peHUB Wire: Monday, June 29, 2009

For the past 15 years, I’ve had a running conversation with a friend of mine named Mary, over the issue of work ethic. It was originally derived from my time as a corps member with City Year (an urban peace corps of sorts), where we were paid $125 per week, plus a $50 bi-weekly bonus if we were on-time and properly uniformed each morning. Both rules were very strict. I once lost my bonus for forgetting to wear the correct belt, while someone else lost out after his train was one train was delayed by someone jumping in front of it.

For me, the loss of $50 was devastating. I had already given up movies, restaurants and most anything else that didn’t include the word “free” in front of it. But that extra $50 was really needed for food, rent and utilities. My roommates managed to float me, but it was a tough enough month that I still remember it 15 years later.

What amazed me, though, was that a handful of my fellow corps members were regularly late or wrongly-dressed. Most of them weren’t bunking with their parents, but instead were living on their own (like me) and came from the inner city communities in which we worked (not like me). One of them was a teammate of mine named Mike, who I began calling at 6:30 each morning to make sure he’d arrive on time. Most of the time he thanked me, but sometimes he just hung up. Mike rarely earned his $50, and ultimately left the program.

To me, it was incomprehensible. Mike, for example, worked extremely hard. So how could it be a lack of work ethic? I also knew he needed the cash, so why was the financial incentive not adequately compelling?

This logical fissure was the nature of my talks with Mary, who would actually join City Year five years after I left. She had grown up in very difficult circumstances, and argued that work ethic was pure conditioning. “If you see your parents or friend’s parents eave for work at the same time each morning, then you’ll probably do the same,” she’d say. “It’s not conscious, and it’s divorced from the money.”

The conversations obviously were more complex than that, but the gist was my bewilderment and Mary’s understanding. What we both agreed, however, was that City Year was poorer for an Americorps rule banning corps members from spending three weeks working at a for-profit externship. It had been part of the program before accepting federal funds, and provided a corps members with certain white collar experience that many of them would not have had otherwise.

“Ok Dan,” says rhetorical reader. “Why on earth are you discussing this in a private equity column?”

Well, dear reader, it’s a very long way of giving recognition to Leonard Harlan and the rest of his team at mid-market buyout firm Castle Harlan. A few years back, Harlan participated in the Principal for a Day program at a high school in the South Bronx. Soon after, he offered after-school jobs to a bunch of that school’s students. Several afternoons per week, they’d head downtown to the buyout shop’s office.

Part of it, of course, was to provide a paycheck, but Harlan says it was also about providing an otherwise-unavailable framework of office life. He understood what Mary had been trying to tell me, and put it into practice. It’s one of those small things that could have extraordinary ripple effects.

“My experience with that high school and with [a related financial literacy/experience program for middle schoolers] has been one of the most rewarding of my life,” Harlan says. “I’m glad that we have had the ability to do something like this.”

So am I Leonard, and I hope that some other firms take your lead. With great wealth comes great opportunity…

* Data Point: More than half of venture capitalists (52.9%) believe that their industry is “broken,” according to a survey conducted by executive search firm Polachi Inc. Nearly 60% said that they are less confident in the VC industry today than they were six months ago. Get the full survey results here.

* Update: Friday’s column was about the performance of VC funds that had their sizes reduced, in the aftermath of the dotcom bubble burst. My calculations included just 13 of the 16 U.S.-based funds that fell into this category, but I’ve now updated the numbers after receiving IRR data for Kleiner Perkins X and Pacven Walden V (still missing Meritech Capital Partners II). Get the revised data here, plus a bunch of reader comments.

* The DEMO folks (Matt Marshall and Chris Shipley) will be in Boston tonight, to scout local companies and products for their September 21-23 conference in San Diego. And I’ll be there as well, since peHUB is co-hosting the evening with Xconomy.

