peHUB Wire: Friday, March 19, 2010

Last month, I wrote about how venture capitalist Giri Sekhar had been indicted for trying to blackmail a New York public pension official. The alleged story is that Sekhar threatened to disclose an extra-marital affair, unless the official helped secure a $25 million LP commitment to a new fund being raised by Sekhar’s fund.

Sekhar’s case hasn’t progressed much since then, with the only available paperwork being the original three-page indictment. A rep from the Albany County DA’s office would only say that the case is “ongoing,” while Sekhar didn’t reply to email requests for comment.

But I was curious as to what all this scumdrudgery means for FA Technology Ventures, the firm at which Sekhar had been a partner (he officially left in la! te December, just as the fan began to stink). A firm spokesman declined to comment, so let’s move onto anonymous sourcing:

For the uninitiated, the “FA” in FA Technology Ventures stands for First Albany Corp. The firm originally began as the bank’s in-house venture unit, and made balance-sheet investments in such companies as Roomba maker iRobot. It later raised a $150 million third-party fund in 2000 with First Albany as a cornerstone investor. First Albany also served as the general partner, with FA Tech Ventures staffers basically considered company employees.

First Albany was later renamed Broadpoint Securities, but the arrangement with its VC group remains relatively intact.

Late last year, FA Tech Ventures went out in search of its second fund. It was during this process that Sekhar is alleged to have committed his blackmail, which came as a total surprise to! his fellow partners. In fact, surprise might be an understatement.

You know those people who get charged with a crime, and folks who know him nod their heads and say, “Oh, that makes sense.” Well, Sekhar was not one of those people. I’ve spoken to a bunch of people who worked with Sekhar – he was based in Boston – and have heard unanimous praise (save for this latest incident).

Nonetheless, what’s happened has happened, and FA Technology Ventures is trying to plot its next move. The firm has a pretty strong Fund I portfolio – wins like A123, eInk and iRobot, plus future contenders like CreditSights – but does not have dry powder for new investments (it does have follow-on capital, however). In other words, it really needs that next fund.

The problem, of course, is that the FA Tech Ventures brand is a bit toxic right now due to Sekhar’s alleged actions (even though the firm itself has not been implicated). For example, there is basically no way that a public pension fund would, ! or even could, commit. Moreover, it previously had signaled its intentions to spin out of Broadview with the new fund – thus making it unlikely that it could return to Albany for balance-sheet cash.

One option is for FA Tech Ventures to wait out the headline risk, and spend the next year managing its existing investments. This may be what happens, but the remaining partners also have held discussions with several institutions about again becoming a captive fund. This would require some re-branding, but that would hardly be the worst thing given the circumstances.

In short: The team isn’t shriveling up due to the bizarre actions of its former partner. It is, however, trying to figure out how to regain its footing.

*** Word is that Polaris Venture Partners is steaming toward a final close next month on its sixth fund, which is being marketed with a $500 million target (half of what it raised for Fund V i! n 2006). A number of LP fence-sitters seem to be breaking in the firm’ s favor, with indications due by month’s end.

*** The KKR fund performance numbers I shared yesterday were gross IRRs. I’ve also posted the net IRRs here.

*** It’s looking like Hank Morris won’t go down without a fight. The former “finder” has filed a 153-page pretrial motion, arguing that his actions did not cause any “economic harm” – a requirement for prosecution under New York’s Martin Act.

It’s an interesting legal strategy, particularly given that it tacitly stipulates that Morris did indeed participate in pay-to-play shenanigans. As his attorneys wrote: “The question posed here is whether gaining access, and even influence, in that manner is criminal.” You can read his entire motion here (click the link in the first non-italicized graph).

*** Apologies for any typos. I’m feeling a bit under the weather. Nothing viral, just still ill from watching last night’s Bruins game.

*** March Madness Update: We’ve got 500 readers playing in our pool, and the first-day reader goes by MJE. Not sure who it is (remember to email me your team names), but it probably doesn’t matter. The one game MJR got wrong was Georgetown, and he/she has them in their Final Four…

*** Have a great weekend…

Top Three

Walt Disney Co. is expecting bids today for its Miramax film studio, with an asking price of more than $650 million. Likely bidders include Platinum Equity Partners and Mesa Global.

