peHUB Wire: Friday, August 28, 2009

The sun is shining (for now), the markets keep rising and I’m just a few hours away from a weekend in Waterville Valley. In other words, it’s time for some Friday Feedback…

First up are some replies to Wednesday’s column on venture capital industry shrinkage. Tim kicks us off: “Thank you for pointing out what we all know, but don’t like to admit: Inertia is the single greatest force in investing and most LPs have historically been proven unable to swim against it. VC commitments now, VC commitments forever.”

Eric dissents: “I think Bill Gurley’s assessment of the situation was spot on. Foundations and endowments were the life’s blood of the venture capital business. While they may not be out of the game as far as venture capital is concerned, their allocations have come down significantly due to liquidity issues. Large pension funds have never been significant players in the best venture firms because of FOIA concerns. Today with the scarcity of capital, marginal venture firms are fading away and brand name firms are reducing their fund sizes as a reaction to the environment. The world has changed and GPs realize that they can’t rely on their existing LP base for their next fund. Net net shrinkage is good for the venture industry and should be good for performance.”

*** Jase on the FDIC decision: “Other than the required 3-year hold, I am not sure why the PE is having such a hard time with this.If they have a higher required capital position for 3 years (the hold period) it would be reasonable to expect a buyer, which is likely a strategic, to pay a premium because they will have the benefit of the extra capital to leverage going forward (i.e. higher exit multiple)…Is the FDIC really going to turn that down because some guys made some money on the deal? Obviously the PE firms can’t count on that, but that can be priced in also.Any investor worth his salt is looking to hold the asset at least three years anyway.”

*** Two comments on yesterday’s lead into the announcement of our October cleantech event in Boston:

David: “To state that government is now an equal third leg reflects a fundamental misunderstanding of government and the public sector.We, the private sector, pay for public sector in entirety via taxes in current period or guaranteeing debt in future periods.Best case the public sector provides some services that don’t destroy economic value.Governments are almost by design terrible at creating economic value.They rely on the private sector to do that and then feed off the surplus.Some would call it a parasitic relationship based on belief that the government parasite eventually harms its host (the private sector). Government not equal third leg – it’s more like the chipping grey paint that the buyer and seller were required to buy and apply to the stool.”

George: “Dan, You are left of Castro, but that’s part of the charm, value and relative hilarity of your being the go-to source of information of such a purely capitalist market.”

*** Random Promotion Alert: Buyouts and VCJ are holding a webinar for VC and PE firms on Sept. 23, titled Registration & The New Regulatory Regime. You can get more info here, and Wire readers can receive a 10% discount by adding the word Primack into the discount code box.

*** Have a great weekend…

Top Three

National Express (LSE: NEX), Britain’s debt-laden bus and rail operator, has rejected a £600 million buyout offer co-led by CVC Capital Partners and its main shareholder (Spain’s Cosmen family). The company now says that it is focusing on a non-control equity fundraising.

NYSE Euronext has agreed to buy electronic exchange systems provider NYFIX (Nasdaq: NYFX) for approximately $144 million. The $1.675 per share offer represents around a 95% premium over Wednesday’s closing price. Warburg Pincus holds around a 38% stake in NYFIX, based on a $75 million investment it made back in 2006.

Think Global AS, a Norwegian electric car maker, has emerged from bankruptcy after restructuring its debt and raising $47 million in new equity capital. New investors include Ener1 Inc. (USA), Valmet Automotive (Finland) and Investinor (Norway), while returnees included Rockport Capital Partners and Kleiner Perkins (which previously held a stake in a US subsidiary which has now been folded into the Norweigen parent).It’s unclear if past backers likeElement Partners,British Hazel Capital and CG Capital participated. Think Global had previously raised around $85 million.

