peHUB Wire: Thursday, May 7, 2009

New York City Comptroller/mayoral candidate William Thompson appeared on CNBC yesterday morning, and spoke a bit about the placement agent ban. Here’s the key quote:

“In some cases, [placement agents] are doing everything from the doing the PPM to almost the presentations to helping market around the country. Because a lot of these private equity funds, particularly the smaller ones and the mid-sized ones don’t have marketing sides, don’t know how to reach out. So in some instances, you could say it helps. We’re just going to beef up our staffs and work alone with our outside consultant to try to create better access.”

In other words, placement agents can serve a worthy purpose, but we’re banning all of them because of a few rotten apples. Kind of like selling your car to avoid fender benders. As I’ve said before – and will say again, knowing my penchant for repetition – corruption and political influence on investment decisions could be largely curtailed by requiring a detailed timeline of how a fund was first introduced to pension staff, and how the due diligence progressed from there. If someone inside the pension is corrupt, then all the placement agent ban does is remove the middleman (i.e., general partners could bribe directly).

What I applaud, however, is Thompson’s statement that NYC will “beef up” its investment staff. I first wrote two years ago that the City’s pension systems were woefully understaffed vis-à-vis private equity, in part because people kept leaving for other lines of work. It’s fine for a public pension to rely on an outside consultant (PCG in this case), but systems with more than a billion dollars should also have more than just a few dedicated internal staffers.

I’d like to say that I know how many folks currently work on private equity for NYC – or who is even in charge of the asset class — but that would require an actual answer from Thompson’s press office (warning: pettiness alert). I called yesterday for that purpose, but was never provided with an answer. Couldn’t even find out the name of the person in charge, which must be on a flowchart somewhere. By early evening, I shot a note to someone who I thought might be on staff, reiterating my questions.

Unfortunately, I also mentioned that the press office seemed clueless, which led to Thompson spokesman Jeff Simmons picking up my call this morning, then shrieking at me for about 30 seconds before hanging up. Great fun, but no help in getting answers to my question. Really not sure if the press office doesn’t know the answer, or if it doesn’t want to say…

But, again, glad they realize the theoretical value of staffing up. One position I see on the Comptroller’s website is for managing director of private markets, so dust off those resumes…

*** Last quarter, the largest VC deal was a $50 million round for Anacor Pharmaceuticals. This quarter, we’ve already had a handful of deals that have matched or surpassed that figure.

The big daddy was WorkDay’s $75 million round, but ExactTarget yesterday announced that it had raised $70 million. It’s not exactly a pure VC deal, since part of the round was a secondary that provided liquidity to past shareholders, but it still helps support the theory that last quarter was an aberration.

Three other quick notes on this funding: (a) Past backer Insight Venture Partners (35% owner before the round) did not participate, but remains a significant shareholder and keeps a board seat; (b) Scott Maxwell, a former Insight partner who was one of the firm’s two ExactTarget board members, will stay on as an independent director; (c) This is a deal that would not have happened were there a more viable IPO market, and it’s unlikely that there would be another private financing round.

*** Field of Dreams: Some of you have asked if you can donate to ABCD, on behalf of the peHUB team that has already raised more than $10,000. The answer is an emphatic “yes.” Just shoot me a note, and I can provide the relevant info (including ABCD’s tax info for your records).

*** Self-Promotion Alert: This evening I’ll be moderating an ACG Boston panel for emerging professionals. The topic is about how to manage your career in a recession. My panelists are Tom Shields of Shields & Co. and Jay Jester of Audax Group. Hope to see some of you there.

Top Three

ExactTarget, an Indianapolis-based maker of email marketing software, has raised $70 million in new VC funding. Battery Ventures led the round, and was joined by Scale Venture Partners and return backer Montagu Newhall. The release does not mention Insight Venture Partners, which held a 35% stake in ExactTarget. In related news, ExactTarget also withdrew registration for an IPO.

