so maybe the B- is a bit aggressive.

For those that can’t resist… my bracket had 14 of the Sweet 16, 7 of the Great 8, 4 of Final 4, 2 of 2, and UNC was my champion pre-Obama pick too. In the venture capital spirit, when it comes to picking THE winner, sometimes you have to set aside emotion and personal allegiances and go with the obvious.

Till this time next year (I hope), stay thirsty my friends.

Top Three

GTCR has formed Six3 Systems Inc., a Fairfax, Va.-based government services acquisition platform focused on national security and defense intelligence. No financial terms were disclosed. Six3 Systems will be led by Robert Coleman, former CEO of government contractor ManTech International (NYSE: MANT).

A federal bankruptcy judge said that an $87.5 million bid by Hilco Consumer Capital and Gordon Brothers Group was the “best offer” for Polaroid’s assets.

New Atlantic Ventures has closed its third fund with $115 million in capital commitments. The firm focuses on early-stage IT opportunities, and has offices in Cambridge, Mass. and Reston, Virginia.

VC Deals

Luxim Corp., a Sunnyvale, Calif.-based developer of energy-efficient lighting technologies, has raised $12 million in fifth-round funding. Return backers include Sequoia Capital, Crosslink Capital, DAG Ventures and Worldview Technology Partners. As part of the deal, Sequoia’s Mike Moritz will join the board as chairman (the former chairman was ex-Sequoia partner Pierre Lamond). Luxim has now raised around $73 million in total VC funding.

Calient Networks Inc., a San Jose, Calif.-based provider of carrier-class automated fiber management systems, has held a $5 million first close on its Series C round, led by return backer TeleSoft Partners.

Buyout Deals

Lakeview Equity Partners of Milwaukee has acquired the event housing and registration assets of Ambassadors, an Atlanta-based event travel services company. No financial terms were disclosed.

Lotte Group, a South Korean retailer, will not submit a final offer for InBev’s Oriental Brewery, which likely means that a private equity firm will wind up with the South Korean beer company.

Renewable Energy Generation, a listed UK wind farm operator, said that it received a takeover approach from an unnamed party. The news sent the company’s shares up by nearly 50%, valu! ing the business at just shy of $90 million.

Firms & Funds

Context Capital Partners has raised $44 million for a family of private equity funds that invest in de novo and community banks.