VC Deals

CardioMEMS Inc., an Atlanta-based developer of wireless medical pressure sensors, has raised $22.1 million in sixth-round funding from existing shareholders. The company previously had raised around $85 million, from firms like Arcapita Ventures, Boston Millennia Partners, Medtronic, Easton Capital Partners, Foundation Medical Partners, Arboretum Ventures, Deerfield Capital Management, Vision Capital Advisors, Aperture Venture Partners and Rockport Venture Securities.

ValenTx Inc., a Carpinteria, Calif.-based developer of minimally-invasive treatments for morbid obesity, has raised $20.29 million in new VC funding, according to a regulatory filing. The company previously raised around $7 million from firms like EDF Ventures, Affinity Capital Management, Kaiser Permanente Ventures, TGap Ventures and Sapient Capital Management.

ClearEdge Power, a Hillsboro, Ore.-based fuel cell develops, has raised $15 million in fifth-round funding, according to a regulatory filing. Backers include Applied Ventures, Big Basin Ventures and the Kohlberg family.The company previously raised around $30 million.

MyShape, a Pasadena, Calif.-based online apparel retailer, has secured $10.56 million of a $12 million Series C round, according to a regulatory filing. Backers include Draper Fisher Jurvetson, Tenaya Capital and Tech Coast Angels.

Black Sand Technologies Inc., an Austin, Texas-based developer of mixed-signal semiconductors, has raised $10 million in second-round funding, according to a regulatory filing. The company previously raised over $8 million from Austin Ventures and North Bridge Venture Partners.

Seeo Inc., a Berkeley, Calif.-based lithium-ion battery developer, has raised over $8.6 million in new VC funding, according to a regulatory filing. Return backers include Khosla Ventures.

OneRiot, a Boulder, Colo.-based developer of a social search engine, has secured $5.7 million of a $7 million Series C round, according to a regulatory filing. Return backers include Commonwealth Capital Ventures, Spark Capital and Appian Ventures.

MOG, a Berkeley, Calif.-based online music community and blog network, has raised $5 million in new VC funding. Menlo Ventures led the round, and was joined by return backers Simon Equity Partners and Scott Jones. The company previously raised around $5.75 million.

CFX Battery Inc., a Pasadena, Calif.-based developer of primary and rechargeable batteries enabled by nanotechnology, has secured $5 million of a $27 million Series B round, according to a regulatory filing. It previously raised $15.18 million from firms like CMEA Ventures, Harris & Harris Group and U.S. Venture Partners.

Copan Systems, a Longmont, Colo.-based provider of persistent data storage solutions, has secured $3 million of a $6.24 million funding round, according to a regulatory filing. The company previously raised over $100 million, from firms like Austin Ventures, Globespan Capital Partners, FirstMark Capital, Westbury Partners and Credit Suisse. Battery Ventures also is a past backer, but did not participate in an $18.5 million round earlier this year.

FolioDynamix, a New York-based provider of software for the wealth management market, has raised around $2.18 million in new VC funding, according to a regulatory filing. It previously raised around $7.5 million from Edison Venture Fund.

iSocket, a commission-free ad platform, has raised $2 million in Series A funding. Backers include Tim Draper and Jeff Clavier.

Buyouts Deals

AIG has received three bids of less than $1.5 billion for its Taiwan Nan Shan Life unit, even though AIG had been expecting at least $2 billion per offer. One joint bid came from The Carlyle Group and Fubon Financial, while Bain Capital reportedly has pulled out of its joint bid with Chinatrust Financial. It is unclear if AIG will proceed with its sale without significant bid price increases.

Citigroup next week will be taking bids on Japanese telemarketer Bellsystem24, which is expected to garner more than $1 billion. Around 20 buyout firms have looked at the company, which is owned by Citi affiliate Nikki Principal Investments. They include KKR, Permira, Bain Capital and CVC Capital Partners.

IK Investment Partners has agreed to acquire a majority stake in Vistra Group, a European provider of international trust and corporate services. No financial terms were disclosed for the deal, which also includes Reggeborgh Groep as a co-investor.