Ironplanet Inc., a Pleasanton, California-based operator of an online marketplace for used heavy equipment, has filed for a $92 million IPO. It plans to trade on the Nasdaq under ticker symbol IRON, with J.P. Morgan and Deutsche Bank serving as co-lead underwriters. The company has raised nearly $47 million in VC funding, from Accel Partners (19.5% pre-IPO stake), Kleiner Perkins Caufield &! Byers (19.5%), Caterpillar (9.79%), Dyncorp, Marubeni Corp., IGNITE Group and Windspeed Ventures.

Yale University has increased its targeted private equity allocation from 21% to 26 percent. The school also reported that its private equity portfolio value fell 24% for the year ending on June 30, 2009.

VC Deals

Ankeena Networks Inc., a Santa Clara, Calif.-based provider of new media infrastructure solutions, has raised around $16 million in new VC funding, according to a regulatory filing. No investor information was disclosed, but the company previously raised capital from Clearstone Venture Partners, Mayfield Fund and Trinity Ventures.

Avvo Inc., a Seattle-based online provider of legal information for consumers, has raised $10 million in Series C funding. DAG Ventures led the round, and was joined by return backers Benchmark Capital and Ignition Partners. Avvo previously raised $12.5 million.

Plastic Jungle, aMountain View, Calif.-based operator of an online gift card marketplace, has raised $7.4 million in Series B funding. Redpoint! Ventures led the round, and was joined by return backers Shasta Ventures, First Round Capital and Bay Partners. The company previously raised $4.8 million.

Aureon Laboratories, a New York-based developer of analytics focused on predictive cancer treatment options, has called down $7 million of an $18 million funding round, according to a regulatory filing. Return backers include Atlas Venture, New Leaf Venture Partners andPfizer Inc. The company previously raised around $62 million.

Chomp, a San Francisco-based provider of iPhone app reviews and recommendations, has raised $2 million in VC funding. Backers include Bluerun Ventures, Ron Conway, Brian Pokorny and David Lee.

Panvidea! , a New York-based provider of on-demand video preparation and distrib ution solutions, has raised around $2 million in Series A funding. DFJ Gotham Ventures led the round, and was joined by Contour Venture Partners, eValue, NYCSeed and Wider Wake Network. Panvidea previously raised $1 million in seed funding.

Buyouts Deals

CVC Capital Partners and Ontario Teachers’ Pension Plan reportedly remain as the final two bidders for British national lottery operator Camelot.

Egeria has set mid-April as the deadline for second round bids on portfolio company SIF Group, an offshore mono-pile maker that is expected to garner up to €500 million. Suitors include Apax Partners, BC Partners, Investcorp and First Reserve.

Francisco Partners has completed its $126 million take-private acquisition of QuadraMed Corp., a Reston, Va.-based provider of healthcare IT services. The deal was first announced last December. Wells Fargo Foothill and Silicon Valley Bank committed debt financing.

Swander Pace Capital has acquired Incase Designs Corp., abrand ofcases and bags for consumer electronic products like laptops and mobile phones. No financial terms were disclosed. Incase has offices in Los Angeles and San

PE-Backed IPOs

The Telx Group Inc., a New York-based interconnection and co-location data center operator, has filed for a $100 million IPO. It plans to trade on the Nasdaq under ticker symbol TELX, with Goldman Sachs and Deutsche Bank Securities serving as co-lead underwriters. The company reports $98 million in 2009 revenue, compared to $70 million in 2008. Major shareholders include private equity firm GI Partners.

PE-Backed M&A

RenoNorden Holding AS, a portfolio company of Norvestor, has acquired the household waste collection division of Danish waste management company Renoflex-Gruppen AS. No financial terms were disclosed.

Firms & Funds

Easton Capital is raising a pair of new funds, according to VentureWire. One will be a traditional biotech VC fund with a target of between $100 million and $200 million. The other will be focused on biotech companies that can produce returns within three-to-five years, and comes with a $50 million to $75 million target.

Human Resources

Duke Dayal has joined Bank of the West as chief financial officer. He previously was a managing director with private equity firm Brysam Global Partners.