So if you’re a local entrepreneur or VC, it would be great to see you. We’ll all be at Vox Populi (755 Boylston Street) from 6pm to 8pm. Attendance is free, but registration is required. The first 40 folks through the door will get a coupon for their first beer or wine.

Top Three

Candover Investments (LSE: CDI) says that it has ended talks with potential acquirers, and that it should meet key debt covenants thanks to cost reductions and asset disposals.

ParAccel, a Cuptertino, Calif.-based provider of a massively parallel processing platform for analytic queries, has raised $22 million in Series C funding. Menlo Ventures led the round, and was joined by return backers Bay Partners, Mohr Davidow Ventures, Tao Venture Partners and Walden International. ParAccel previously raised nearly $30 million.

Towers Perrin Forster & Crosby Inc. has agreed to merge with fellow management consulting firm Watson Wyatt Worldwide Inc. The deal is valued at approximately $3.5 billion, and will result in a publicly-traded company named Towers Watson & Co.

VC Deals

VytronUS Inc., a Sunnyvale, Calif.-based cardiac medical device maker, has secured $11 million of an $11.5 million Series B round, according to a regulatory filing. Return backers included Delphi Ventures and New Enterprise Associates. The company previously raised $6.55 million.

Glubble BV, an Amsterdam-based social networking site for families, has raised $1 million in Series B funding. No investor information was disclosed by the company, which had previously raised $3 million.

Clavis Pharma ASA (OSE: CLAVIS), an Oslo-based oncology drug company, has raised around $20 million via a private placement of 10.75 million shares. Buyers inc! luded existing shareholders NeoMed Management and MVM Life Science Partners.

Buyouts Deals

Argan Capital has agreed to transfer its ownership of Swedish facility management company Addici to Danske Bank, in a no-cash deal designed to relieve debts.

The British government is expected to postpone plans to sell part of Royal Mail, according to Business Secretary Peter Mandelson. CVC Capital Partners has offered just under £2 billion for the stake.

GDF Suez has sold a 32.8% stake in an Omani power project (United Power Co.) to an investor group that includes HSBC, Waha Capital and Dubai International Capi! tal. The deal is valued at $26.5 million.

Lime Rock Partners has paid $49.7 million to acquire approximately 19.89 million shares of common stock in Allis-Chalmers Energy Inc. (NYSE: ALY), which represents around a 27.9% ownership position. The position could rise to 39.8%, based on a backstop agreement and preferred stock purchase commitment.

PE-Backed M&A

Premier Precision Group, a Minneapolis-based contract manufacturer of fabricated and complex precision machined components, has acquired the assets of Phoenix-based Aimco Precision Inc. No financial terms were disclosed. PPG is a portfolio company of Spell Capital Partners.

Firms & Funds

The Blackstone Group has closed its third European real estate fund with €3.1 billion in capital commitments, compared to a €2.5 billion target. The Park Hill Group, a Blackstone affiliate, served as placement agent.

Acton Capital Partners, a spinout of the corporate VC arm of German! y’s Hubert Burda Media, has secured €125 million in capital commitments for its debut fund, according to VentureWire. The group began fundraising with a €250 million target, but is now seeking a total of 150 million.

MK Capital has held a $75 million first close on its second VC fund, including $25 million from the SBIC program, according to VentureWire. The Chicago-based firm is seeking a total of $150 million.

Human Resources

Arnon Dinur has joined Greylock as a partner in the firm’s Israel office. He previously spent seven years with SanDisk, as a senior vice president leading mobile strategy.

Stephen Kessler has joined the California Public Employees’ Retirement Syst! em (CalPERS) as deputy executive office of operations. He previously served in a similar position with the California Department of Public Health.

Alex de Winter has joined Mohr Davidow Ventures as a partner, with a focus on life sciences, personalized medicine and biotech-based clean technology. He previously spent two years with Pacific Biosciences and, before that, worked at 454 Life Sciences (bought by Roche).