Montagu Private Equity has entered exclusive talks to buy ADB Airfield Solutions from Siemens AG. ADB makes airport runway lighting, signage and other related products. Bank of Ireland and WestLB reportedly would finance Montagu’s acquisition.

Select Comfort Corp. (Nasdaq: SCSS) shareholders narrowly rejected a deal in which Sterling Partners would have invested $35 million for a 52.5% equity position.

PE Exits

CVC Capital Partners has given up its holding in Japanese restaurant chain Skylark Co. to Chuo Mitsui Capital Co., after failing to repay a loan that helped finance its original buyout of Skylark in 2006.

Grand Canyon Education Inc.(Nasdaq: LOPE),a Phoenix-based provider of online post-secondary education services, has to sell common stock via a secondary public offering. The company itself would sell just one million shares, while Endeavour Capital plans to sellan undisclosed number of its10 million remaining shares. Grand Canyon went public via an IPO last November, pricing its shares at $12 a piece. It closed trading yesterday at $18.56 per share.

Tibco Software Inc. (Nasdaq: TIBX) has acquired DataSynapse Inc., a New York-based provider of enterprise grid and cloud computing software. The deal is valued at approximately $28 million in cash. DataSynapse had raised around $46 million in VC funding beginning in 2000, from firms like Bain Capital Ventures, Broadview Capital Partners, Goldman Sachs, Greenhill SAVP, Intel Capital, NeoCarta Ventures, Rare Ventures, Stonehenge Capital, Wand Capital andWachovia.

Vulcan Capital has sold its 50% stake in PAA Natural Gas Storage LLC to Plans All American Pipeline (NYSE: PAA). The deal is valued at $220 million, including $90 million in cash, $40 million in deferred contingent cash consideration 1.9 million PAA common units valued at $90 million. PAA Natural Gas Storage is a joint venture Vulcan launched with PAAP back in 2005.

PE-Backed M&A

AdMob, a San Mateo, Calif.-based mobile advertising marketplace, has acquired AdWhirl, a Menlo Park, Calif.-based developer of monetization solutions for mobile app makers. No financial terms were disclosed. AdMob has raised over $46 million in VC funding, from firms like Accel Partners, Sequoia Capital, DFJ Growth Fund and Northgate Capital AdWhirl had raised seed funding from Foundation Capital and individual angels.

DotNetNuke, a Seattle-based developer of an open-source application framework for the Microsoft tech platform, has acquired SnowCovered, an online marketplace for DotNetNuke modules, skins, services and related product. No financial terms were disclosed. DotNetNukehas raised around $6 million in VC funding fromAugust Capital and Sierra Ventures.

HHI Holdings LLC, a portfolio company of KPS Capital Partners, has agreed to acquire the assets of FormTech Industries LLC, via a prepackaged bankruptcy process. FormTech makes forged metal automotive components, and employes around 400 people in Michigan and Ohio.

Synfora Inc., a Mountain View, Calif.-based provider of algorithmic synthesis tools for IC and system designers, has bought the Esterel Studio suite of EDA tools from Esterel Technologies SA. No financial terms were disclosed. Synfora has raised around $27 million in VC funding, from firms like ATA Ventures, Foundation Capital, Wafra Partners, Xilinx and U.S. Venture Partners. Esterel Technologies backers include Galileo Partners, Eurofund, 123Ventures and La Financiere de Brienne.

Firms & Funds

SVG Capital (LSE: SVI) reported that its net asset value fell 18% during the first six months of 2009, and blamed much of the decline on currency effects.

Human Resources

Woody Marshall, a general partner of Technology Crossover Ventures, has joined the board of (Nasdaq: TSCM).TCV invested $55 million into TSCM in November 2007 – buying preferred stock that would convert into common at $14.26 per share.Fellow TCV partner Jay Hoag quietly resigned from the TSCM board earlier this year.