peHUB Wire: Tuesday, September 14, 2010

Forget about cleantech, mobile apps or even China. What I’ve been asking VCs about lately is their cloud strategy.

And if they don’t have one, I want to know why.

Just yesterday, I wrote about the cloud storage appliance-maker StorSimple, which is announcing today that it has banked a $13 million Series B round from new investors Mayfield Fund and Ignition Partners and return VCs Index Ventures and Redpoint Ventures.

Meanwhile, I’m reporting on another cloud storage company that is getting ready to come out of stealth mode in the next couple of days to announce an 8-digit Series A round. Stay tuned for more details about that Silicon Valley startup.

These and other recent fundings come as at least five cloud-based, venture-backed companies have been acquired in recent weeks, with the $2.4 billion sale of 3PAR being the most prominent. The M&A activity is leading many to wonder what other cloud companies are hot targets. My colleague Deborah Gage and I wrote about that in the latest issue of PE Week (subscribers can access it here).

As one cloud executive told me at the VMworld conference in San Francisco earlier this month: “Things are certainly getting frothy, and we expect to see a lot more acquisitions…in the months ahead.”

Many VCs have already figured this out, as evidence by StorSimple and other recent deals. When Redpoint Ventures raised $400 million for its fourth fund, which closed in February, the firm, which also is an investor in, said that it would focus on cloud deals along with social media, mobile Internet companies and cleantech. I’ve heard of other venture firms creating entire practices to go after the market.

Yesterday, I spoke about what’s going on in with Navin Chaddha, managing director at Mayfield, which led the StorSimple Series B funding. Chaddha was extremely bullish about the market. Fresh off of the sale of 3PAR, which the firm still held a sizeable number of shares in, Mayfield is also an investor in cloud companies Marketo, Cloud 9 Analytics and Gigya.

Chaddha is one of four partners at Mayfield looking at enterprise deals and cloud opportunities. The StorSimple deal is part of the firm’s 13th fund, which closed with nearly $400 million in commitments in 2008.

Chaddha believes that the nascent market will be a target for VCs for the next five to 10 years, in part because of the technology’s ability to make enterprises more efficient and to bring economies of scale to networks.

“VCs like funding companies that solve pain-points for consumers,” Chaddha says. “Whether it’s infrastructure companies, like 3PAR or StorSimple, or cloud applications or cloud-based software-as-a-service, the opportunities are massive. The cloud market is here to stay.”

So what’s your cloud strategy?

Alastair Goldfisher is managing editor at Thomson Reuters. Reach him at

Top Three

Private equity firm Apollo Management [APOLO.UL] has decided to merge its two specialty chemicals companies, Hexion Specialty Chemicals Inc and Momentive Performance Materials Inc, creating a company with more than $7.5 billion in sales. The companies said in a statement on Monday that the new company will operate under the Momentive name. The combined company is expected to generate about $1.24 billion of adjusted EBITDA per year.

The Private Equity Council changed its name to the Private Equity Growth Capital Council. The change reflects the group’s expanded and diversified membership. It sought to broaden its membership earlier this year and now has 30 members with assets under management ranging from less than $1 billion to $20 billion. The council also plans to form a Growth Capital Committee to deal with issues of interest to mid-market and small market firms.

Intel Capital made four investments totaling more than $30 million. It provided funding to Adaptive Computing, a provider of automation intelligence technology; Ciranova, an analog integrated circuit physical design software developer; Joyent, a provider of cloud computing infrastructure and services; and Nexant, a provider of energy software and services.

VC Deals

Joyent secured $15 million in Series C funding. The provider of smart computing solutions plans to use the capital to expand its international operations and to build market momentum for its core platform-as-a-service cloud computing technologies. The round was led by Intel Capital. Greycroft Partners and new investor Liberty Global also participated.

Adaptive Computing closed a Series A round of financing. It secured $14 million from Intel Capital (the lead investor), EPIC Ventures and Tudor Ventures. Adaptive Computing, which is behind the Moab® unified automation intelligence technology, plans to use the capital to expand its ability to meet the customer demand for cloud automation intelligence.

StorSimple raised $13 million through a Series B funding. The round was led by Mayfield Fund, and brings the developer of an application-optimized hybrid storage solution’s total funding to $21 million. Ignition Partners is a new investor in StorSimple. Commitments also came from return investors Index Ventures and Redpoint Ventures.

