peHUB Wire: Tuesday, May 26, 2009

Today’s guest column is from Jeff Bussgang of Boston venture capital firm Flybridge Capital Partners. While Dan is out, send press releases for peHUB Wire to

It’s Terry Time at the NVCA

Amid the hoopla a few weeks ago at the annual NVCA meeting, where the focus was rightly on improving liquidity, it was barely noticed that a new chairman was elected – Polaris co-founder and managing general partner Terry McGuire, one of the leading life sciences investors in the industry. In normal times, the NVCA chairman is hardly an earth-shaking position (although certainly of higher value than FDR’s Vice President John Garner felt about his office). But these are hardly normal times and the NVCA chairman is bound to find himself in the middle of many interesting policy debates in the coming y! ear. I was therefore intrigued by Terry’s election and so talked to him the other day about his new role.

Terry co-founded Polaris in 1996 after seven years as a VC at Burr Egan. His focus on life sciences emerged over the last 10 years, although he started in the business as a generalist and has had no formal medical training or education. In addition to his impressive life sciences portfolio (including Sirtris, GlycoFi and Cubist), Terry was the initial investor in one of the most successful VC deals of all time, Akamai, a company that Polaris invested in (alongside Battery) with an $8m Series A in 1998 and then went public in 1999 and commanded a peak market capitalization of over $20 billion shortly after the IPO (the market capitalization is now $3.5 billion, as the company has successfully “grown into its valuation” and become the leading in the content delivery market).

Terry’s ascension to chair of the NVCA comes at an interesting time, to say the least. In our conversation, he made a few observations in his usual soft-spoken but pointed way that I found particularly interesting:

(1) Small Ball. At $20-30 billion per year, the venture capital industry as a whole remains a “drop in the bucket” in terms of capital deployed relative to the over trillion dollars sitting in private equity firms. Yet the impact is enormous, with 18% of GDP provided by venture-backed companies. Thus, there is great (positive) leverage in the VC model and, as a result, policy makers should be paying more atten! tion to it and demonstrate an interest in how to accelerate it.

(2) Wanted: Grumpy Old Men. There is a tremendous need for “old guys” to stick around in the VC business rather than fade off into the sunset. In the private equity world, the industry leaders hang around forever well past their 50s and 60s. In VC, it’s considered more naturally a young person’s game (perhaps because we’re always dealing with waves of new technology, young founders). Yet, the VC bu! siness takes a long time to figure out. The industry needs the investors who were around in the pre-bubble era (1980s and first half of the 1990s) to stick around and impart their wisdom on the next generation, who has grown up in the business during unusual times. It is scary to reflect on how few of the 7,000 professionals active in the industry today were general partners before Netscape’s IPO in 1995.

(3) Life sciences. With the incredible advancements in genomics, computational power and miniaturization, we are arguably entering into a golden age of innovation in life sciences (which encompasses health IT, medical devices, diagnostics, and touches adjacent areas such as materials science and robotics. Having an NVCA chairman steeped in that world, at a time when the US Government is looking to perform a top-down! re-engineering of the health care system, which is projected to make up 20% of GDP in a few years, is good timing indeed.

(4) Boston. With 14 teaching hospitals and world-class research and entrepreneurship factories like MIT and Harvard, Boston has arguably emerged as the top life sciences start-up environment! . With related technology advancements in energy technology and strong legislative support from the state of Massachusetts, it is arguably uniquely positioned there as well. Admittedly it is a distant second to California in software and Internet innovation, but as a proud Boston-based VC, I was pleased to see Terry brimming with confidence in Boston as an entrepreneurial hub.

It will be a year of both challenges and opportunity for the VC industry, but Terry was eager to dig in during the year ahead.

By the way, on the topic of older VCs and history, I wonder if folks out there can name the first VC who graced the cover of Time magazine, signaling the mainstream “coming of age” of the industry? The trivia answer will be provided tomorrow.

Top Three

Digital Sky Technologies, a Russian Internet group has offered to invest $200 million in Facebook in a deal that would value the social networking site at $10 billion, the Wall Street Journal reported on Friday.

Goldman Sachs and private equity firm MBK Partners will jointly buy Universal Studios Japan in a $1.4 billion deal, South Korea’s Maeil Business Newspaper reported.

