peHUB Wire: Monday, May 17, 2010

For nearly the past decade, talk of VC-backed IPOs has included at least passing mention to alternative exchanges. London’s AIM, Hong Kong, Shanghai, India, etc. Basically: If the window is closed to smaller companies here, maybe it’s open elsewhere.

The latest entrant is Taiwan, which recently changed its rules to allow listings by foreign companies.

Its guinea pig will be a Campbell, Calif.-based chipmaker called Integrated Memory Logic (IML), which has raised around $8 million in VC funding from Storm Ventures, InveStar Capital and Telos Venture Partners. IML officially priced $40 million of shares last Friday ($39.6m in the bank, af! ter fees) and will begin trading tomorrow. Fairly similar to a NYSE listing ceremony, except they bang a drum instead of a bell.

Storm Ventures managing director Sanjay Subhedar flew to Tapei on the red-eye last night, and gave several reasons for why the Taiwan listing made sense for IML: (1) Most of the company’s customers are in Asia, as are its packaging and testing facilities; (2) The multiples are similar, but the legal and compliance costs are lower; (3) IML fell into a no man’s land from a semiconductor M&A perspective, because it was larger than $150m and smaller than $500m.

But there is one giant concern: Liquidity.

Subhedar says that there are dozens of other VC-backed companies lined up behind IML, and that he worries about share supply outpacing capital demand. This gets exacerbated by Storm’s lock-up on IML, in which it must wait for at least one year to sell all of its shares (can sell half after six months).

One offset is that Taiwan recently cut its estate tax rate from 50% to 10%, and Subheda r believes the local market is “very savvy” when it comes to semiconductors.

It’s a risky bet for Storm, but one that could pay large dividends. The firm plans to begin raising its fourth fund within the next several months – it has enough dry powder left in Fund III to add two or three new portfolio companies – and IML could be a 20-bagger. Storm invested in IML at a $13 million pre-money valuation in 2005, and the listing granted an enterprise value of between $350 million and $400 million.

If IML succeeds in Taiwan, Storm might have a much easier path to its new fund. And VCs everywhere might have a new path to liquidity…

*** Correction: I made a mistake in Friday’s column, when discussing the new VC performance data from Cambridge Associates and the NVCA. The 10-year figure, which turned negative, no longer included any data from 1999.

I know that some VCs view these stats as little more than rearview mirror watching – with little ROI relevance to the road ahead (save for fund-raising abilities). And it’s true that today’s venture market is very different than what we saw in 2000 or 2002. But one thing is still the same: Talk about how important it is to get in early.

I can’t count the number of times between 2000-2004 that I heard VCs talk about “returning to basics” or “sticking to our knitting.” Unfortunately, it would appear that either: (a) Knitting isn’t very profitable, or (b) These claims were more about lip service than actual investment decisions.

Either way, it requires some additional thought. I think I’ll do that now (and report back later).

*** New VC firm alert: Gale n Moore of Mass High Tech reported on Friday that a new Boston-area seed-stage firm is being formed by Dave Biesel (Venrock), Rob Go (Spark Capital) and Lee Hower (Point Judith).

We knew that Go and Hower had left their firms, but hadn’t yet heard about Beisel. His departure is particularly interesting, given a VentureWire story this morning about how several current Venrock partners — Ray Rothrock, Tony Evnin and Mike Brooks – won’t participate on the firm’s next fund….

Top Three

Apollo Management is in talks to buy packaging company Pactiv Corp. (NYSE: PTV), according to the Wall Street Journal. No financial terms were reported, except that the deal would be a leveraged buyout. Pactiv has a market cap of around $3.19 billion, and around $1.5 billion in existing debt., a Chinese online retailer, has hired Credit Suisse and Morgan Stanley to underwrite a U.S. IPO in the fourth quarter. The company raised $30 million in 2006 from firms like DCM and Walden International.

Adam Dell has joined Austin Ventures as a venture partner. He previously was founder and managing general par! tner of Impact Venture Partners and before that, he was a partner with Crosspoint Venture Partners. He also founded MessageOne.

VC Deals

Gilt Groupe, a New York-based online luxury retailer, has raised $35 million in new VC funding from return backers General Atlantic and Matrix Partners.