Bothell, Wash.-based Winshuttle secured $12 million in growth equity financing from Summit Partners. Winshuttle plans to use the capital to accelerate its global expansion. The company provides software that allow users to work with SAP from Excel and Web forms without any programming.

Get Satisfaction raised $6 million in Series A funding. The San Francisco-based community-building platform said the round was led by Azure Capital Partners with O’Reilly AlphaTech Ventures and First Round Capital participating. Azure’s founding general partner, Cameron Lester, will be joining the Get Satisfaction board.

Buyout Deals

Cryo-Cell has rejected a $17.63 million takeover bid from DW Healthcare Partners. DW Healthcare had offered to buy Cryo-Cell for $1.50 a share, representing a 67% premium to the company’s Friday closing stock price. Cryo-Cell’s board has determined that the offer is “inadequate and believes that it significantly undervalues the company and its growth prospects,” according to a statement. Oldsmar, Fla.-based Cryo-Cell operates a cord blood bank service. DW Healthcare is located in Park City, Utah.

Evercore Partners Inc. agreed to acquire a 50 percent stake in G5 Advisors, a São Paulo-based investment banking boutique and investment management firm. The firm agreed to pay $20 million in cash and securities at closing, with the potential for earn-out payments based on performance through 2013. The transaction is expected to close in early October. Evercore will have an opportunity to acquire the remaining 50 percent stake in 2014.

A management-led group backed by UK-based private equity shop LGV Capital acquired Snow+Rock Sports Ltd., which includes CycleSurgery and Runners Need. The deal was supported by Snow+Rock’s former owner Andrew Brownsword, who is leaving a significant investment in the specialty retailer.

TPG Capital is close to acquiring a 10 percent stake in VTB, a bank, for $2.4 billion to $3.1 billion, newspaper Kommersant reported on Tuesday. VTB is 85.5 percent controlled by the Russian government.

PE Exits

Green Mountain Coffee Roasters Inc. agreed to acquire all the outstanding shares of LJVH Holdings Inc. (Van Houtte), from an affiliate of Littlejohn & Co. LLC for C$915 million, or $890 million, based on the exchange rate as of Sept. 13. The transaction is expected to close by the end of 2010. Van Houtte is a coffee company based in Montreal, Quebec.

TowerBrook Capital Partners, L.P. agreed to sell portfolio company The Broadlane Group Inc. to MedAssets Inc. for $850 million in cash. Broadlane provides cost management solutions to the U.S. health care industry. The transaction is expected to close within 60 to 90 days. TowerBrook acquired Broadlane in August 2008.

TreeHouse Foods said Monday that it has agreed to buy S.T. Specialty Foods, which is owned by Windjammer Capital Investors, for about $180 million cash. S.T. Specialty Foods, of Brooklyn Park, M.N., provides private label macaroni and cheese, skillet diners and salads. It has annual sales of about $100 million. The deal includes an additional $15 million in cash if S.T. Specialty achieves certain earnings targets for the 12 months ended Dec.31, 2010. The deal is expected to close in October. Windjammer, of Newport, Calif., invests in mid-market buyouts.

Human Resources

Aequitas Capital Management Inc. has named Bill Malloy to its senior management team at the company’s newest office in San Diego, Calif. Malloy joined the alternative investment firm as executive vice president. He will lead strategic planning, growth and marketing of existing and new products.

Bill McLendon was promoted to president and CEO of CAV International, which is owned by Ranger International Services Group. McLendon was previously CAV’s COO. Carroll Vaughan, CAV’s founder, is now chairman. CAV, of Greenville, S.C., is a government outsourcing contractor with expertise in airfield services & logistics. Ranger International is a PE consolidator that specializes n aerospace and defense services.

TA Associates has named Dhiraj Poddar as a director of TA Associates Advisory Pvt. Ltd. He will work from the Mumbai office, where he will focus on investments in growth companies in India and other emerging markets. He was previously a director at Standard Chartered Private Equity.

Bridgepoint Capital Ltd. named Stuart Rose to its European Advisory Committee. Rose is the outgoing chairman of Marks & Spencer. He held this post since June 2008.