peHUB Wire: Tuesday, March 9, 2010

I spent a bunch of time in New York City last month, including extended hobnobbing with local VCs and entrepreneurs. One thing I heard over and over again was how the locals would soon leapfrog Boston in terms of entrepreneurial activity and venture capital funding — positioning themselves in the coveted runner-up position behind perennial leader Silicon Valley.

The sentiment was fueled by a variety of factors, including some discussed in a NY Times story last Friday. Here they are in no particular order:

• New York is the global home of media, and media/media tech is one of the venture world’s fastest growing sectors.

• New York has finally filtered through most of its dotcom mess (it took a while), and those 2000-vintage entrepreneurs have launched new ventures.

• New York has many more early-stage VC firms than it used to, and local corporations are again investing (Time Warner, etc.).

• Boston still has way more VCs, but the “good ones” spend many of their working hours 200 miles south.

• New York has lots of empty office space and ex-Wall Street IT guys looking for jobs (not “fix your Ethernet connect” IT, but ”big bank network security” IT).

• New York once again has a vibrant techie networking scene, and even has a group dedicated to early-stage life sciences (I attended their monthly coktail party – probably between 50 and 75 people there).

• Did you know that FourSquare is based in New York, and that VCs care more about their FourSquare rankings than about their IRRs?

All of that is lovely, but let’s look at the actual MoneyTree numbers:

Last decade, the New York region accounted for approximately 8.3% of all U.S. venture capital investment. This ranked third, well behind New England (12.5%) and barely in front of the Southeast (8%). For context, Silicon Valley snagged around 34 percent. The percentages for number of companies funded — as opposed to dollars invested — were fairly similar.

Last year, New York accounted for 8.1% of all venture dollars invested in U.S. companies. New England again ranked second (12.4%) and the Southeast came in fourth (5.5%). Again, the number of companies was fairly similar (New York companies comprised 8.6% of the total).

Finally, let’s look at the first 66 days of 2010. This is where things get a bit interesting. New York still ranks third, but is fairly close to New England in terms of percentage of dollars invested (13.8% vs. 14.3%). On the other hand, it’s back to its traditiona! l level in terms of number of companies funded (8.4% for New York vs. 18.7% for New England).

In short: New York’s venture revival is more about feel than fact. More qualitative than quantitative.

This doesn’t, of course, mean that New York’s buzz can’t help spur additional funding going forward. Nor does a higher investment total necessarily result in a high percentage of successful companies.

But I’d submit that New York simply isn’t going to catch New England anytime soon. Maybe it will for a quarter here or there (it’s happened before), but not for the long haul. Not because one market is “better” or “smarter” than the other, but because New England has a legacy head-start and has experienced many of the same positive developments (replace big media hub with big academic hub — and an equally-growing techie ecosystem that may convince top students to stick around rather than move West).

And, hey, there’s no shame in being third. Well, unless y! ou’re the Yankees or Red Sox…

*** Lots of revived carri ed interest taxation chatter. Worth noting that the new acting head of the House Ways & Means Committee is Sandy Levin (D-MI), who introduced the first carried interest bill back in June 2007. As you may recall, my support for his legislation didn’t temper my concerns that Levin himself didn’t know much about the issue (based on a pair of conversations we had). Maybe it’s time for a follow-up…

*** Below is information on the next peHUB Shindig, which will take place in Boston. We’re also planning a San Francisco event, and will release details next week. Still looking for one more sponsor, so shoot me a note if your firm is interested…

Top Three

Marsh & McLennan Cos. (NYSE: MMC) reportedly has put security consulting business Kroll on the block for $1.3 billion, and has received bids from private equity firms Apax Partners, Carlyle Group and General Atlantic.

SiBeam Inc., a Sunnyvale, Calif.-based developer of semiconductor systems solutions for wireless communications platforms, has raised $36.5 million in Series D funding. Return backer Foundation Capital led the round, and was joined by new investors Lux Capital andHatteras Funds. Also participating were existing shareholders U.S. Ventures Partnersand New Enterprise Associates. The company previously raised more than $80 million.

The European Space Agency has launched The Open Sky Technologies Fund, an early-stage VCthat will back companies that apply space technologies and satellite applicationsto terrestrial industries. It will be managed by Triangle Venture Capital Group, and so far has closed on €15 million of its €100 million target.

VC Deals

1010data, a New York-based provider of a hosted analytics and reporting platform for mortgage and asset backed securities research and trading, has raised $35 million in private equity funding, according to a regulatory filing. The company was founded in 2000, and does not appear to previously have taken institutional funding. Jon Kossow, a partner with Norwest Venture Partners, is listed as a board member.

Scale Computing, an Indianapolis-based provider of end-to-end midmarket clustered storage solutions, has raised $9 million in Series B funding. Benchmark Capital led the round, and was joined by return backersBlue Chip Venture Co., CID Equity and Spring Mill Venture Partners.

Omthera Pharmaceuticals Inc., a Bedminster, N.J.-based developer of dyslipidemia therap! ies, has raised $6.5 million in Series A funding led by Sofinnova Partners.

ActiveTrak Inc., a Portland, Ore.-based provider of mobile endpoint security solutions, has raised an undisclosed amount of first-round funding led by strategic backer ProtectCell.

Buyouts Deals

CCMP Capital confirmed reports that it has agreed to acquire data and marketing services company Infogroup Inc. (Nasdaq: IUSA). The deal is valued at approximately $635 million, including debt refinancing. Infogroup stockholders will receive $8 per share.

Extended Stay America Inc. could exit bankruptcy as early as June, according to reorganization plans that would include a new $450 million investment from Centerbridge Partners and Paulson & Company.

Harrah’s Entertainment Inc. has received lender approval to extend the maturity date on a $5.5 billion real estate loan to 2015. The company was taken private in 2008 by Apollo Management and TPG Capital.

Superior Capital Partners has acquired the assets of Q’SO Inc., a Fort Worth, Texas-based maker of adhesive and sealant products that are sold to the construction and infrastructure markets. No financial terms were disclosed. The new company will be known as Edge Adhesives.

PE-Backed M&A

HomeAway Inc., an Austin, Texas-based operator of an online vacation rentals website, has acquired the publisher of Brazilian vacation rental site No financial terms were disclosed. HomeAway has raised over $480 million in VC funding, from firms like Technology Crossover Ventures, Institutional Venture Partners, Redpoint Ventures, Trident Capital and Austin Ventures.

Firms & Funds

Team Europe Ventures of Berlin has launched a €6 million fund for Internet and mobile Internet startups. It will focus on European companies, but also will make U.S. investments. The fund expects to make between four and five investments per year, with a maximum of €500,000 per company.

WFD Ventures, a New York-based firm focused on medical device startups, has secured $116 million in capital commitments for its second fund, according to a regulatory filing.

Human Resource

Robert Brown has joined Advent International as a managing director and global head of limited partner services. He previously was a managing director with The Carlyle Group, focused on fundraising and investor relations.

Mitch Petrick has agreed to join The Carlyle Group as head of the firm’s leveraged finance and mezzanine business in the U.S. and Europe. He previously ran trading operations for Morgan Stanley, before leaving in a management shakeup.

Barry Freeman has joined Summer Street Capital Partners as a healthcare advisory partner. Is the former head of healthcare services I-banking for Lazard Middle Market.

Steve Bono, a former NFL quarterback, has joined Constellation Wealth Advisors as a principal in the firm’s Menlo Park, Calif. office.

Brian Hong, a former associate with General Atlantic, has joined Longroad Asset Management.