peHUB Wire: Monday, March 1, 2010

Greetings from the home office, where I hope to be stationed for the next week or two (Hobo cries at the sight of suitcases). Some notes to kick off the week:

*** Last year I wrote about Correlation Ventures, a new firm that would use an algorithm to passively invest in VC deals led by other firms. Basically a quant approach to venture capital.

Someone was kind enough to send over one of the firm’s recent decks, and we’ve learned a bit more information:

1. Correlation’s debut fund target is $150 million;

2. Cornerstone limited partners are Morgan Stanley AIP and BGI Growth Partners;

3. The portfolio is expected to have between 50 and 75 companies, with average investment sizes of between $1 million and $4 million;

4. Typical investment decision time will be just two weeks;

5. Average annual management fees will be just 1.4%;

6. Correlation has held “recent GP deal-flow meetings” with 48 U.S.-based venture firms;

7. The firm’s quantitative director is J.D. Opdyke, former president of DataMineIt.

*** Speaking of new funds: Stage1 Ventures has launched a new platform called S1 Capital Partners, which will focus on hybrid venture transactions for later-stage companies (i.e., deals that provide both primary and secondary capital). The fund target is $250 million, with cornerstone LPs having already committed to fund a pair of initial transactions.

Also expect Stage1 Ventures to raise its second fund this year with a $25 million target. You can get more details here, based on an interview with firm founder David Baum.

*** There’s been some vigorous – and at times vitriolic – debate at peHUB over the issue of pay-to-pitch VC conferences and prepayment to VC “finders.” I just wanted to briefly address one line of misguided argument: Those charging entrepreneurs to pitch their wares are no differe! nt from VCs charging management fees to make investments.

The case here is that both fees are being paid voluntarily, and in anticipation of a future event (startups getting funded, VCs making investments).

To me, this is flawed thinking from the get-go. Entrepreneurs pitching at pay-to-play conferences have no guarantees of getting funded. And, if they strike out, there is no chance for a refund (ditto for fees charged by “finders” like Sloan). VCs, on the other hand, do commit to investing a certain amount of capital over a specified period of time. Were the firm not to do so, LPs would have recourse.

A more apt comparison would be if LPs charged general partners an up-front fee, before considering a new fund commitment. This, of cours! e, sounds ridiculous on its face. So does charging entrepreneurs.

*** Factoid from a Colorado economic development official: The Centennial State has the nation’s second-best educated population, based on percentage of collegiate and advanced degrees. Tops is Massachusetts.

*** Per your votes, the next peHUB Shindig will be in Boston later this month. Details to come early next week. We also plan to host a San Francisco event in mid-April…

Top Three

Green Dot Corp., a Monrovia, Calif.-based seller of prepaid debit cards, has filed for a $150 million IPO. It plans to trade on the NYSE, with J.P. Morgan and Morgan Stanley serving as co-lead underwriters. Company shareholders include Sequoia Capital (32.7% pre-IPO stake) and Total Technology Partners (11.1%).

Northern Timber Nova Scotia, a portfolio company of Atlas Holdings and Blue Wolf Capital Management, have agreed to acquire 475,000 acres of Nova Scotia forest land from Neenah Paper Inc. (NYSE: NP). The deal is valued at $82 million.

Art Levitt, former president and CEO of movie ticketing website Fandango, has joined Jerusalem Venture Partners as a New York-based venture partner. He left Fandango in 2006, and has beenserving as a consultant to the entertainment and hospitality industries.

VC Deals

Awarepoint Corp., a San Diego-based provider of real-time location systems for U.S. hospitals, has raised $10 million in Series E funding. Jafco Ventures led the round, and was joined by return backers Cardinal Partners and Venrock. Awarepoint previously raised over $19 million.

WealthEngine, a Bethesda, Md.-based provider of wealth research services firm for nonprofit organizations and financial services companies, has secured $2 million of a $5 million financing round. Backers include Novak Biddle Venture Partners and QED Investors.

Loggly, a San Francisco-based log management in the cloud company, has raised $500,000 in Series A funding led by True Ventures.

Lantiq, a Germany-based provider of access and home networking tec! hnologies, has raised an undisclosed amount of new funding from T-Venture, the venture capital arm of Deutsche Telekom. Lantiq is a portfolio company of Golden Gate Capital.

Venrock is leading an $18.2 million PIPE into drug company Chelsea Therapeutics International Ltd. (Nasdaq: CHTP). The deal includes 6.7 million shares of common stock being purchased at $2.72 per share, along with warrants to purchase another 2.3 million common shares. Leerink Swannand Needham & Co. served as placement agents.

Buyouts Deals

Apollo Management is leading a creditor group that is expected to reject Reliance Industries Ltd.’s bid for bankrupt chemicals maker LyondellBasell, according to the NY Post. The move would help Apollo acquire LyondellBasell, via Apollo portfolio company Hexion Specialty Chemicals.

TPG Capital has become the frontrunner to acquire Dow Chemical’s Styron platics unit, according to the WSJ. The deal is expected to be valued at between $1 billion and $2 billion.

PE-Backed IPOs

Promethean World, a UK maker of interactive white boards and associated software for the education market, has launched a London IPO designed to raise upwards of £224 million. Apax Partners holds a 25% stake in Promethean, and is selling shares worth between £72 million and £110 million.

Sensata Technologies Inc., an Attleboro, Mass.-based sensors and controls company, has set its IPO terms to 31.6 million common shares being offered at between $18 and $20 per share. It would have an initial market cap of approximately $3.42 billion, were it to price at the top of its offering range. Sensata is majority-owned by Bain Capital, based on a 2006 buyout from Texas Instruments.

PE-Backed M&A

RoadSafe Traffic Systems Inc., a Bensalem, Penn.-based provider of traffic safety services, has acquired Trutwin Industries Inc., a Fort Myers, Fla.-based provider of roadway pavement marking and removal services. No financial terms were disclosed. RoadSafe is a portfolio company of Aperion Management and Falcon Investment Advisors.

PE Exits

Baxter International Inc. (NYSE: BAX) has agreed to acquire ApaTech, a UK-based developer of orthopedic implants. The deal is valued at upwards of $330 million, including an up-front cash payment of $240 million. The company had raised around $70 million in VC funding, with current shareholders including Encore Ventures (via acquisition of 3i portfolio position) and HealthCor Partners.

Firms & Funds

Hall Capital Partners is targeting $100 million for its second fund, according to a regulatory filing. The Oklahoma City-based firm invests between $2 million and $25 million into family-owned businesses.

Rockefeller & Co., a wealth management firm for individuals and institutions, has renamed itself Rockefeller Financial.

Human Resource

Bill Arnold has been named chief financial officer of Neuberger Berman. He previously was with Citigroup, where he served as CFO of the firm’s global asset management and alternative investment businesses.

Neeraj Choubey has stepped down as a vice president with Venrock, in order to join Dell as general manager of the company’s tablets division. He had joined Venrock in 2006, before which he had been an associate with Bay Partners.

Johan Leven has joined Barclays as co-head of Asia-Pacific corporate finance. He previously was with Goldman Sachs as co-head of Asia M&A (excluding Japan).

Frank Panaccio has joined healthcare advisory firm KBT as a partner. He previously was a vice president with Fidelity Ventures.

Sanjiv Sawhney has joined Citigroup as global head of fund services for the firm’s Securities and Fund Services business. He previously was with J.P. Morgan.