peHUB Wire: Thursday, June 3, 2010

Greetings from the Boston seaport, where I’m attending the SuperReturn US conference (I’ll be the guy in front of the cameras — doing interviews both for Reuters Insider and SuperReturn TV). Some notes to kick us off…

*** HBS professor Josh Lerner yesterday tried to turn conventional wisdom – and proper grammar — on its head, with a talk titled “Why VC Ain’t Broke.”

His basic argument was that today’s VC market is pretty similar to VC markets of past eras (minus the dotcom years), in terms of performance, percentage of GDP, etc. Not sure he really made the case (you can read my live-blog here), but here were a couple of interesting takeaways:

• I asked Lerner during Q&A about the rise of super-angels and the corresponding decline of IT startup costs. More specifically, I wanted to know if he thought venture could survive/thrive if a significant portion of IT investment fell below traditional VC thresholds.

He responded with the following data point: Take a look at historical venture returns, and then exclude the bubble years of 1996-2000. What you find, he says, is that life sciences deals have outperformed IT deals. Pretty striking, considering that Google’s 2002 IPO is included in the IT data. Also makes the VC/startup media’s obsession with IT and avoidance of life sciences that much more irresponsible.

• Lerner said his data shows that the best-performing VC firms have three general characteristics: (1) An emphasis on partner specialization by sector; (2) Not too much change in fund size from fund to fund; (3) Funds are neither much larger nor much smaller than the median VC fund.

*** Lerner also conducted a Q&A with Wayne Smith, head of alternative investing at the Massachusetts Public Retirement Investment Board (PRIM). No questions about the system’s recent tumult –executive director Michael Travaligni just resigned to join a hedge fund – but Lerner did ask Smith if pension systems had received a de facto boost from recent criticism of “the endowment model.”

Before continuing, let’s leave aside the obvious fact that public pensions have taken much bigger PR hits lately than have Swensen and sons. Ok, moving on:

Smith acknowledged that the endowment model slams may have caused harm “at the margins,” but that universities remain the golden LP ring for many general partners. Any reputational damage, he says, is easily outweighed by Harvard alums wanting Harvard to be an investor, Stanford alums wanting Stanford to be an investor, etc.

*** Overhang: Andr! ea Auerbach of Cambridge Associates put the current private equity overhang at nearly $850 billion. That’s 3.5x the overhang in 2000, and represents 54% of all capital commitments made between 2004 and 2009. Over 85% of the $850 billion is in funds larger than $1 billion, including 48% in funds larger than $5 billion.

Considering how many firms are starved for cash, it appears that the PE market might be bifurcating into the have-nots and have-too-muches.

*** Personnel Scoop: Tom Bradley and Mark Maruszewski have stepped down as partners with secondaries firm Pomona Capital. LPs were informed last week. No word yet on their future plans…

*** I think there might be a few more GPs here if the Celts had home court advantage tonight…

Top Three

Nielsen Holdings BV, the world’s largest TV and consumer measurement company, has filed for a $1.75 billion IPO. J.P. Morgan and Goldman Sachs are serving as co-lead underwriters. Nielsen was taken private for around $10 billion in 2006, by KKR (19.65% pre-IPO position), THL Partners (19.65%), The Carlyle Group (19.35%), The Blackstone Group (19.35%), Hellman & Friedman (9.32%) and AlpInvest Partners (6.59%).

HauteLook, a members-only online shopping club, has raised $31 million in Series C funding led by existing shareholder Insight Venture Partners. J.P. Morgan advised HauteLook on the round, which followed a $10 million Series B deal also led by Insight.

Thoma Bravo has agreed to led an acquisition of IT security company SonicWall Inc. (Nasdaq: SNWL), for around $717 million. SonicWall stockholders would receive $1! 1.50 per share, or a 28% premium to yesterday’s closing price. Partici pating alongside Thoma Bravo on the equity tranche would be Teachers’ Private Capital.

VC Deals

Zeltiq, a Pleasanton, Calif.-based developer of non-invasive fat-reduction technology, has raised $25 million in Series D funding. Aisling Capital led the round, and was joined by return backers Venrock, Frazier Healthcare Ventures and Advanced Technology Ventures. The company previously raised $72.2 million.