Booyah, a Palo Alto, Calif.-based maker of a social game based onlocation-based achievements, has raised $20 million in new VC funding. Accel Partners led the round, and was joined by return backers DAG Ventures and Kleiner Perkins Caufield & Byers. The company previously raised $9.5 million.

Grockit Inc., a San Francisco-based online test prep school, has raised $7 million in third-round VC funding. Atlas Venture led the round, and was joined by return backers Benchmark Capital and Integral Capital Partners. The company previously raised around $10.3 million.

Caprotec Bioanalytics, a Berlin, Germany-based developer of capture compound mass spectrometry technology, has raised €4 million in Series B funding. Return backers include Creathor Venture, IBB Beteiligungsgesellschaft and ERP Startfonds.

XPI, an Ontario-based provider of online solutions for corporate dis! closure research, has raised C$3 million in VC funding from existing s hareholder BEST Funds.

Buyouts Deals

Alliance Boots, a UK pharmacy chain taken private in 2007 by KKR and Stefano Pessina, reported today that it has posted annual profit of over £1 billion.

American Express Co. reportedly has teamed with Permira to bid on Royal Bank of Scotland’s payment processing unit. In related news, Atos Origin has joined a rival consortium that already included CVC Capital Partners and Welsh Carson Anderson & Stowe.

Francisco Partners has agreed ! to acquire EF Johnson Technologies Inc. (Nasdaq: EFJI), an Irving, Texas-based provider of secure communications solutions to organizations that protect and save lives. The deal is valued at around $27.8 million, or $1.05 per share.

Mid Europa Partners has agreed to invest €60 million for an equity stake in Energy 21, a Czech developer and operator of solar power parks in Central and Eastern Europe.

Providence Equity Partners has agreed to buy Virtual Radiologic Corp. (Nasdaq: VRAD), an Eden Prairie, Minn.-based national radiology practice and developer of radiologist workflow technology. The deal is valued at $294 million, or $17.25 per share. Goldman Sachs advised VRC on the deal. Generation Partners is VRC’s largest shareholder, and first institutional investor.

Psychiatric Solutions Inc. (Nasdaq: PSYS), a mental health facilities operator, reportedly is nearing a deal to be acquired by Universal Health Services Inc. (NYSE: UHS) for between $33 and $34 per share. Psychiatric Solutions previously had been in discussions with Bain! Capital.

Summit Partners has agreed to acquire a majority stake in European online payment processing company Ogone SA/NV. No financial terms were disclosed.

PE-Backed IPOs

NuPathe Inc., a Conshohocken, Penn.-based drug developer focused on the central nervous system, has filed for an $86.25 million IPO. It plans to trade on the Nasdaq under ticker symbol PATH, with Lazard Capital Markets and Leerink Swann serving as co-lead underwriters. The company reports $11.3 million in 2009 revenue and a $15.6 million net loss. NuPathe has raised $53 million in VC funding, from firms like Quaker BioVentures, Safeguard Scientifics, Battelle Ventures, Birchmere Ventures, S.R. One Ltd.

PE Exits

Bitstream Inc. (Nasdaq: BITS) has agreed to acquire the assets of Press-sense Ltd., an Israel-based provider of business flow automation systems.The deal is valued at $6.5 million in cash plus the assumption of certain liabilities. Press-sense has raised VC funding from firms like Evergreen Ventures.

Harris Corp. (NYSE: HRS) has agreed to acquire SignaCert Inc., a Portland, Ore.-based provider of cyber solutions for government and commercial customers. No financial terms were disclosed. SignaCert has raised just over $27 million in VC funding from DCM, Garage Technology Ventures, Intel Capital, PacRim Venture Partners and SmartForest Ventures.

Firms & Funds

FirstMark Capital announced the creation of a seed investment program called FirstSteps. It also announced the program’s first 10 investments: Ahalife, AppFirst, GoodCrush, NetComp, MarketFactory, MyCityWay, Packlate, Payoff, Pinterest and Turiya.

Human Resources

Peg Jackson has joined Cava Capital as a managing partner. She previously was a managing director with NeoCarta Ventures, before which she was a VP of business development at NBC.