Wilbur Ross’s WL Ross & Co, Carlyle Group and Blackstone Group each took stakes of between 20 percent and 24.9 percent in Florida lender BankUnited, a source familiar with the group said on Friday. Centerbridge Capital’s stake is below that, while other investors are much smaller participants, the source said.

VC Deals

Business Insider, New York-based business website, has raised its third round of financing. The round was undisclosed, coming from existing investors Kohlberg & Co., as well as new investors Allen & Company LLC, Marc Andreessen, Jim Friedlich of Zelnick Media, and Matt Luckett of Balestra Capital.

DAG Ventures has joined the backers of online advertising startup OpenX, leading a series C funding round of $10 million that takes total investment in the company to $31 million.

LogLogic, a San Jose, Calif.-based developer of log lifecycle management appliances, has raised $8.8 million to support its recent acquisition of Exaprotect, a Mountain View, Calif.-based security management business. The fundraise is an extended Series D and is led by Focus Ventures, and includes prior investors Sequoia Capital, SAP Ventures, Telesoft Partners, Worldview Technology Partners and Invesco Private Capital.

Plastic Jungle, an online gift card marketplace based in Clovis, Calif., has raised $4.8 million in Series A financing from Shasta Ventures, Bay Partners, First Round Capital and Harrison Metal.

Buyout Deals

Denison Mines, a Canadian uranium producer, has entered into an agreement with a to sell 40 million common shares, raising gross proceeds of C$82 million. The deal is being co-led by GMP Securities and Cormark Securities. It also includes support from Canaccord Capital Corp, Scotia Capital, CIBC World Markets and Raymond James Ltd.

Germany denied it was considering a possible breakup of carmaker Opel ahead of a crucial final round of meetings on Tuesday between the government and top executives from Italian suitor Fiat (FIA.MI).

U.S. Federal Trade Commission officials are opposed to Australian biotech firm CSL Ltd’s planned $3.1 billion purchase of smaller U.S. rival Talecris Biotherapeutics Holdings Corp. Talecris is owned by private equity groups Cerberus Partners and Tribeca Investment Partners.

Allis-Chalmers Energy plans to sell the shares to its current shareholders for $2.50 a piece, a 32 percent discount to its Wednesday closing price of $3.65. Lime Rock Partners L.P, has agreed to backstop the offering by purchasing from Allis-Chalmers, at the same price, any shares not purchased by existing shareholders, the company said.

Broker dealer Raymond James has purchased Lane Berry, a Boston and Danver-based investment banking business. No terms were disclosed.

Discovery Group , the second largest shareholder of SumTotal Systems Inc, which is currently at the heart of a bidding war between Accel-KKR and Vista Equity Partners, said it would not be surprised to see the “bid increase somewhat from this point”.

Italy eyewear company Safilo SpA’s talks with private equity funds on taking a stake in the company could slip beyond the end-June target for completion, Reuters reported. Two suitors dropped out, leaving Bain Capital and Pai Partners in the running for the stake.

Barclays has sidelined private equity houses bidding for iShares, its exchange-traded fund unit, and is looking to sell its entire asset management arm instead if offers approach $12 billion. U.S. money manager BlackRock and Bank of New York Mellon are among the interested bidders for Barclays Global Investors (BGI), the world’s biggest asset manager.

Harbinger Capital, one of Asarco LLC’s largest bondholders, is seeking to offer its own $500 million reorganization plan for the bankrupt U.S. copper miner, battling India’s Sterlite Industries and Asarco’s parent Grupo Mexico for control of the company.

Blackstone Group, Carlye Group and TPG, are looking to buy a minority stake in China Huiyuan Juice Group the South China Morning Post reported, citing sources.

Cat Trail Capital, a merchant bank based in Weston, Conn., plans to restructure its note with NuVision Inc. in a deal that will give the firm a 99% stake in the company. NuVision is a maker of LDC HDTV’s based in Scottsdale, Ariz.

Guidepoint Global, LLC, a primary research firm used by buyout firms, acquired Vista Research, Inc. from Standard & Poor’s, a division of The McGraw-Hill Companies.

Firms & Funds

Buyout firm Cinven faces one of its biggest losses after lenders seized control of USP Hospitales, its Spanish hospitals portfolio, The Times reported.

Human Resources

Winslow Sargeant, Ph.D., a Managing Director at Venture Investors LLC, has been nominated to a key administration post as Chief Counsel for Advocacy, Small Business Administration, by President Barack Obama. The nomination is subject to Senate confirmation.