Vista Equity Partners has increased its buyout offer for Sumtotal Systems Inc. (Nasdaq: SUMT), a Mountain View, Calif.-based provider of enterprise learning and performance management systems. The new bid is $4.50 per share, which would value SumTotal’s equity at around $146 million. Vista originally bid $3.25 per share, but was bested by a $3.80 per share offer from Accel-KKR.

StarVest Partners has closed its second fund with $244 million in capital commitments. The New York-based venture capital firm focuses on opportunities in the U.S. tech-enabled business services sector.

VC Deals

VaxInnate Corp., a Cranbury, N.J.-based developer of vaccines for both pandemic and seasonal influenza, has raised $30 million in Series D funding. The Wellcome Trust led the round, and was joined by return backers New Leaf Venture Partners, Canaan Partners, HealthCare Ventures, Oxford Bioscience Partners, MedImmune Ventures and CHL Medical Ventures. The company has now raised more than $90 million in total VC funding.

Mantara Inc., a Jersey City, N.J.-based provider of technology solutions for securities trading, has raised $7.6 million in third-round funding. Return backers include Mohr Davidow Ventures, Southern Cross Venture Partners, CM Capital and Allen & Buckeridge. The company previously raised around $13 million.

Covarity Inc., an Ontario-based provider of commercial loan portfolio management software, has raised C$3 million in new VC funding from BDC, GrowthWorks, Tech Capital Partners and VentureLink Group of Funds., a Seattle-based online online cooking encyclopedia that can be edited by users, has raised Series A funding led by No financial terms were disclosed, but a recent regulatory filing suggests that the round was for approximately $600,000.

ImageTree Corp., a Morgantown, West. Va.-based developer of forestry technology solutions, has raised an undisclosed amount of strategic funding from In-Q-Tel.

Buyout Deals

Atlanta Equity Fund has acquired Richmond Cold Storage Inc., a Richmond, Va.-based operator of a network of refrigerated warehouse space. No financial terms were disclosed.

Bain Capital and Goldman Sachs are among the firms in preliminary talks to buy Landwind, a Shanghai-based maker of diagnostic imaging equipment. The seller is Citi Venture Capital International, which acquired a 70% stake in Landwind for S$127 million in 2007.

Florida Merchant Capital Investors, a Tampa, Fla.-based private equity firm, has acquired, operator of an employment website. No financial terms were disclosed.

PE-Backed IPOs

OpenTable Inc., a San Francisco-based operator of an online restaurant reservation system, has set its IPO terms to three million common shares being offered at between $12 and $14 per share. It would have an initial market cap of approximately $302 million, were it to price at the high end of its range. OpenTable plans to trade on the Nasdaq under ticker symbol OPEN, with Merrill Lynch serving as lead underwriter. It raised around $110 million in VC funding between 1999 and 2003, from firms like Benchmark Capital (26.42% pre-IPO stake), Impact Venture Partners (17.5%), IAC/Interactive Corp. (10.88%) and Integral Capital Partners (7.51%).

PE Exits

QinetiQ Group PLC has agreed to acquire Cyveillance Inc., a -based provider of online monitoring technology to identify and track data ! in cyberspace. The deal includes an initial cash payment of $40 millio n. Cyveillance shareholders include ABS Capital Partners and New Enterprise Associates.

Zed Group of Spain has acquired Player X, a UK-based mobile entertainment company. No financial terms were disclosed. Player X had raised over $16 million in VC funding from firms like Arts Alliance, LongAcre Partners and Nordic Venture Partners.

Firms & Funds

3i Infrastructure said its net asset value was up 3% in 2008. It also said that last year it invested £115 million in five junior debt instruments issued by infrastructure companies.

Fortress Investment Group (NYSE: FIG) posted a $67 million Q1 loss, compared to a $69 million loss in Q1 2008. The firm also announced that it would take over management of $2 billion of credit investment funds from D.B. Zwirn & Co.

Human Resources

Michael Fitzgerald has joined AIC Ventures as head of West Coast acquisitions. He previously was a vice president with Thomas Weisel Partners. AIC Ventures is an Austin, Texas-based firm focused on office and industrial sale-leasebacks and net-leased acquisitions.