EarlySense, an Israeli developer of a patient supervision system for hospital and post acute care, has raised $13 million in third-round funding. Pitango Venture Capital led the round, and was joined by return backers Etgar Challenge Fund, Proseed VC Fund, Docor International Management, Noaber and Bridge Investment. The company previously raised $9 million.

Marin Software, a San Francisco-based provider of paid search management applications for advertisers and agencies, has raised $11.2 million in Series D funding. Triangle Peak Partners led the round, and was joined by return backers Amicus Capital, Benchmark Capital, DAG Ventures and Focus Ventures. The company previously raised around $25 million.

BookRenter, an online platform for renting textbooks, has raised $10 million in Series B funding. Norwest Venture Partners led the round, and was joined by return backers Storm Ventures and Adams Capital Management. BookRenter previously raised $6 million.

Compact Power Motors GmbH, a German maker of compact electric power drives, has raised €5 million in VC funding. Environmental Technologies Fund led the round, and was joined by return backers Munich Venture Partners and KfW Bankengruppe.

Green Biologics, a UK-based developer of bio-butanol for biochemicals and biofuels, has raised£4.9 million in new VC funding. Capricorn Venture Partners led the round, and was joined by return backers Morningside Ventures, Carbon Trust Investment Limited and Oxford Capital Partners.

LucidMedia, a Reston, Va.-based provider of an online advertising demand-side platform, has raised $4.5 million in venture debt funding led by MMV Financial. LucidMedia shareholders include Lake Street Capital, RLI Partners, Melton Investments, Redleaf Group and Milan Mandaric.

Docea Power SAS, a French EDA company focused on controlling the energy consumption of electronic systems, has raised $1.5 million in VC funding. Backers include Rhône-Alpes Création, Alps Development Sustainable Investment, Siparex and Octalfa.

Structural Clay Products LLC has raised $21.9 million in project financing to help reopen a brick manufacturing plant in Mexico, Missouri. Advantage Capital Partners provided $9.75 million of the total.

Buyouts Deals

Vector Capital has agreed to acquire UK-based vehicle tracking company Trafficmaster PLC, The deal is valued at approximately £73.27 million, with TrafficMaster stockholders to receive 47 pence per

PE-Backed IPOs

Chr. Hansen, a Danish food ingredients maker owned by PAI Partners, raised around $520 million via an IPO that priced at the low end of its expected range subscribed IPO.

Higher One Holdings Inc., a New Haven, Conn.-based provider of technology and payment services to the higher education industry, has set its IPO terms to 14.3 million shares being offered at between $15 and $17 per share. Lightyear Capital holds a 32% pre-IPO ownership position.

PE-Backed M&A

NorthgateArinso, a KKR portfolio company that provides HR software and services, has completed its previously-announced acquisition of the HR management unit of Convergys (NYSE: CVG). The deal is valued at $100 million in cash, including an $85 million up-front payment.

PE Exits

Hearst Corp. has finalized a $325 million deal to buybuy digital marketing company iCrossing, whose shareholdersinclude Goldman Sachs and Oak Investment Partners. The Jordan, Edmiston Group advised Hearst on the transaction, whicha WSJ report last month had put at closer to $375

Irving Place Capital Partners has completed its previously-announced sale of a 55% stake in women’s footwear maker Stuart Weitzman Holdings LLC to Jones Apparel Group Inc. (NYSE: JNY) for around $180 million in cash. Stuart Weitzmanhas retainedthe other 45% ownership position.

Firms & Funds

Polaris Private Equity, a private equity firm focused on SMEs in Denmark and Sweden has closed its third fund with €365 million in capital commitments.

Firms & Funds

John Canning, co-founder and chairman of Madison Dearborn Partners, has joined the board of Corning Inc. (NYSE: GLW) as an independent director.

Christopher Keber has joined Starwood Capital Group as director of fundraising and investor relations. He previously was in the real estate private funds group of Credit Suisse.